Rule 287 — Percentage of Government grant for considering any University, hospital, or any other institution, as substantially financed by the Government for purposes of Schedule VII [Table: Sl. Nos. 17 and 18] to Act.
The rule fixes the percentage that makes an institution substantially financed by the Government for the purposes of Schedule VII [Table: Sl. Nos. 17 and 18] to the Act. A university or other educational institution, hospital or other institution referred to there is to be considered as substantially financed by the Government for a tax year if the Government grant to it for that tax year exceeds 50% of its total receipts, including any donations, during that tax year.
Schedule VII [Table: Sl. Nos. 17 and 18] turns on an institution being substantially financed by the Government, and "substantially" is not a figure. The rule converts it into one, and does so year by year and against total receipts including donations, so the test is a proportion of everything the institution took in and not merely of its funded budget.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Government grant as a proportion of total receipts | Exceeding 50% | Government grant for the tax year measured against total receipts including any donations during that tax year | Rule 287 |
The test is applied for each tax year, so an institution can be substantially financed in one year and not in the next, and the position has to be worked out afresh every year rather than settled once. The denominator is total receipts including any donations, which means a good year for fundraising can push the grant below the line even though the grant itself has not fallen. The word is "exceeds", so a grant of exactly half the total receipts does not satisfy the rule.
A hospital receives a Government grant of Rs. 6 crore in a tax year and its total receipts, including donations of Rs. 2 crore, are Rs. 11 crore. The grant is about 54.5% of total receipts, which exceeds 50%, so it is considered substantially financed by the Government for that year. If donations in the next year rise so that total receipts reach Rs. 13 crore on the same grant, the grant is under half and the test is not met for that year.
A reader meets it when an institution claims the benefit of Schedule VII [Table: Sl. Nos. 17 and 18] in its return, and in any enquiry into that claim where the year's grant and total receipts are compared.
if the Government grant to such University or other educational institution, hospital or other institution for such tax year exceeds 50% of their total receipts including any donations during the said tax year
