Year-specific Government financing test governs educational exemption, and cumulative grants cannot establish substantial financing.

Exemption under section 10(23C)(iiiab) depends on whether a university existing solely for educational purposes and not for profit is substantially financed by the Government in the relevant previous year. The applicable test is year-specific under the statute and Rule 2BBB, so Government grants received during that year must be compared with total receipts; cumulative grants from inception are not the correct basis. On the facts, the assessee's Government financing remained below the 50% threshold in the years considered, so it did not qualify as substantially financed by the Government and the exemption was denied.

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Issues: Whether the assessee university was entitled to exemption under section 10(23C)(iiiab) of the Income-tax Act, 1961, and whether the test of being "substantially financed by the Government" was to be applied on cumulative grants from inception or only on Government grants received during the relevant previous year.

Analysis: Section 10(23C)(iiiab), read with the Explanation and Rule 2BBB of the Income-tax Rules, 1962, requires that a university or other educational institution existing solely for educational purposes and not for profit must be wholly or substantially financed by the Government. The governing language makes the relevant test year-specific, because the prescribed percentage is to be applied to Government grants received during the relevant previous year against total receipts, including voluntary contributions. The cumulative grant theory was rejected as inconsistent with the text and legislative scheme. On the facts, the assessee received Government grants of 47.85% for assessment year 2016-17 and 9.77% for assessment year 2017-18, both below the statutory threshold of 50%.

Conclusion: The assessee was not entitled to exemption under section 10(23C)(iiiab), and the denial of exemption was / upheld against the assessee.

Final Conclusion: The appeals failed, as the assessee did not satisfy the statutory requirement of substantial Government financing for the relevant previous years.

Ratio Decidendi: For exemption under section 10(23C)(iiiab), the extent of Government financing must be determined with reference to the relevant previous year, and only if Government grants exceed 50% of total receipts can the institution be treated as substantially financed by the Government.

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