Karnataka High Court
The Commissioner Of Income Tax vs Indian Institute Of Management on 24 August, 2010
Bench: N.Kumar, H.S.Kempanna
IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 24™ Day OF AUGUST. 2010 ws, PRESENT --_ os | THE HON'BLE MR. JUSTICE N.KUMAR" ae | AND. THE HON'BLE MR. JUSTICE H.S.Ki'MPANNA LTA. No. 529 of 2008. Between: - Pa 1. The Commissioner of Income Tax, ~~ C.R. Building, a Queen's Road, Bangalore. | - 2. The Dy. Commissioner of Income Tax (Exmp.) Circle-17() C.RBuildis. Queen's Road, Bangalore, -- ; * .. Appellants od (By Sri. K.V.Aravina, for Sri. M.V. Seshachala, Advocates) io : oe Indian Institute of Management, _ Bannerghatta Road, ~ Bangalore-560 076, ... Respondent
FRR ER kk This ITA is filed Under Section 260-A of LT.Act, 196] arising out of Order dated 30.11.2007 passed in TYA.No.399/BNG/2007, for the Assessment year 1999-2000,
- praying to (i) formulate the substantial questions of law stated therein and (ii) allow the appeal and set aside the Order passed by the ITAT Bangalore in ITA No. 399/BNG/2007, dated 30.11.2007 and confirm the Order of the Appellate Commissioner confirming the Onder passed by the Deputy Commissioner of Income _ Hamp. i). Circle-17(1), Bangalore.
This ITA, coming on for Admission - tisis 'day, N.Kumar J., delivered the following: _ ;
'JUDGMENT:
This appeal is by the. revenue ohlenging the order passed by the Tribunal holding that the assteacé is entitled to exemption under Section Lo@scjti of the Income-tax Act and accoraingly,: dismissing, the. - eppeal filed by the revenue, 7
2. The assessce is an educational institution. It claimed exeniption 'under Section 10(23C)(iiiab) of the Income-tasx Act Hor shot hereinafter referred to as, 'the Act'). The assessee filed return of income for the assessment | year 199 99- 2000, declaring 'nil' income and subsequently, A filed | Tevised return of income. Noticing the assessee was entitled for. exemption Under section 10(23C)(iv) or under "section 1 O(23C)fitiab) of the Act, the assessment came to be . reopened, The Assessing Officer found only 37.85% of the 7 total income was financed by the Government and the Assessee is not notified by the prescribed authority nor it is registered under section 124 of the Act. It was also found \.
that the Assessee is not approved under section 10(23C) (iv) of the Act. Lastly, it was held that the income. was not exempted under section 11 of the Act. 'Therefore, the Assessing Officer held that the Assessee is not entittea to . claim exemption. The Assessee preferred a an appeal, "the Commissioner (Appeals) tosix. note of thee contitbution moka by the Central Government from the year. 1972- 73 to 2004- 2005 and held that the Assrssee is substantially financed by the Government and accordingly, Set aside the assessment order and "granted "exemption, claie ned by the Assessee. Against the said order, 'the Revenue preferred the appeal before the Appellate Tribunal, 'The Appellate Tribunal taking note of the fact that the esilier years also such appeals by the Revenue was rejected, rejected the present appeal also. oa Aggiieved by the same, the Revenue is in appeal. 7 a Learned counsel for the appellant assailing the impugned order contends that, admittedly; out of total MS receipt of 20.61 lakhs the grant from the Central ws Government is only Rs.7.80 lakhs which works out to hardly 37, 85%. It does not exceed 50% and therefore, the Assessee "is not entitled to exemption. The Appellate Tribunal committed serious error in interfering with the order of hL-
assessment and therefore, he submits that case for interference is made out.
4. This Court had an occasion to censider. section L0(23C) (iiiab) in the case of the Commissioner of Income Tax 7 and another Vs. M/s. National Education Society in ITA 808/2009, where it was held as under:
"Para-4. The word' 'substantia! 'has 1 not been defined under the. Income Tox Act. However, it has been the subject matter or interpretation by various Courts in. various- contexts, The authorities in deciding what constitutes a 'substantial' portion of the finance: have. taken nete of the statutory Provisions vontained in the Banking Regulation Act, (949, wh ere a. person who has the beneficial interest of more than 10%. or the total capital subscribed by all the partners of. the firm has been held to be ~ having substantial interest. Similarly, 'substantial " interest' has also been defined in explanation to Section . 4OA(2)(a) of the Income Tax Act, where a oO person who is having voting power of not less than | 20% in the case of the Company, is deemed to have substantial interest in the business of the company.
Para-5. In the case of assessee itself, when the grant was more than 50%, exemption has been extended to the assessee. It is in this context, in the absence of any definition for the word 'substantial' in the Act, what is to be seen is, what is the ey receipts and from what source. In that context, we have to find out whether the grant of 36. 42% of. total receipts constitutes substantial finance. 'by the 7 Government"
total income of the assessee from. all sources is 20, Gi. laichs. Out of which, a sum of Rs.7 *80 lakhs which represents only 37.85% of the total income' is "financed by the Centrai Government. The other source of income being tuition fee, donations. etc. In that context, it is clear that this amount of Rs.7,80, 000/- Ex en 'as grant by the Central Government to this assessce constitutes: substantia finance by the Gover nment.- Accordingly as. rightly held by the authorities below, the as sessee qualiiies for exemption under the aforesaid provision. 'Therefore, we do not find any merit in
-- this appeal. No 'substantial question of law arises for oe consideration in this appeal. Accordingly, the appeal is dismissed. oo dh/tsn*