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The Tax Publishers Visvesvaraya Technological University v. Asstt. CIT [Civil Appeal Nos. 4361-4366 of 2016, dt. 22-4-2016] : 2016 TaxPub(DT) 1933 (SC) Exemptions under section 10(23C)(iiiab) conditions *Facts:* Assessee University was incharge of Dept. of technical education, Govt. of Karnataka and had close to 194 colleges in its jurisdiction. For the assessment year 2004-05 to 2009-10 the exemption under section 10(23C) (iiiab) exemption as NIL income was questioned in reopened assessments. This was upheld by all the lower authorities. Thus the case went in appeal to the Supreme Court. The question was what were the conditions and the caveats to claim 10(23C)(iiiab) and whether the assessee was entitled to the same. Held against the assessee that they were not entitled to section 10(23C)(iiiab). Conditions of section 10(23C)(iiiab) are two fold: The university or institution should exist solely for educational purposes and not for profit. Wholly and substantially financed by the Government. Condition (1) was satisfied but not condition (2) thus was not eligible to the exemption. For Govt. funding condition to be met it should be the percentage of the receipts of that year which has to be seen. Since this has not been met the exemption cannot be granted. Queens educational society v. CIT (2015) 8 SCC 47, CIT v. Surat Cloth manufacturers Association (1980) 2 SCC 31, Aditanar Educational Institution v. CIT [(1997) 3 SCC 346], [American Hotel & Lodging Assn. Educational Institute v. CBDT [(2008) 10 SCC 509 explained - test for falling in scope of section 10(23C) are: Dominant test of objective being achieved needs to be seen. Distinction between surplus and making a profit has to be well appreciated. Surplus is not necessarily profit to whittle down the exemption. Ultimate test is to see overall scheme of things of whether the intent has been served in a purposive manner. Balance surplus if any was also applied exclusively for the objects. Surplus applied for said purpose means it exists solely for educational purposes and not for profit. Common condition for sec. 10(23C)(iiiab), (iiiad) and (iv) to avail exemption - the institution should exist solely for educational purposes and not for profit. Distinction between section 10(23C)(iiiab), (iiiad) and (iv) is as under: (iiiab) imposes additional condition that funding must be from Govt. - this is for Govt. universities. (iiiad) aggregate annual receipts not to exceed threshold - Small universities. (iv) other institutions which do not fall in (iiiab) and (iiiad) viz. private universities so exemption is year on year application basis.

The Tax Publishers

Visvesvaraya Technological University v. Asstt. CIT [Civil Appeal Nos. 4361-4366 of 2016, dt. 22-4-2016] : 2016 TaxPub(DT) 1933 (SC)

Exemptions under section 10(23C)(iiiab) conditions

Facts:

Assessee University was incharge of Dept. of technical education, Govt. of Karnataka and had close to 194 colleges in its jurisdiction. For the assessment year 2004-05 to 2009-10 the exemption under section 10(23C) (iiiab) exemption as NIL income was questioned in reopened assessments. This was upheld by all the lower authorities. Thus the case went in appeal to the Supreme Court. The question was what were the conditions and the caveats to claim 10(23C)(iiiab) and whether the assessee was entitled to the same.

Held against the assessee that they were not entitled to section 10(23C)(iiiab).

Conditions of section 10(23C)(iiiab) are two fold:

The university or institution should exist solely for educational purposes and not for profit. Wholly and substantially financed by the Government. Condition (1) was satisfied but not condition (2) thus was not eligible to the exemption. For Govt. funding condition to be met it should be the percentage of the receipts of that year which has to be seen. Since this has not been met the exemption cannot be granted.

Queens educational society v. CIT (2015) 8 SCC 47, CIT v. Surat Cloth manufacturers Association (1980) 2 SCC 31, Aditanar Educational Institution v. CIT [(1997) 3 SCC 346], [American Hotel & Lodging Assn. Educational Institute v. CBDT [(2008) 10 SCC 509 explained - test for falling in scope of section 10(23C) are:

Dominant test of objective being achieved needs to be seen. Distinction between surplus and making a profit has to be well appreciated. Surplus is not necessarily profit to whittle down the exemption. Ultimate test is to see overall scheme of things of whether the intent has been served in a purposive manner. Balance surplus if any was also applied exclusively for the objects. Surplus applied for said purpose means it exists solely for educational purposes and not for profit. Common condition for sec. 10(23C)(iiiab), (iiiad) and (iv) to avail exemption - the institution should exist solely for educational purposes and not for profit. Distinction between section 10(23C)(iiiab), (iiiad) and (iv) is as under:

(iiiab) imposes additional condition that funding must be from Govt. - this is for Govt. universities.

(iiiad) aggregate annual receipts not to exceed threshold - Small universities.

(iv) other institutions which do not fall in (iiiab) and (iiiad) viz. private universities so exemption is year on year application basis.