Karnataka High Court
The Commissioner Of Income Tax vs M/S.National Education Society on 8 July, 2010
Bench: N.Kumar, B.V.Nagarathna
IN THE HIGH COURT OF KARNATAKA AT BANG;AL_-QTRE
{Dated this the 8*" day of.Jul_v, 2013::
Presenl}
THE H()N'BLE
A A11xci1A " h b
TI-IE HON'BLE MRS} ,:.tis'r;§;c_E' "B; % NAGARATI-INA
ni:._A_ ms: s'oé55j;*.2Qd9 V
BE'1wE:E:N;=t' n
1.Th é"'c'o{fin1isSf%;0nér' . II1c:c§fi'n: Ta1x 55/1.. Shi'EVg;):.1S'i11'e'e._ ' V"i_cjy;21_:'eia1ye1 *C'o11ip.1_e:x:. V' "
Vishvesh\va1'ané1geii'--.. _ 4' V Mysore ~= 570 00.8 '~ 2 1_1'1C01"nE% «'£7.f«'_1.2~.i. Offiriel' . V VVé1;'dA' " Sh1:1i(>g£1' ...AppellaI1t:-3 V ' --. Sri M V Seshachaia, Advocate) 3 AM); Z M/s_. Naiionai £Sduc21ti()11 Socriely f'32,1'1:{.=;'e>>.j Urs Road Shin1oga K/.
...Respondem.
Thig {TA is filed Lu'1der Sec1,1'.on 2€50--A of." 'SE. arising out of Order dated O3--O8~2009 nin' --I'"J'A N0473/{ENG/2009. fer the Assessment" ye:;1'r"'2.0O3wO3 '}):'ayirigj "
to {i} f0rIm,:1e1i:e the substarltiazxl c.1L:r:-:'si'i(ms of lam'_SI.ai:r::VciV'ihemizl --. and {ii} allow ihc appeal and set a'i.f:;ide,-£t.I1é} Glider. b}.r1;tf1e }"1'AT E3angaI0re in rm No. 473/I3N'Q/2009. czar.-'cc:.03-o_8>20'09 and c0nfi.1.'m the ordm' of ,_t'.he }4\..pp:%1l211'[:.f " C0_I_1_'u1H'_:ssi()11<:r~ C.011firming the order pzlsscd E.11"eV__11"mQ1iv1_e *T2iX' Offictef. Ward--2. Shimoga. ' This ITA c:()1'11i'i"1'gtT-dr2__ this day.
N. KUMAR J.. delivered tl1e"i'r;)VlIow1C-fig:--'"= " ' The ass(§é'sc?.;vis M'/'s_Na;Liogjat.5EclL1catio1'1 Society. It has been p':*ovi_ded a;. s_1i1n "o.E_""i?s.'5;6.1,51,398wO() as Goverrlmem gram for the 21.sses+3riTr§i':i. ycgix' 200203. The income from other sourctlcs' 'VRs,Qf79.0V9,465--OO. The total receipts is The G0ve1'r1me1'1t grant". co1'1sti1ut.es 36.61;-2% v.cj'f'«..¢f1-:*Ti-rgizzll mceipis. 'E'l'1eref01'e the asscssee Claimed exei11ptio::2 ~1.;fiait%:* Sec£i(')1'1 10 (23C) {i1'1'ab}. It was declined by
-<.__ tI1e Assé;a;~:}Y1g Authority. In .=,1ppc:.:;1l. the first 21pp€?llaE.<? authority ' g;f:';-1.2'[email protected]§3 exe=mp1i()1'1. wl'11'('rh <')1'c1e:' was 2'1f'1'ir:11ecI by the 'I'1'1'bur1z-1!. I/% '..».J Agziixisi. the said two orders. the l't'\~"(E'I1E,.l€ has _}3JT€I"if1"i"Cs{i' ibis appeai.
