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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Akil Kureshi, M.S. Sanklecha, JJ.
DIRECTOR OF INCOME TAX (EXEMPTIONS) PIRAMAL CHAMBERS, PAREL MUMBAI - Appellant
Vs.
TATA INSTITUTE OF SOCIAL SCIENCE, MUMBAI - Respondent
Income Tax Appeal No. 1179 of 2013, 1322 of 2016, 1321 of 2016
Decided On : 26-03-2019
Income Tax Act, 1961 – Sections 147,10(23C)(iiiab),12-A, 260-A - Income Tax Appellate Tribunal - Challenge - Whether on facts and in circumstances of case and in law Tribunal justified in confirming order of CIT(A) and directing AO to allow exemption u/s. 10(23C) (iiiab) of Act without appreciating fact that assessee is not wholly or substantially financed by Govt. in view of explanation to sub section (1) of section 14 of Comptroller and Auditor General (Duties, Powers and Conditions of Services) Act, 1971 as total Govt. grant during year is less that 75% of total expenditure of assessee? Whether on facts and circumstances of case Tribunal was correct in holding Assessment under Section 147 of Act in law? - Whether on facts and in circumstances of case and in law Tribunal was justified in holding that A.O. erred in importing the provision of another legislation in deciding whether Assessee is substantially financed or not when provision of Income Tax Act is silent on issue - Held, Court have considered rival submissions - It is Revenues case before us that in the absence of the words substantially financed by the Government being defined in the Act, the Assessing Officer was entitled to invoke meaning of words substantially financed as found in CAG Act – Court find that there is no basis for invoking meaning of substantially financed found in CAG Act for purposes of Section 10(23C)(iiiab) of Act - First of all provisions of CAG Act are neither incorporated nor cited in section 10(23C)(iiiab) or in any other provisions of Act - Scope and purpose of two Acts i.e. CAG Act and Act are entirely different - CAG Act is in respect of Institutions receiving funds from consolidated funds of India and which would be subject to Audit of the Comptroller and Auditor General of India - It has no application to funds received by an Institution from Government through University Grant Commission - Words substantially financed in Section 10(23C)(iiiab) of Act are used in context of Government grants of finance to educational institutions - It is an agreed position between parties that question raised herein is identical to question raised by Revenue in Income Tax Appeal No. 2013 in respect of Assessment Year 2007- 08 - On facts and in law there is no difference in this Assessment Year i.e. 2006-07 and that in assessment year 2007-08 - Therefore there is no warrant to take a different view of this question from that taken by the us in Income Tax Appeal No of 2013 as discussed herein above - Respondent is registered under Societies Registration Act and Bombay Public Trust Act, 1966 - It is also registered as a Trust under Section 12-A of Act - For subject Assessment year, Respondent-Trust has filed its return of income, seeking exemption from tax under Section 10(23C)(iiiab) of Act - Assessing Officer called upon Respondent to explain its claim for exemption under Section 10(23C)(iiiab) of Act on issue of being solely for educational purposes and being wholly or substantially financed by Government - Respondent in its reply pointed out that it was solely for educational purposes and grants from Government is in excess of over 50% of total expenditure incurred during year - Further grants received from Government were also in excess of 50% of total receipts of respondent - Thus on both above yardsticks Respondent claimed to be substantially financed by Government - Therefore entitled to benefit of Section 10(23C)(iiiab) of Act - Appeal allowed
M.S. Sanklecha, J.
These three Appeals under Section 260-A of the Income Tax Act, 1961 (the Act), challenge the two orders of the Income Tax Appellate Tribunal (the Tribunal) dated 26th September, 2012 and 16th September, 2015. The impugned order dated 26th September, 2012 relates to Assessment Year 2007-08 being Income Tax Appeal No.1179 of 2013. The impugned order dated 16th September, 2015 is a common order of the Tribunal, relating to Assessment Years 2004-05 and 2006-07. Thus the two appeals being Income Tax Appeal No.1321 of 2016 and 1322 of 2016 are in respect of Assessment Year 2006-07 and 2004-05 respectively.
2. On 12th February, 2019, Income Tax Appeal No.1322 of 2016 relating to Assessment Year 2004-05 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 Assessment Year 2006-07, arising out of the common impugned order dated 16th September,2015, urging identical question of law for our consideration. We were also informed that an identical question as referred in (a) above on merits, was a subject matter of Income Tax Appeal No. 1179 of 2013 and admitted on 3rd April, 2013.
4. It was submitted on behalf of the respondent that the issue (a) raised herein above being the major issue in all the these appeals, would now stand concluded in view of amendment made to Section 10(23C) (iiiab) of the Act by an addition of Explanation thereto. This amendment has clarified/explained the expression "substantially financed" in Section 10(23C) (iiiab) of the Act and was brought into the Act by the Finance No.2 Act of 2014 w.e.f. 1st April. 2015. In the above view, on 12th February, 2019 as agreed by the parties, we passed an order, directing the listing of Income Tax Appeal No.1322 of 2016 along with Income Tax Appeal Nos. 1179 of 2013 and 1321 of 2016, involving same question on merits for final disposal. This as the controversy appeared to be within a very narrow compass.
5. On 4th March, 2019, the three Appeals as directed, came up for hearing. We first took up Income Tax Appeal Nos. 1321 of 2016 and 1322 of 2016 (Assessment Years 2004-05 and 2006-07) filed by the Revenue for consideration. As identical questions of law were already admitted (save time bar) in Income Tax Appeal No. 1179 of 2013, on 2nd April, 2013, we admitted both the appeals on the following identical substantial questions 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 circumstances of the case, the Tribunal was correct in holding Assessment under Section 147 of the Act in law?"
6. It was an agreed between the parties that we im
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