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ADIT (Exemption) Versus M/s. Vivek Education Society

2012 (12) TMI 1011 - ITAT MUMBAI

Claim of exemption under section 10(23C)(iiiab) - Held that:- Substantial part did not connote an idea of being a major part i.e. more than 50%, in which in the context of section 2(22)(e)(ii)) it was held that in case 40% of assets were deployed by way of loans and advances then the business of money lending has to be considered as substantial part of the business of the assessee. - CIT(A) also relied on the judgment in the case of Indian Institute of Management (2010 (8) TMI 890 - KARNATA .....

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TA No.5896/Mum/2011 - Dated:- 7-12-2012 - SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER Appellant by : Shri A.B. Koli Respondent by : Shri Pankaj M. Parikh ORDER PER RAJENDRA SINGH, AM: This appeal by the revenue is directed against the order dated 8.6.2011 of CIT(A) for the assessment year 2008-09. The only dispute raised by the revenue is regarding the claim of exemption under section 10(23C)(iiiab) which was allowed by CIT(A). 2. Facts in brief are that the AO .....

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showed that the activities were being carried on for the purpose of earning profit. The AO further noted that the assessee was also running unaided educational institutions for which grants were not received from the government. The AO therefore asked the assessee as to why claim under section 10(23C)(iiiab) should not be rejected. The assessee submitted that gross receipts for the year ending 31.3.2008 were ₹ 5,51,94,182/- out of which fees collected from unaided institutions was ₹ .....

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10(23C)(iiiab) in the past accepting the claim of the assessee that it had been substantially financed by government grants. 2.1 The AO however did not accept the contentions raised. It was observed by him that the phrase substantially financed meant that it should be almost fully financed. He referred to provisions of section 14(1) of Comptroller and Auditor General s (Duties, Powers and Conditions) of Service Act 1971, as per which any body or authority in which case 75% of total expenditure i .....

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dicata was not applicable in income tax proceedings. He accordingly denied the claim of deduction. 3. The assessee disputed the decision of AO and submitted before CIT(A) that the AO had applied provisions of Section 14(1) of Comptroller and Auditor General s (Duties, Powers and Conditions) of Service Act, 1971 in which the phrase substantially financed had been defined which was not so in case of section 10(23C)(iiiab) and, therefore, the said section was not applicable in case of the assessee. .....

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referred to provisions of Banking Regulations Act 1949 as per which a person who had beneficial interest of more that 10% of total capital subscribed has been held to have substantial interest in the company. Similarly, it was pointed out that substantial interest had also been defined in Explanation 40A(2)(a) where a person having voting power of not less than 20% is deemed to have substantial interest in the business of the company. It was accordingly requested that the claim of the assessee .....

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set aside the order of AO and allowed the grant of exemption. Aggrieved by said decision, the revenue is in appeal before the Tribunal. 4. The ld. DR appearing for the revenue supported the order of AO and placed reliance on the findings given in the assessment order whereas the ld. AR for the assessee argued that the case of the assessee was supported by the judgment of Hon'ble Jurisdictional High Court and, therefore, order of CIT(A) should be upheld. 5. We have perused the records and co .....

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nt. Thus 57.46% of gross receipts was financed by the government. The AO took the view that only when at least 75% of expenditure is met by government grant it can be considered as substantially financed by the government. The AO followed the provisions of Comptroller and Auditor General s (Duties, Powers and Conditions) of Service Act 1971, as per which any body or authority in which case 75% of total expenditure is met by government is deemed to be substantially financed by the government. In .....

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