Substantially financed by Government means contextual assessment, not a rigid 75% threshold, for educational exemption claims.

An educational institution is entitled to exemption under section 10(23C)(iiiab) where it exists solely for educational purposes, is not run for profit, and is substantially financed by Government grants. The term "substantially financed" is not defined in the Income-tax Act and must be construed in context; a rigid 75% funding threshold from the Comptroller and Auditor General's Act cannot be imported to deny exemption. On the facts noted, government funding of 56.86% was treated as sufficient substantial finance, and the exemption was upheld.

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Issues: Whether an educational institution receiving government grants of 56.86% of its expenditure could be regarded as wholly or substantially financed by the Government for the purpose of exemption under section 10(23C)(iiiab) of the Income-tax Act, 1961, and whether the 75% threshold from the Comptroller and Auditor General's Act could be imported to deny the exemption.

Analysis: The provision in question requires the institution to exist solely for educational purposes and not for profit, and to be wholly or substantially financed by the Government. The Tribunal held that the expression "substantially financed" is not defined in the Income-tax Act and must be understood on its own context. It rejected the attempt to import the meaning from section 14(1) of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971, because that provision was read only in part and did not justify treating 75% government funding as a rigid statutory benchmark. The Tribunal also noted that the grant received by the assessee was higher than the level accepted as substantial finance in the authorities relied upon.

Conclusion: The assessee satisfied the requirement of being substantially financed by the Government, and the exemption under section 10(23C)(iiiab) was rightly allowed.

Ratio Decidendi: The expression "substantially financed by the Government" under section 10(23C)(iiiab) must be construed contextually on the facts of the institution, and a rigid 75% threshold imported from another statute cannot be applied to deny exemption.

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