TMI Blog2013 (8) TMI 553X X X X Extracts X X X X X X X X Extracts X X X X ..... more than one educational institution then the aggregate annual receipt of each of such educational institution has to be considered separately - the income of these three institutions are also exempt u/s sub-clause(iiiad) of clause (23C) of section 10 because aggregate income of each of these institutions in each of these two years is below Rs. 1 crore. The requirement of approval of CCIT under sub-clause (vi) of clause (23C) of section 10 is for those who are not covered by sub-clauses (iiiab) or (iiiad) of clause (23C) of section 10. Since, these three institutions are covered by clause (iiiad), clause (vi) is not applicable - Decided in favour of assessee. Substantial Government Aid - Held that:- the percentage of grants in aid with respect to total receipts are more than 34.33% considered by the Hon'ble Karnataka High Court to be substantial [2011 (2) TMI 1235 - Karnataka High Court]. - the assessee/institutions were substantially financed/aided by the Govt. and hence are eligible for exemption u/s 10(23C)(iiiab). - Decided in favor of assessee. - I.T.A. No.2542 & 2543/Del/2011 - - - Dated:- 19-7-2013 - Shri U. B. S. Bedi And Shri T. S. Kapoor,JJ. For the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee society derives income from running seven institutions which are as under:- 1. All India Jat HM College. 2. Maharani Kishori Jat Kanya Mahavividalya. 3. Chottu Ram Polytechnic. 4. CR Coillege of Education. 5. Jat HSAS High School. 6. Jat HSAS Senior Secondary School. 7. CR Memorial Public School. 3. The Assessing Officer during the course of assessment proceedings observed that institution mentioned at Sl No.1 to 5 were financed by the Govt. and therefore were exempt u/s 10(23C)(iiiab) but institution mentioned at Sl. No.6 7 and Jat Education Society itself were not financed by the Govt. and aggregate receipts of these institutions exceeded Rs. 1 crore. Hence these institutions were required to be approved by the prescribed authority u/s 10(23C)(vi) of the Income Tax Act, 1961. The Assessing Officer observed that no such approval was obtained from the prescribed authority. Therefore, the assessee society was asked to file proof of exemption granted by the prescribed authority and show cause as to why exemption claimed may not be denied. In response to show cause, the assessee submitted that it had not sought any exemption from prescribed authority and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outset, the Ld AR filed synopsis giving sequence of events and also explained the facts in respect of both the appeals. It was contended that the cases of the assessee are covered by the ITAT order in respect of assessee itself in respect of assessment year 2003- 04 and 2004-05. In this respect our attention was invited to paper book pages 102 to 114. Our attention was also invited to head notes mentioned at page 104 and in view of this it was argued that annual aggregate receipts of each institution has to be considered separately for the purpose of determining the exemption limit of Rs. 1 crore. It was further submitted that aggregate of gross receipts in respect of institutions run by assessee was taken by the Assessing Officer for the purpose of determining gross receipts. It was submitted that the taxable income as assessed by the Assessing Officer on the basis of aggregate of gross receipts these institutions was not correct as the individual gross receipts in respect of these institutions were less than Rs.1 crore. In this respect our attention was invited to assessment order wherein gross receipts were mentioned which were less than Rs. 1 crore. Therefore, on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adjudicated by the Tribunal in assessee's own case for the assessment year 2003-04 2004-05 reported at 58 DTR 188. In the said decision, it has been held in para 20 21 as under:- "20 Regarding prescribed amount of annual receipt, we find that as per Rule 2BC such prescribed limit is Rs.l crore. Now, we find that the Assessing Officer has considered the total receipts of three educational institution being run by the assessee society whereas the claim of the assessee is that the same should be considered separately and if it is done then, the income of these institutions is fully exempt U/S 10(23C)(iiiad). Here, we are in agreement with Ld AR of the assessee that we have to consider the claim of the assessee on the basis of each educational institution separately. Hence, for the purpose of section 10(23C)(iiiad), the annual gross receipts of three educational institution being run separately by the assessee society cannot be clubbed together for examining the fulfillment of the conditions of receipt being less then the prescribed limit of annual gross receipts. If the annual gross receipts of these three educational institutions are considered separately, the same is below Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annual receipt of all of them should be considered together. The term "aggregate annual receipts" in this sub clause, in our opinion, does not say that aggregate of all educational institutions should be considered together. In our opinion, this term is used here to aggregate annual receipts of each educational institutions from all sources and on all account and hence, we feel that the aggregate gross receipt of each educational institution has to be considered separately and if that is done, each of them is having annual gross receipts of less than Rs. 1 crore, in each of the year, which are under consideration before us. We also find that the applicability of sub clause (iiiad) of section 23C of section 10 was not examined by the Assessing Officer or by the ld CIT(A). In fact, the assessee has claimed exemption under sub clause (iiiab) of clause (23C) of section 10 and the assessee also did not claim exemption under sub clause (iiiad) of clause (23C) of section 10. The Assessing Officer and Ld CIT(A) has considered the applicability of clause (vi) of clause (23C) of section 10 but they have also not discussed regarding applicability of sub clause (iiiad) of clause (23C) of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down as a proposition of law, to get benefit under the aforesaid provision, the institution must be getting more than 70% of its income as grant. On the contrary, we have judgment of this court in ITA No.808/2009 disposed of on 08.07.2010 where, after considering Section 10(23C) (iii)(ab), this court has interpreted, the word 'substantial interest' defined under the Income Tax Act. It has also been the subject matter of interpretation by various courts in various contexts. In deciding what constitutes 'substantial' portion of the finance, have taken note of the statutory provisions contained in the Banking Regulation Act, 1949, where, a person who has the beneficial interest of more than 10% of the total capital subscribed by all the partners of the firm has been held to be having substantial interest. Similarly, 'substantial interest' has also been defined in Section 40(2)(a) of the Income Tax Act where a person who is voting power of not less than 20% in the case of the company, is deemed to have substantial interest in the business of the company. In that context, it was held, when 36.42% constitutes grant of the government aid to the educational institutions involved in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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