TaxTMI 
TaxTMI 
2016 (4) TMI 874
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....said claim of exemption was negatived by the Assessing Officer who proceeded to make the assessments. The same view has been taken by all the Authorities under the Act and also by the High Court in the order under challenge in the present proceedings. 4. The question, therefore, that arises in the present appeals is the entitlement of the appellant - University - Assessee to exemption from payment of tax under the provisions of Section 10(23C)(iiiab) of the Act which is in the following terms: "10. Incomes not included in total income. - In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- (23C) any income received by any person on behalf of- (iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government" 5. The entitlement for exemption under Section 10(23C) (iiiab) is subject to two conditions. Firstly the educational institution or the university must be solely for the purpose of education and without any profit motive. Secondly, it must be wholly or sub....
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....usively to the objects for which the applicant is established." (Paragraph 37) The above principle has been specifically reiterated in paragraph 19 of the decision in Queen's Educational Society (supra) in the following terms: "The final conclusion that if a surplus is made by an educational society and ploughed back to construct its own premises would fall out of Section 10(23-C) is to ignore the language of the section and to ignore the tests laid down in Surat Art Silk Cloth case [CIT v. Surat Art Silk Cloth Manufacturers' Assn.(1980) 2 SCC 31], Aditanar case [Aditanar Educational Institution v. CIT [(1997) 3 SCC 346] and American Hotel & Lodging case [American Hotel & Lodging Assn. Educational Institute v. CBDT [(2008) 10 SCC 509]. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit." 8. In the present case, we find that during a short period of a decade i.e. from the year 1999 to 2010 the appellant University had generated a surplus of about Rs. 500 crores. There is no doubt that the huge surplus has been collected/accumulated by realizing fees ....
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.... situation, following the consistent principles laid down by this Court referred to earlier and specifically what has been said in paragraph 19 in Queen's Educational Society (supra), extracted above, it must be held that the first requirement of Section 10(23C) (iiiab), namely, that the appellant University exists "solely for educational purposes and not for purposes of profit" is satisfied. The exemption granted in respect of the University under Section 80G of the Act, qua the donations made to it also cannot be ignored in view of an inbuilt recognition in such exemption with regard to the charitable nature of the institution i.e. the appellant University. 10. The above would require the Court to go into the further question as to whether the appellant University is wholly or substantially financed by the Government which is an additional requirement for claiming benefit under Section 10(23C)(iiiab) of the Act. It is not in dispute that grants/direct financing by the Government during the six (06) Assessment Years in question i.e. 2004-2005 to 2009-2010 had never exceeded 1% of the total receipts of the appellant - University- Assessee. In such a situation, the argument adv....
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....es is to be understood to be amounting to funding by the Government merely because collection of such fees is empowered by the Statute, all such receipts by way of fees may become eligible to claim exemption under Section 10 (23c) (iiiab). Such a result which would virtually render the provisions of the other two Sub-sections nugatory cannot be understood to have been intended by the Legislature and must, therefore, be avoided. 13. It will, therefore, be more appropriate to hold that funds received from the Government contemplated under Section 10(23c)(iiiab) of the Act must be direct grants/contributions from governmental sources and not fees collected under the statute. The view of the Delhi High Court in Mother Diary Fruit & Vegetable Private Limited vs. Hatim Ali & Anr . [(2015) 217 DLT 470] which had been brought to the notice of the Court has to be understood in the context of the definition of 'public authority' as specified in Section 2(h)(d)(ii) of the Right to Information Act, 2005 which is in the following terms: (h) "public authority" means any authority or body or institution of self-government established or constituted,- (a) .................. (b) .........