Appeal Details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 6080 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 3 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-02-2018
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Assessment Year
misc
Appeal Filed On
07-11-2014
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA.NO.2934/AHD/2014 / ASSTT.YEAR : - INDUS UNIVERSITY A-1, SKY LARK APARTMENTS SATELLITE ROAD SATELLITE AHMEDABAD 380 015. PAN : AAALI 0222 L VS ACIT, CIR.5(3) AHMEDABAD. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. DIVETIA, WITH SHRI P.D. SHAH, AR REVENUE BY : MS. AP ARNA AGRAWAL, CIT - DR / DATE OF HEARING : 25/01/2018 / DATE OF PRONOUNCEMENT: 20/02/2018 !'/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.DIT(EXEMPTIONS), AHMEDABAD, DATED 29.09.2014 PAS SED UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. 2. THOUGH THE ASSESSEE HAS TAKEN THREE GROUNDS OF A PPEAL ALONG WITH SUB- GROUNDS, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. THE ITA NO.2934/AHD/2014 2 LD.DIT(EXEMPTION) HAS ERRED IN NOT GRANTING REGISTR ATION UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE UNIVERSITY ENGAGED IN IMPARTING EDUCATION. IT WAS APPROVED BY VIRTUE OF OFFICIAL GAZETTE ON 11.4.2012 OF GOVERNMENT OF GUJARAT AND ESTABLISH ED AS UNIVERSITY UNDER GUJARAT PRIVATE UNIVERSITY ACT, 2009 (GPUA FOR SH ORT) VIDE GOVERNMENT NOTIFICATION DATED 28.1.2014. THE ASSESSEE-UNIVERS ITY HAS APPLIED FOR GRANT OF REGISTRATION UNDER SECTION 12AA OF THE ACT VIDE APP LICATION DATED 29.3.2014 IN FORM NO.10A. ON RECEIPT OF APPLICATION THE LD.D IT(E) CALLED FOR NECESSARY DETAILS. AFTER AN INQUIRY, LD.DIT(E) HAS OBSERVED THAT SECTION 10 OF GPUA AUTHORISES GOVT. OF GUJARAT TO ESTABLISH INSTITUTIO NS SPECIFIED IN COLUMN 2 OF SCHEDULE AS A PRIVATE UNIVERSITY OF SPONSORING BO DY. THUS, IN VIEW OF NOTIFICATION, INSTITUTION INDUS UNIVERSITY AHMEDA BAD WAS ESTABLISHED AS PRIVATE UNIVERSITY UNDER GPUA AND SPONSORING BODY AS A BHANDARI CHARITABLE TRUST (BCT FOR SHORT). ACCORDING TO T HE LD.DIT(E) NOTIFICATION OF GOVT. OF GUJARAT SIMPLY DECLARED INSTITUTION, I NDUS UNIVERSITY AS A PRIVATE UNIVERSITY. HE ALSO OBSERVED THAT GPUA D OES NOT ENSURE THAT INSTITUTION IS NON-PROFIT ORGANIZATION. HENCE, HE CALLED FOR FURTHER DETAILS, AND THEREAFTER EXAMINED VARIOUS PROVISIONS OF GPUA. T HE LD.DIT HAS ASSIGNED FOUR REASONS FOR NOT GRANTING ASSESSEE REGISTRATION UNDER SECTION 12AA OF THE ACT. WE DEEM IT APPROPRIATE TO TAKE NOTE OF THESE FOUR REASONS, WHICH READ AS UNDER: I) WITH RESPECT TO THE CONTROL IT IS SEEN FROM