TaxTMI 
TaxTMI 
2019 (3) TMI 1619
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.... Appeal No.1321 of 2016 and 1322 of 2016 are in respect of Assessment Year 2006­07 and 2004­05 respectively. 2. On 12th February, 2019, Income Tax Appeal No.1322 of 2016 relating to Assessment Year 2004­05 was on board for admission. The following questions of law were urged in the appeal for our consideration :­ "(a) Whether on the facts and in the circumstances of the case and in law, the Tribunal justified in confirming the order of the CIT(A) and directing the AO to allow exemption u/s. 10(23C) (iiiab) of the Act without appreciating the fact that the assessee is not wholly or substantially financed by the Govt. in view of explanation to sub section (1) of section 14 of the Comptroller and Auditor General (Duties, Powers and Conditions of Services) Act, 1971 as the total Govt. grant during the year is less that 75% of the total expenditure of the assessee? (b) Whether on the facts and circumstances of the case, the Tribunal was correct in holding Assessment under Section 147 of the Act in law?" 3. At that time, it was pointed out to us that, identical question of law had been raised by the Revenue in Income Tax Appeal No.1321 of 2016 relating to Asse....
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....osal. Therefore, we took up the three appeals for final disposal in chronological order i.e. relating to the year of the appeal in this Court:­ 7. Income Tax Appeal No. 1179 of 2013­ (A.Y. 2007­-08):­ (i) This Appeal by the Revenue, was admitted on 2nd April, 2013 on the following substantial question of law:­ "(a) Whether on the facts and in the circumstances of the case and in law, the Tribunal justified in confirming the order of the CIT(A) and directing the AO to allow exemption u/s. 10(23C) (iiiab) of the Act without appreciating the fact that the assessee is not wholly or substantially financed by the Govt. in view of explanation to sub section (1) of section 14 of the Comptroller and Auditor General (Duties, Powers and Conditions of Services) Act, 1971 as the total Govt. grant during the year is less that 75% of the total expenditure of the assessee? (b) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that A.O. erred in importing the provision of another legislation in deciding whether the Assessee is substantially financed or not when the provision of the Income Tax Act i....
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.... 24th December, 2009 of Assessing Officer, the Respondent filed an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 4th January,2011, the CIT(A) allowed the appeal of the Respondent on the issue of being substantially financed by the Government for purposes of Section 10(23C) (iiiab) of the Act. This conclusion was reached after holding that provisions of CAG Act will not be applicable to the Act in the absence of any reference to it. Besides, it held that the words 'substantially financed by the Government' was subject of consideration by the Karnataka High Court in the case of CIT v/s.Indian Institute of Management, reported in 196 Taxman 276 which in turn relied upon CIT v/s. National Education Society (IT Appeal No.808 of 2009 unreported). In the above cases, a grant of approximately 37% from the Government out of the total receipts was held to satisfy the meaning of the words 'substantially financed' by the Government. (e) Being aggrieved with the order dated 4th January, 2012 of the CIT(A) on the above issue, the Revenue filed an appeal to the Tribunal. The impugned order of Tribunal records the fact that the Assessing Of....
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....port of the impugned order, submits as under :­ (a) In the absence of words 'substantially financed by the Government' being defined in the Act at the relevant time, one would have to adopt the general meaning and understanding of the words 'substantially'. It is submitted that the normal meaning of the word 'substantial' is ample/ large. This is how the words 'substantially financed', has been understood by Karnataka High Court in National Education Society (supra) and Indian Institute of Management (supra) while holding 37% of grant from the Government in context of total revenue was considered substantial. Further, as the Punjab and Haryana High Court in CIT v/s. Jat Education Society 383 ITR 355 also held 44% of the total Revenue as grants from the Government would satisfy the test of substantially financed by the Government. (b) The absence of any definition of the words 'substantially financed' in the Act will not permit the Revenue to import meaning given to the words 'substantially financed' as provided in the CAG Act. This in the absence of any incorporation or reference to the CAG Act in the Act. It is ....
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.... with its definition in another statute, when it is not dealing with a cognate subject. Therefore, reading the provisions of one Act into another when not in pari materia will lead to what the Courts has observed in Msco Pvt. Ltd. (supra) to a new terror in construction while quoting with approval Crais on Statute Law (6th Edition). (vi) One may look into the meaning given to particular words in a different statute provided the other Act is in pari materia with the statute being interpreted. The two Acts can be said to be in pari materia when they relate to the same person or thing or class of persons or things i.e. have the same object and operate in the same field. As the scope and the purpose of the CAG Act and the said Act are completely different, they cannot be said to be pari materia so as to permit importing the meaning given in the CAG Act to the said Act. In fact, in the absence of the words 'substantially financed' being defined in the Act at the relevant time, different methods / modes were being adopted by the Authorities under the Act to determine the manner in which the words 'substantially financed' have to be measured. It is to be noted that, the....
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....duced by the explanation. The object and purpose of an Explanation as held by the Supreme Court in S. Sundaram Pillai Vs. Pattabiraman, AIR 1985 (SC) 582 is amongst other things to clarify any obscurity or vagueness in the main enactment. In fact, our attention was invited to the Explanatory Notes to the provisions of Finance (No.2) Act, 2014 by which the Explanation to Section 10(23C)(iiiab) of the Act was introduced as found in the Circular No.1 of 2015 dated 21st July, 2015 issued by the Central Board of Direct Taxes. In the above Circular, the raison detre to introduce the Explanation to Section 10(23C)(iiiab) of the Act was that in the absence of definition of the phrase 'substantially financed by the Government' therein has led to litigation and varying decision of various judicial fora, leading to uncertainty in this regard. Thus, it is clear that the Explanation to Section 10(23C)(iiiab) of the Act was to clarify the position/meaning of the words 'substantially financed by the Government'. (x) Thus, the vagueness attributable to the meaning of the words 'substantially financed' is removed by the addition of the Explanation to Section 10(23C)(iiiab....
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....the amendment is not held to be retrospective. This has so been held by the Apex Court in Thirui Menickan & Co. v/s. State of Tamil Nadu AIR 1977 SC 518. In the above case, the Court held that an amendment to the Act which is not retrospective may yet be used as an exposition of the Parliamentary intent as contained in the Section even before its amendment. Thus, in the present facts, the same measure as has been clarified by the Explanation introduced by the amendment viz.­ grant from Government is in excess of 50% of its total receipts, it is substantially financed by the Government could be taken as the exposition of the Parliamentary intent of the unamended Section. Thus, without holding the Explanation to Section 10(23C)(iiiab) of the Act, inserted into the Act w.e.f. 1st April, 2015, is retrospective, the same is being used as an aid in construing the ambiguous provision. Therefore, in the present facts the Revenue's appeal is required to be dismissed. (xii) In the above view, the admitted substantial question of law is answered in the affirmative i.e. in favour of the respondent assessee and against the Revenue. (xiii) Thus, the Revenue's appeal is dismisse....