GEETANJALI UNIVERSITY TRUST V. CHIEF COMMISSIONEROF INCOME TAX and ANR

CW/11799/2010

AI Insights

The case involves Geetanjali University Trust, which operates a medical college and sought exemption from income tax under Section 10(23C) of the Income Tax Act, 1961. The Chief Commissioner of Income Tax, Udaipur, denied this exemption for the Assessment Year 2008-09, citing illegal admissions as per a High Court decision. The Trust contested this decision, arguing that the ongoing litigation regarding the admissions should not affect their tax exemption status. The High Court found that the Chief Commissioner's decision was premature as the matter was still sub judice in the Supreme Court and that the legal right to litigate should not be curtailed by denying tax exemption.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 685161 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 24-11-2011
• Assessment Year: misc
• Other Referred Cases: SBCWP No.10858/2008 - Abhishek Sain & Ors. vs. Raj. University of Health Sc. & Ors., DB Civil Special Appeal (Writ) No. 241/2009, SLP (Civil) No. 23763/2009
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Applicant
• Court: HIGH COURT
• Department Lawyers: K K BISSA
• Assessee Lawyers: VIKAS BALIA
• Keywords: Chief Commissioner of Income Tax; Educational purposes; Income Tax; Tax Exemption; Illegal admissions
• Section: 10(23C)