2. It". is conienciecf that <>f11y1'wI'1e1'1 i.vi'"'.'t';A".GC)\"€¥"li1I1€i}1§ grain is more than 50% as 'wéss "1'!1.<~7 c:a1.~:.(;>--..ii'1'w..1jIf"1'_<,= éurliéi' years. the assesses is Clltitlt-'d to the }'JE5i'§-('Iii €)"i'__iI1e 21I'(')r€:se'1"ici provision and 36.42% of the L.()1a11'gA1'21r1i' 11 0:.._ "e:.()i':;'st.i1',L.ii<3 subsizmtial fiiiance by the GQVV-'Ef_l'l'1lT!E§V1'11v;"Ti1Ci"€.if(}.lfC? i't.'V(%on1,<-:1'1ded that the sa i d 0 rd C rs _1_"t3.{]"'c ii i'cii;_ 1,91 be 1'.l_"1'.€' lift? mic} i1'.h». .[ii'i.eib} reads as under:
L 'V "Iii "cO:':r,i)'z.1tii'rg} the total in.con'1e,> Qf a. {)fe;:.g'O1.is 'Lijea':'*"*cg_i" any person. czny i'r1crornefaIling ,Lv'£.?i{I'}'I1'I:"Vt"tviiily Q/h (i1e>_ft)lEowi'r1g c:!ar.r.scs shall not be 1 Any L;'r'ziucrsr'!y or oliwr educational iT:V'isi.i£.i;aiii)r'1 czxistinlg solely for Ihé' educratz'on.al , ffigrgjoses and norfor tile purpose Qf prqfif and i,i}I'2ic?I'1 is u,.v}1o£ly and su.bsiIcu'1t'ia.IIy '_/'i'.nan.c?ed by E/ {he-> Govern men I' "
4. The word 's141bs1an1'ie1I' has no: been d€fi'r1_6'.(§.'.U!1d€?l' the Income Tzix ACE. i"Iowe\=(?1'. it has been lht'? Si:-Ei?f'%(}i' "iT.1"e~1--E.1€:r_T(')i!7 interpretation by various Courts iii ve1ri0u'S5"'t:--diif,éX3_s';, The» &11.1f'hO1'i1.i€¥S in deciding when c<J11s1.iir_t:i'.<?rs~21--3'Subs'£:z1i11,ié£l':"ipofii_on of the fiI'}E1l'1(3t',' have '£'£1}iG1'1 I'iOi.ij of "IA}.i_e' 912-iiiiiibify.._Vp1*o_sérisi0113* Contained in the Bariking l'{eg4L1VI_a'[i011 AC't,._ l'949.} where. a person who has the 13€?1V1f;';fI5'(«?i£1I.~'il'1?l§??'éS§._{)f.ii'}()l'€ than 10% of the total capital subscribeci b}fV_&fiI~.VU/ifi'. 13:g1i'i'ii<:1*s~~..tji!7 the firm has been held to be havingg§;i1:»st::ar1taiai'mt;e;f¢s"i_;-aim-uiariy. 'substantial i1'1tei"esl'fV l1é1siAA.£i..Fs(3 7'?:3<-$c1'i"=d'ei'i1ied in exlziiianaiion 10 Section 4OA(2][a)loI" :.I'1<-3 I1'icEt31:_i1Qi"'i7:-"pi"~A£:i 'WhCl'€'. a pg'-=,rso:'1 who is having voting _po\v€i'"of i'mt_I;3sS'~_t.1i£i'i1 20% in the case of the Company. '"~,_is Ci.;§éi:1'}f§€,_iV l'C)_ h2.1ve" 's':ib's1a:1t':'e1! iiiicrczsi in 1116* business of the V' CL).Y'11''i_)£-?.V11"_'y...' '' M '.5. .. in ilie case of assessce ii.seIE. when the giaiii was i.:I}.i<j1*e"1'.l-12111 50%. exe111p11z'()1'1 has been extiended 10 the assesses. is in this context, in the E3.bS€1'1C€ of any defiiiition for the V. '...la word, 'suE)s1a1'11ial' in the Act. \-'U112-1'; to be seen is when is the t.01.a1 receipts and from what source. In E41121: (:0m.ex'{. \.ve_have 10 find out whether the grant of 36.42% of 1,0{.a_i'*..feeeEip'Ls c01'1s1it.utes substantial finan(:e by the CIOV-'€I'I'}:'11E?'I.jIi;-:.' V
6. Viewed [F0111 H131.
received {foul the s1.udents, «\V%veV 'ioQk received by way of (i0n'c11.i0:'1 i'I'OI}u1'v'4"(?~'.{V'ht31f2S. 1.0 the amount granted by the oI' 3E-43 .42% of the total revenue do Ae'o:1sti[L§1_C; SL1fi§i'Ve1E11,i-ii}Vv.'!§'e_é}1.fi-E:i21l aid from {he G0ver11i11en_I'-a11d7'£1h.;14Sv{he_i'i"1s_1i£.L.é1,i.on--assessee is entiilecl to the benefit of lhe z1l'0ress-:a'i"c1 'p,.1'(5'viVsi(')11.
7. " 1 'I'wG ;ippe11a'i'e au'i11()rities have carefuliy Considered V'i'l1.e 'Ij'23L?1,:S '0;1'"1.h.e (muse. law on the point and by a detaiiecf A:'=eVaSened: epféief'-}3.§i1ve righfly held Lhal 38.42% of grant. by the Gox-'e.z_f1'1nje1*1i bx' the year 2002433 do ('.()1'1Sii1.L:1.€ su':)s1'.am1'z2z1 "*._ '{7i1'1a11ce. v.\'«.-":l'1i('.h e111.i[!e.s". the assessee 1.0 the benefit of the "£:1'_1'f;'Jl7§33:5A§}.iC1 p1'0visi01'1, (3
8. V-V0 do not %'i1'1d 21113! c*1'm:' (*():"1111::'11..6c% "lay, 'the appeIi.:.1Ec= aL11'l*1o:"iLies whitth ("TE-INS for i1'11'erfb1'e:1(*€:'..'_zi11c1 no sL1bst.2miial qucs'£i<.>1'1 of law do ari.<;e"fe.:7 &c.*.o;§1sid4ei'a.1'j:>:i vi--1€1}1I'i'§.s
-£.Vl"ie.:3€.£70 1'e ' 2"q;)13&%al. Accordingly, the appeal i§gre_Eéc'fédT['af'tl1:e admission.
ji x j JUDGE ksp/~