CLA USE 2 OF CHAPTER 3; NAMELY 'OFFICERS OF INDUS UNIVERSITY' AND READ WITH CHAPTER 4 'AUTHORITIES OF INDUS UNIVERSITY' THAT BOARD OF GOV ERNANCE AS WELL AS BOARD OF MANAGEMENT IS ENTIRELY CONTROLLED BY SPONSORING BODY NAMELY BHANDARI CHARITABLE TRUST. B OARD OF GOVERNANCE CONSISTS OF CHAIRMAN WHO IS PATRON (PRES IDENT), ALTERNATE CHAIRMAN WHO IS ASSOCIATE PATRON AND THE VICE ITA NO.2934/AHD/2014 3 CHAIRMAN, EXECUTIVE PRESIDENT WHO IS ALSO A PROVOST , EXECUTIVE VICE PRESIDENT WHO IS ADDITIONAL PROVOST, 4 PERSONS TO BE NOMINATED BY THE SPONSOR, 2 DEANS TO BE NOMINATED B Y EXECUTIVE PRESIDENT WITH PRIOR APPROVAL OF PATRON E TC. AND BOARD OF MANAGEMENT SIMILARLY CONSISTS OF CHAIRMAN WHO IS PATRON, CO-CHAIRMAN WHO IS ASSOCIATE PATRON, VICE C HAIRMAN WHO IS EXECUTIVE PRESIDENT, TWO MEMBERS OF BOARD OF GOVERNANCE NOMINATED BY SPONSORING BODY, OTHER TWO MEMBERS TO BE NOMINATED BY SPONSORING BODY, 3 MEMBERS FROM FACULTY MEMBERS TO BE NOMINATED BY SPONSORING BODY ETC. FUR THER THE PATRON (PRESIDENT) IS NOMINATED BY SPONSORING BODY, ASSOCIATE PATRON IS NOMINATED BY SPONSORING BODY, EXECUTIVE P RESIDENT (PROVOST) IS APPOINTED BY PATRON WHO IS NOMINATED B Y SPONSORING BODY, EXECUTIVE VICE PRESIDENT ( ADDL. P ROVOST) IS APPOINTED BY PATRON WHO IS NOMINATED BY THE SPONSOR ING BODY, REGISTRAR APPOINTED BY THE PATRON WITH THE APPROVAL OF THE SPONSORING BODY. THIS SHOWS THAT THE UNIVERSITY IS NOT INDEPENDENT BUT IS FULLY CONTROLLED BY THE SPONSORI NG BODY TRUST WHICH HAS BEEN DENIED EXEMPTION U/S 12. IF THE UNIV ERSITY IS NOT AN INDEPENDENT BODY, ITS EXISTENCE AS A LEGAL JURID ICAL PERSON GETS COMPROMISED. II) WITH RESPECT TO THE FUNDS, IT IS SEEN THAT THERE IS COMPLETE INTER- MINGLING OF FUNDS ALSO. THE BALANCE SHEET AS ON 31/ 3/2013 OF THE INDUS UNIVERSITY SHOWS UNSECURED LOANS OF RS.3.15 C RORE FROM BHANDARI CHARITABLE TRUST, THE SPONSORING BODY WHIC H FROM THE BALANCE SHEET APPEARS TO HAVE INVESTED IN FIXED ASS ETS ETC. OF 4.05 CRORES. HOWEVER, PERUSAL OF THE FIXED ASSET SC HEDULE SHOWS THAT ITS FIXED ASSETS COMPRISE OF PAPERS, FURNITURE AND FIXTURES, BOOKS, OFFICE EQUIPMENTS, SCIENTIFIC INSTRUMENTS, S OFTWARE AND VARIOUS OTHER FIXED ASSETS TO THE TUNE OF RS.4.10 C RORES WHICH WERE TRANSFERRED FROM SPONSOR TRUST I.E. BHANDARI C HARITABLE TRUST. THE AUDITORS' REPORT ANNEXED TO THE FINAL AC COUNTS SHOWS THAT BHANDARI CHARITABLE TRUST WAS ALREADY CARRYING ON EDUCATIONAL ACTIVITIES SINCE 2006 IN THE NAME OF IN DUS INSTITUTE OF TECHNHNOLOGY AND ENGINEERING AND ON FORMATION OF IN DUS UNIVERSITY, ALL EDUCATIONAL ACTIVITIES HAVE BEEN TA KEN OVER