TaxTMI 
2026 (3) TMI 1780
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....nue: "1. "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee is "wholly or substantially financed by the Government within the meaning of section 10(23C)(iiiab), by considering non-recurring elements such as capital grants, land, and infrastructure, which are neither recurring nor reflected in the Income & Expenditure Account." 2. "On the facts and circumstances of the case and in law, the Ld. CIT(A), NFAC erred in holding that the term "substantially financed by the Government" under section 10(23C)(iiiab) can be interpreted to include capital grants and non-cash government assistance, in absence of any statutory threshold or specific quantitative test prescribed under the Income Tax Act." 3. "On the facts and circumstances of the case and in law, the Ld. CITYA), NFAC is justified in ignoring the Assessing Officer's adoption of the 75% benchmark as derived from section 14(1) of the Comptroller & Auditor General (CAG) Act, 1971, as a reasonable test to determine "substantial financing". 4. "On the facts and circumstances of the case and in law, the Ld. CIT(A). NFAC erred in allowing exempt....
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.... making and substantially financed by the government are eligible for the exemption u/s 10(23C)(iiiab) of the IT Act. Secondly and equally important fact is that the assessee is not substantially financed by the Government. During the year under consideration, the assessee had received Government grant of 16,92,28,931 whereas the expenditure of the assessee is to the tune of Rs. 91,12,96,159. Thus, it can be seen that the assessee got only 19% of its expenditure as government grant which cannot be said as substantially financed by the Government. 6. Further, as per section 14(1) of C & AG Act 1971, substantially financed means not less than 75% of the expenditure of the assessee which is the only Central Govt. Act in which the meaning and content of the phrase "substantially financed" has been statutorily laid down. Such an organization is also audited by the Ca AG, which is not in the case of the assessee. There is no such provision in any of the Central Govt. Act in favour of the assessee by which it can be said that even if getting the grant at 19% of its expenditure only, the assessee may be accepted as substantially financed by the government. Hence, in the eye of the centr....
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....9;ble ITAT, Kolkata in the case of Sikkim Manipal University in ITA No.1227- 1230/K/2011 dated 29.11.2011, wherein if was held that, a perusal of Sec 10(23C) (iiiab) shows that the educational institution should exist 'solely for educational purposes and not for purposes of profit, that is to mean that the institution should provide education and not indulge in any profit making activity. The determination of the existence of educational institution solely for educational purposes is to be done on the basis of its objects and utilization of its income in accordance with the conditions laid down in the third proviso to Sec. 10(23C). Merely for the reason that the educational institution has surplus funds, it would not ipso facto lead to an inevitable conclusion that an educational institution exists for making profits and not solely for educational purposes. 12. On this preposition we found strength from the decision of Sikkim Manipal University in ITA No. 1227-1230/K/2011 dated 29.11.2011 and further reliance has also been placed upon the decision of Coordinate Bench of ITAT in the case of Banglore in the case of Bangalore University in ITA No. 398/Bang/2007 order dated 28.0....
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.... controversy was adjudicated by the Hon'ble High Court of Karnataka in the case of Indian Institute of Management [2014] 49 taxmann.com 136 (Karnataka) dated 17.06.2014 as below, "6. From the aforesaid letter, it is clear, the assessee is a public institution, the Revenue generated by the institution belongs to the consolidated fund of India. The Government after a conscious decision has permitted the assessee to retain and spend the revenue so generated for their maintenance/growth. In addition to that, the Government is providing grants both for recurring and non-recurring expenditure. The amount of such grant varies from year to year depending upon the short fall. The assessee has been established entirely with the budgetary support of the Government. It is an institution wholly or substantially financed by the Government. The fact that this institution was granted land by the Government of Karnataka to the extent of 100 acres and the Government of India has funded initially 100% and it has permitted them to retain and spend the Revenue so generated for the maintenance and growth and the Government of India is also granting grant every year is not in dispute. Under ....
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....IT(A). Even after multiple reminders, AO failed to submit any remand report, therefore, Ld. CIT(A) construed that the submissions made by the assessee are acceptable as the additional evidences under Rule 46A of the Income Tax Rules, 1962. In this regard reliance has placed upon the decision of Coordinate Bench in the case of ACIT V. Raj Bajwa in ITA No. 4830/DEL/2024 the operative portion of the same is contained in Para 4 to 7 and the same is reproduced herein below: 4. The Ld. Senior Departmental Representative (hereinafter, the "Sr. DR) submitted that the AO had provided sufficient opportunity of being heard to the assessee for explaining the source of said cash deposits. However, the assessee did not ensure any compliance as a tactical way to avoid investigations. Hence, the AO had rightly taxed the said cash deposit of Rs. 1,33,18,000/-. It was further submitted that during the appellate proceeding, the assessee produced various additional evidences justifying the source of said cash deposits in his bank accounts as detailed in para 10.2 of the impugned order, which was sent to the AO by the Ld. CIT(A) for submitting the remand report after enquiry/verification/inves....