TaxTMI 
TaxTMI 
2026 (6) TMI 346
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....ailability in the entire course of week and since, the Ld. CIT-DR is on rotation, hence it was brought to the notice of the concerned Commissioner by separate application by the said Ld. CIT-DR that she would not be able to attend cases before the Bench in the entire week for which, she had been deputed. However, the Commissioner has not provided any alternate arrangement by posting Ld. CIT-DR for this week in absence of the Ld. CIT-DR on rotation. That when the matter was called for hearing, the Ld. Counsel for the assessee was present and both these appeals are assessee's appeal, therefore, there cannot be any prejudice caused to the assessee due to non-availability of the Ld. CIT-DR when the Department has not bothered to assign Ld.CIT-DR. The Ld. Sr. DR was present and he read out the findings of the A.O as well as the Ld. CIT(Appeals)/NFAC. Accordingly, in the interest of substantive justice, both these matters were heard together on merits and disposed of vide this consolidated order after careful consideration of the documents on record. 4. That there is a factual background pertaining to these appeals which is relevant for the purpose of record and adjudication. That at ....
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....received by the assessee was 47.85% i.e. below 50% as laid down in Rule 2BBB of the Income Tax Rules, 1962 and it failed to fulfil the requirement of the relevant Section of 'wholly or substantially financed by the Government'. The CIT(A)/NFAC, therefore, upheld the action of the A.O. 7. Aggrieved by the order of Ld. CIT(Appeals)/NFAC, the assessee filed a writ petition before the Hon'ble High Court of Chhattisgarh, Bilaspur wherein the Hon'ble High Court had set-aside the order of Ld.CIT(A)/NFAC and directed the assessee to appear before the Appellate Authority and that the appeal to be decided within a period of 45 days from the date of hearing of the appeal. 8. The present order by the Ld. CIT(Appeals)/NFAC is the impugned order before us passed in accordance with the remand proceedings by the Hon'ble Jurisdictional High Court wherein the matter was restored to the file of the First Appellate Authority as afore-stated. 9. The assessee had filed detailed written submissions before the Ld. CIT(Appeals)/NFAC which is on record and forming part of the order of the First Appellate Authority. The Ld. CIT(Appeals)/NFAC after considering the submissions of the asses....
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....t to section 10(23C)(iiiab) is as under - FINANCE (NO. 2) ACT, 2014 [No. 25 of 2014]* An Act to give effect to the financial proposals of the Central Government far the financial year 2014-2015. BE it enacted by Parliament in the Sixty-fifth Year of the Republic of India as follows:- CHAPTER I PRELIMINARY Short title and Commencement. 1. (1) This Act may be called the Finance (No. 2) Act, 2014. (2) Save as otherwise provided in this Act, sections 2 to 71 shall be deemed to have come into force on the 1st day of April. 2014. Amendment of section 10. 5. In section 10 of the Income-tax Act, with effect from the 1st day of April, 2015,- (a) in clause (23C),- (i) after sub-clause (iiiac), the following Explanation shall be inserted, namely:- "Explanation.-For the purposes of sub-clauses (iiiab) and (iiiac), any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government kg any previous year, if the Government grant to such university or other educational institution. hospital or other instituti....
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....substantially financed by the Government. 6.2 Absence of a definition of the phrase "substantially financed by the Government" had led to litigation and varying decisions of judicial authorities who had, for this purpose, relied upon various other provisions of the Income-tax Act and other Acts. Thus, there has been lack of certainty in this regard. 6.3 Therefore, clause (23C) of section 10 has been amended by inserting an Explanation below sub-clause (iiiac) of the said clause. It provides that if the Government grant to a university or for that previous year. Vide notification No.79 /2014 dated 12.12.2014, Rule 2BBB has been other educational institution, hospital or other institution referred to in section 10(23C)(iiiab) or 10(23C)(iiiac) during any previous year exceeds a prescribed percentage of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government inserted in the Income-tax Rules. The said Rule pro....
