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2015 (12) TMI 1071 - PUNJAB AND HARYANA HIGH COURT

2015 (12) TMI 1071 - PUNJAB AND HARYANA HIGH COURT - [2016] 383 ITR 355 - Eligibility for exemption u/s 11 denied - CIT(A) held that the assessee was not eligible for exemption under Section 10(23C)(iiiab) - ITAT allowed assessee appeal holding that the institution/society run by the assessee had received substantial Government aid for the purpose of claiming exemption under Section 10(23C)(iiiab) - Held that:- In the present case, there has been financing by the Government when examined on indi .....

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010 (8) TMI 890 - KARNATAKA HIGH COURT) held where there was financing of 37.85% by the Government held the assessee to be entitled to eligible for exemption under Section 10(23C)(iiiab) - Decided against revenue. - ITA No. 133 and 140 of 2014 (O&M) - Dated:- 17-9-2015 - MR. AJAY KUMAR MITTAL AND MR. RAMENDRA JAIN, JJ. For The Appellant : Mr. Inderpreet Singh, Advocate For The Respondent : Mr. Pankaj Jain, Senior Advocate with Mr. Madhur Sharma, Advocate, Mr. Divya Suri, Advocate, Mr. Deepanshu .....

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e Tribunal, Delhi Bench 'D', New Delhi (hereinafter referred to as the Tribunal ) in ITA No. 2543/Del/2011, relating to the assessment year 2007-08, claiming the following substantial questions of law:- a. Whether Hon'ble ITAT is justified in law in deleting the addition of ₹ 21,04,921/- made by the Assessing Officer by taxing the surplus as the assessee society viz. The Jat Education Society, which is the parent body of all the institutions, has not been granted registration u .....

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s Memorial College as this institute received grant of 45.95% of the gross aggregate receipts which fell far short of 'substantially' financed by the Government; the Hon'ble ITAT allowed the exemption u/s 10(23C)(iiiab) by relying upon the judgment of Hon'ble Karnataka High Court in ITA No. 1133 of 2008 wherein the grant of 34.33% was considered 'substantial' but the Revenue has not accepted this judgment and has filed appeal against the order in Hon'ble Supreme Court .....

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iiiab) of the Act to All India Jat Heroes Memorial College, an institution run by the assessee, by relying on an ispo facto erroneous non-contextual interpretation of the definition of the term 'Substantially financed by the Government' of the above section, by relying on unrelated statutory provisions of the Banking Regulation Act, 1949 and Section 40A(2)(a) of the Income Tax Act wherein the interpretation is qua an absolutely dis-similar fact of substantial interest of a person in a co .....

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exemption under Section 11 of the Act was not applicable. The assessee had claimed exemption under Section 10(23C)(iiiab) of the Act on the entire income as per the return of income. Accordingly, the assessee was assessed at an income of ₹ 93,25,443/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity the CIT(A) ]. The CIT(A) vide order dated 10.3.2011 (Annexure A-II) dismissed the appeal holding that the assessee was not eligible .....

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e Act. Hence, the present appeals. 5. We have heard learned counsel for the parties and perused the record. 6. After hearing learned counsel for the parties, in our opinion, the issue that arises for consideration in these two appeals is whether the Institution/Society run by the assessee received substantial contribution towards the corpus of the assessee or not so as to claim exemption under Section 10(23C)(iiiab) of the Act? 7. It would be expedient to reproduce clause (iiiab) of subsection ( .....

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the said clause shows that any university or other educational institution existing for educational purposes and not for profit and is wholly or substantially financed by the Government is entitled to claim exemption from income tax under the Act. 9. Learned counsel for the assessee has relied upon the judgments of the Karnataka High Court in Commissioner of Income Tax v. National Education Society, ITA No. 808 of 2009, Commissioner of Income Tax v. Indian Institute of Management (2011) 196 Taxm .....

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e (supra) where there was financing of 37.85% by the Government held the assessee to be entitled to eligible for exemption under Section 10(23C)(iiiab) of the Act with the following observations:- 3. Learned counsel for the appellant assailing the impugned order contends that, admittedly, out of total receipt of ₹ 20.61 lakhs the grant from the Central Government is only ₹ 7.80 lakhs which works out to hardly 37.85 per cent. It does not exceed 50 per cent and, therefore, the assessee .....

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s in various contexts. The authorities in deciding what constitutes a '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 per cent 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 Explanation to s. 40A(2)(a) of the IT Act, .....

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find out whether the grant of 36.42 per cent of total receipts constitutes substantial finance by the Government. 5. Applying the aforesaid law, in the instant case, the total income of the assessee from all sources is ₹ 20.61 lakhs. Out of which, a sum of ₹ 7.80 lakhs which represents only 37.85 per cent of the total income is financed by the Central Government, the other source of income being tuition fee, donations, etc. In that context, it is clear that this amount of ₹ 7, .....

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