Government financing for educational exemption can include land, infrastructure and grants received over time.

An educational institution may qualify for exemption under section 10(23C)(iiiab) where it exists solely for educational purposes, is not run for private benefit, and is controlled by a government-appointed Board. Substantial government financing can be established by taking the overall support received over time into account, including land, infrastructure and grants from the State Government and the University Grants Commission. On those facts, the institution was treated as wholly or substantially financed by Government and entitled to the exemption.

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Issues: Whether the respondent institution was entitled to exemption under section 10(23C)(iiiab) of the Income-tax Act, 1961 on the basis that it was wholly or substantially financed by the Government, having regard to the land, infrastructure and funds granted over earlier years.

Analysis: The institution existed only for educational purposes and not for private benefit. It was controlled by a Board appointed by the Government. The Government of Karnataka had granted substantial land and the institution had been built up with funds granted by the State Government and the University Grants Commission over the relevant period. On that basis, the financing received was treated as substantial government financing for the purpose of the exemption provision.

Conclusion: The respondent was entitled to exemption under section 10(23C)(iiiab) of the Income-tax Act, 1961.

Ratio Decidendi: For purposes of section 10(23C)(iiiab), substantial government financing may be established by considering the overall governmental support and assistance received by an educational institution, including land, infrastructure and grants received over the relevant period.

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