Judgement Text

"S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 1/8 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR O R D E R Geetanjali University Trust vs. Chief Commission of Income tax, Udaipur & Anr. S.B.CIVIL WRIT PETITION NO. 11799/2010 DATE OF ORDER : 24th November, 2011 P R E S E N T HON'BLE DR.JUSTICE VINEET KOTHARI Mr. Vikas Balia, for the petitioner. Mr. K.K.Bissa, for the respondent Department. REPORTABLE BY THE COURT: 1. This writ petition has been filed by the petitioner assessee being aggrieved of the order dated 27/1/2010 passed by the Chief Commissioner of Income Tax, Udaipur under Section 10(23C) of the Income Tax Act, 1961 rejecting the application of the petitioner Trust for exemption from tax for Assessment Year 2008-2009 in prescribed Form No. 56D. The petitioner Trust runs a medical college with attached hospital of 450 beds and imparts such education to 150 students of MBBS Course besides running the colleges of Pharmaceutical, Physiotherapy and Nursing having separate intake of students. During the relevant year 2008-2009, the admissions by the petitioner Trust were not made on the basis of merit list/waiting list S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 2/8 prepared on the basis of RPMT-2008 Examination, which system has been approved by the Medical Council of India and Rajasthan University. Against such admissions made by the petitioner Trust, a writ petition, namely; SBCWP No.10858/2008 -Abhishek Sain & Ors. vs. Raj. University of Health Sc. & Ors. was filed before the High Court & learned Single Judge of this Court vide order dated 18/3/2009 held that Medical Council of India Regulations were mandatory and have to be complied with and admissions should have been given on the basis of Common Entrance Test of RPMT – 2008 and merit of Common Entrance Test RPMT – 2008 could not sacrificed even in the aided institutions for which admission to 85% of 150 seats have been made and accordingly the learned Single Judge declared the admissions made by the petitioner Trust against 85% of the seats as illegal. The Division Bench appeal filed by the petitioner Trust, namely DB Civil Special Appeal (Writ) No. 241/2009 also failed and Division Bench vide its judgment dated 3/9/2009 affirmed the decision of learned Single Judge, against which the petitioner Trust is said to have approached the Apex Court by filing Special Leave Petition, namely; SLP (Civil) No. 23763/2009 and there the matter is still pending before the Hon'ble Supreme Court. 2. Learned counsel for the petitioner, Mr. Vikas Balia urged that the right to litigate and contest in courts of law that the admissions S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 3/8 were rightly and legally made by the petitioner Trust cannot be curtailed or shut in indirect manner by denying the exemption from income tax under Section 10(23C) of the Act for which the periodical sanction from the Chief Commissioner of Income Tax was required. He submitted that according to the petitioner Trust, such admissions were legally made and merely because some students challenged the admissions, which litigation is pending before the Apex court as of now, it cannot be said that petitioner was not running the educational institution for educational purposes without profit motive as per the provisions of Section 10(23C) of the Act. He submitted that this is the only reason assigned by the Chief Commissioner of Income Tax in the impugned order dated 27/1/2010. 3. Learned counsel for the petitioner also brought to the notice of the court that for subsequent years i.e. Assessment Year 2010-2011 and onwards, same authority i.e. Chief Commissioner of Income Tax, Udaipur has granted such approval under Section 10(23C) of the Act vide order dated 17/1/2011, a copy of which has been placed on record along with the additional affidavit of the petitioner. 4. On the other hand, learned counsel Mr. K.K.Bissa appearing for the respondent Department submitted that in the subsequent years since no such illegal admission procedure was found out against the petitioner Trust, the necessary approval was granted for such S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 4/8 subsequent years vide order dated 17/1/2011. He submitted that since illegality in admission was committed by the petitioner Trust in the year 2008, the respondent authority could even infer a profit motive in the same and could deny such approval under Section 10(23C) of the Act and, therefore, he has rightly passed the order dated 27/1/2010. 5. Having heard the learned counsels, this Court is of the opinion that the since question of legality of the admissions made by the petitioner Trust is still a matter sub judice before the Apex Court, of course, the Rajasthan High court has held against the petitioner Trust that such admissions were not made in accordance with law vide judgment of learned Single Judge as aforesaid and affirmed by the Division Bench, it cannot be said finally yet that petitioner has committed any such illegality & no such opinion could be formed by the learned Chief Commissioner of Income Tax so long as the matter is pending before the Supreme Court of India and is not decided against the petitioner Trust. 6. Right to litigate a particular issue in the Court of Law is a legal right of any Institution or a Charitable Trust, who is seeking exemption from income tax for which sanction is required by the competent authority within the parameters like no profit motive, or object of education of the Trust etc. laid down under Section 10(23C) S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 5/8 of the Act which are relevant and not the admission procedure undertaken by the petitioner Trust. Nexus between the profit motive and alleged illegal admission is too remote and cannot be presumed without any other adverse material on record against the assessee, for drawing such adverse inference. Learned Chief Commissioner of Income Tax vide order dated 27/1/2010 has only assigned one single reason as stated above to deny the approval under Section 10(23C) of the Act. The relevant portion of the impugned order dated 27/1/2010 is reproduced hereunder for ready reference:- “11. It is also apparent that the Trust is not satisfying essential condition for exemption u/s 10 (23C) (vi) and (via). As per the relevant clause, any income received by any person on behalf of any university or other educational purposes. Moreover, the income earned should be applied wholly and exclusively to the objects for which it is established, i.e. for educational purpose. In the institution's case, the Hon'ble High Court has held that the admissions made for Academic Year 2008-2009 were illegal. The purpose of education would not be served, if the education is for students who have been illegally admitted. The purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise. The spending of funds on education of students who have been admitted illegally will not amount to application of income for the purpose of S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 6/8 education. In the Trust's case, neither the condition regarding existence for the purpose of education nor the application of funds for the objects, are being fulfilled. 12. Keeping in view the above discussion and the decision of the Hon'ble High Court, I hereby reject the trust's application for approval under Section 10(23C) (vi) and (via) for A.Y. 2008-09 onwards. Sd/- (Mukesh Bhanti) Chief Commissioner of Income-tax, Udaipur.” 7. The subsequent order granting such approval passed on 17/1/2011 subject to usual conditions reads as under:- “In exercise of powers conferred on me by the sub-clause (vi) of clause (23C) of Section 10 of the Income tax Act, 1961 (43 of 1961) read with rule 2CA of the I.T.Rules, 1962, I Chief Commissioner of Income tax, Udaipur hereby accord approval to M/S. GEETANJALI UNIVERSITY TRUST, UDAIPUR (PAN: AAATG9525E) for the purpose of the said section for the assessment year 2010-11 and onwards subject to conditions mentioned hereunder:” 8. If the alleged illegal admissions made by the petitioner Trust in the year 2008-09 could be a valid criteria or relevant consideration S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 7/8 for denying approval under section 10(23C) of the Act, such alleged illegal admissions continued in the subsequent years also as those students continued to be in the college for subsequent years also and the same authority on the same set of facts, once denied the approval and subsequently granted such approval for subsequent years. This incongruity in the two orders itself repels the argument of learned counsel for the respondent Revenue. 9. In the opinion of this court also, this ground alone as such could not be relevant and a valid basis for refusing the approval under Section 10(23C) of the Act to the petitioner Trust especially since the matter is still pending before the Hon'ble Supreme Court. Of course, the authority concerned is free to apply its mind and take into account the relevant consideration while deciding the case of petitioner Trust under Section 10(23C) of the Act as laid down in the provisions of Section 10(23C) itself and if there are other grounds made out of rejection of its case under Section 10(23C) of the Act or say if Hon'ble Supreme court of India also holds against the petitioner, the authority concerned may be justified in denying the exemption under Section 10(23C) of the Act. 10. Consequently, the present writ petition is allowed & setting aside the impugned order Annex. 16 dated 27/1/2010 passed by the learned Chief Commissioner of Income Tax under Section 10(23C) S.B.CIVIL WRIT PETITION NO. 11799/2010 - Geetanjali University Trust vs. CCIT, Udaipur & Anr. Order dt: 24/11/2011 8/8 of the Act, the said authority is left free to decide afresh the said proceedings for A.Y. 2008-09 and onwards till A.Y. 2010-11 by passing fresh speaking order under Section 10(23C) of the Act for Assessment Year 2008-09 to Assessment Year 2010-11 after affording opportunity of hearing to the petitioner Trust. No order as to costs. (DR.VINEET KOTHARI), J. item no. 29 baweja/- "