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....rposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution. hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year. if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other educational institution, hospital or other institution, as the case may be. during the relevant previous year. The Act or the sifslar never mentioned about the cumulative grant but the grant received during the previous year. In the instant case, the total grants received by the appellant come to 47.85% which is below 50% and hence failed to fulfil the requirement of Section of 'wholly or substantially financed by the Government'. In view of the foregoing discussion, the appellant is not eligible for exemption u/s 10(23C)(iiiab). Accordingly. the grounds raised by the appellant in this regard are dismissed. 5.10. Since the case has been decided, the question of stay is inconsequential. Hence,....
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....y financed by the Government'. In view of the foregoing discussion, the appellant is not eligible for exemption u/s 10(23C)(iiiab). Accordingly, the grounds raised by the appellant in this regard are dismissed." 11. At the time of hearing, the Ld. Counsel for the assessee submitted that the Revenue authorities had erred in not providing exemption to the assessee u/s.10(23C)(iiiab) of the Act since grants received from the Government should not be considered only for the previous year but the entire grants received from the Government cumulatively till the relevant previous year from inception is required to be considered. In other words, what the assessee contends through its Ld. Counsel that Government grants for the previous year should not be considered alone but the cumulative grants from inception till the relevant previous year should have to be considered. In this regard, the Ld. Counsel for the assessee heavily relied on the decision of the Hon'ble High Court of Karnataka in the case of Commissioner of Income Tax Vs. Indian Institute of Management, (2015) 370 ITR 81 (Kar.), wherein the phrase "substantially financed by the Government" has been dealt upon. 12. Per ....
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....relevant previous year; or" 14. That from a plain reading of the aforesaid provisions i.e. Section 10(23C)(iiiab) read a/w. Explanation which also covers the purpose of Section (iiiac), it is crystal clear that the legislature has ended the confusion regarding interpretation of the term "substantially financed by the Government" for previous year by stating that if the Government grants to such university or educational institution etc. exceeds such percentage of the total receipts including any voluntary contributions, as may be prescribed, of such university or other educational institution, hospital or other institution, as the case may be, "during the relevant previous year". This has to be read with Rule 2BBB of the Income Tax Rule, 1962 which prescribes percentage of the Government grants for considering as "substantially financed by the Government" The said Rule 2BBB of the Income Tax Rules, 1962 is extracted as follows: "Percentage of Government Grant for considering university, hospital, etc., as substantially financed by the Government for the purposes of clause (23C) of section 10. 2BBB. For the purposes of sub-clauses (iiiab) and (iliac) of clause (....
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....entage of the total receipts (including any voluntary contributions), of such university or other educational institution, hospital or other institution, as the case may be, then such university or other educational institution, hospital or other institution shall be considered as being substantially financed by the Government inserted in the Income-tax Rules. The said Rule provides that any university or other educational institution, hospital or other institution referred to in sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10 of the Income-tax Act shall be considered as being substantially financed by the Government for any previous year if the Government grant to such university, hospital, or institution exceeds 50 per cent of its total receipts, including any voluntary contributions, during the said previous year." 16. That Section 10(23C)(iiiab) with Explanation therein a/w. Rule 2BBB shall apply to A.Ys.2016-17 & 2017-18. 17. That in the lead case for adjudication i.e. A.Y.2016-17, admittedly grants received from Government for the relevant previous year comes to 47.85%, hence below 50% and therefore, in contravention to Rule 2BB of the Income Tax Rules, 19....
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.... the other part i.e. whether the assessee is wholly or substantially financed by the Government. To this, Explanation to (iiiab) clarifies that in order to be "substantially financed by the Government" such institution should get substantially financed or entirely financed in the relevant previous year exceeding such percentage of total receipts. Rule 2BBB of the Income Tax Rules, 1962 provides exactly what is the percentage that should be accepted in order to qualify for such exemption u/s.10(23C)(iiiab) r.w. Explanation thereto and that such grants as per Rule 2BBB should exceed 50% of the grants received from Government during the relevant previous year. That on this count itself, the assessee becomes ineligible for exemption claimed since twin conditions for getting exemption u/s.10(23C)(iiiab) r.w. Explanation a/w. Rule 2BBB is not fulfilled in the case of the assessee. That in A.Y.2016-17, the Government grants are only 47.85% in the previous year. That for A.Y.2017-18, the Government grants are only 9.77% in the previous year. The assessee is ineligible for exemption u/s.10(23C)(iiiab) of the Act for both the years in appeal. 20. The decision in the case of Hon'ble High C....