Gujarat Knowledge Society Vs ITO (ITAT Ahmedabad)
Interest on Unutilised Government Grants Exempt: ITAT Ahmedabad Allows Section 10(23C)(iiiab) Relief to Gujarat Knowledge Society
The Ahmedabad Bench of the ITAT allowed the appeal of Gujarat Knowledge Society for AY 2017-18, condoned a delay of 239 days, and held that the assessee was entitled to exemption under Section 10(23C)(iiiab) in respect of interest income of ₹4.28 crore earned on surplus funds parked with Gujarat State Financial Services Ltd. The assessee is a Government of Gujarat–established and Government-controlled charitable institution engaged in skill development and vocational education, with its governing body comprising senior State officials.
The Tribunal noted that the surplus funds invested with GSFS represented unutilised Government grants received in earlier years and that, as per binding Government resolutions and finance department circulars, the interest earned on such funds was mandatorily required to be transferred back to the State Government. Consequently, the assessee had no beneficial ownership over the interest income, which retained the character of Government funds.
The ITAT rejected the narrow year-wise arithmetical approach adopted by the AO and the CIT(A) under Rule 2BBB and distinguished the Supreme Court decision in Visvesvaraya Technological University, holding that the said ruling dealt with a largely self-financed institution and did not address interest earned on Government grants refundable to the State. Adopting a purposive interpretation of the expression “wholly or substantially financed by the Government,” the Tribunal held that overall Government control, funding pattern and financial dependence must be considered. Accordingly, the denial of exemption and the addition of ₹4.28 crore were set aside and the appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