BY THE UNIVERSITY. FURTHER THE SIGNIFICANT ACCOUNTING POLI CIES OF THE AUDIT REPORT SHOW THAT BORROWING COST INCLUDES INTE REST WHICH THE UNIVERSITY IS GIVING INTEREST ON THE UNSECURED LOANS. THE COMBINED READING OF INCOME-EXPENDITURE ACCOUNT AND BALANCE SHEET DOES NOT MAKE IT CLEAR AS TO WHETHER THE UNSE CURED LOAN IS ITA NO.2934/AHD/2014 4 PART OF THE FIXED ASSETS TRANSFERRED OR IT IS A SEP ARATE ENTITY BUT IT APPEARS THAT IT SHOULD BE A PART OF THE TRANSFERRED ASSETS. IT IS ALSO NOT CLEAR AS TO THE VALUE AT WHICH THESE ASSET S HAVE BEEN TRANSFERRED BECAUSE THE SPONSORING BODY WAS RUNNING THE COLLEGE SINCE 2006 AND ALL THESE ASSETS BY NOW MUST BE HIGHLY DEPRECIATED ASSETS. III) IT IS VERY PERTINENT TO NOTE THAT ON WINDING UP OF UNIVERSITY I.E. ON DISSOLUTION OF THE UNIVERSITY, ASSETS OF THE UNI VERSITY WILL GO BACK TO THE SPONSORING BODY I.E. BHANDARI CHARITABL E TRUST. IN FACT SECTION 41(1) OF THE GUJARAT PRIVATE UNIVERSIT IES ACT SAYS THAI SPONSORING BODY CAN DISSOLVE ITSELF AND SECTIO N 42(1) OF THE GUJARAT PRIVATE UNIVERSITIES ACT SAYS THAT SPONSORI NG BODY CAN DISSOLVE THE UNIVERSITY, HENCE THE UNIVERSITY IS TO TALLY DEPENDENT UPON THE WISHES OF THE SPONSORING BODY AND WHENEVER THE SPONSORING BODY WANTS, THE UNIVERSITY CAN BE DISSOL VED. FURTHER, SUB-SECTION 2 OF SECTION 42 OF THE CUJARAT PRIVATE UNIVERSITIES ACT SAYS THAT ON DISSOLUTION OF THE UN IVERSITY, ALL THE ASSETS AND LIABILITIES OF THE UNIVERSITY SHALL VEST IN THE SPONSORING BODY IN THE MANNER AS MAY BE PRESCRIBED. THIS MEANS ALL THE ASSETS WHICH ARE PURCHASED/ACQUIRED B Y THE UNIVERSITY THROUGH ITS INCOME WHICH WOULD BE EXEMPT U/S 10(23C)(VI) WILL GO BACK TO THE SPONSORING BODY AND THIS IS AGAINST THE SPIRIT OF CHARITABLE TRUST WHEREUPON DI SSOLUTION, NO ASSETS ARE ALLOWED TO GO BACK TO THE FOUNDER, TRUST EES OR DONORS ETC. IN THE PRESENT CASE, THE ENTIRE ASSETS WILL GO BACK TO BHANDARI CHARITABLE TRUST, THE SPONSORING BODY. BHA NDARI CHARITABLE TRUST IS NO MORE CHARITABLE AS IT DOES N OT HAVE ANY CHARITABLE ACTIVITY IN THE F.Y.2012-13 AND 2013-14 AS NO EVIDENCE OF ANY SUCH ACTIVITY WAS GIVEN BY BHANDARI CHARITABLE TRUST. BHANDARI CHARITABLE TRUST HAS ALSO BEEN DE NIED REGISTRATION VIDE ORDER DATED 29/09/2014. IV) FURTHER, PERUSAL OF THE BANK STATEMENT SHOWS THAT F OR THE F.Y.2012-13, THE AXIS BANK SHOWS PAYMENT OF RS.25 L ACS ON 7/9/2012, RS.22 LACS ON 12/9/2012, RS.15 LACS ON 26 OR 27/9/2012, RS.1.5 LAC ON 5/10/2012, RS.6 LACS ON 9/ 11/2012 TO BHANDARI CHARITABLE TRUST AND RS.4 LACS ON 9/11/201 2, RS.63 LACS ON 17/1/2013, RS.60 LACS ON 14/2/2013 AND RS.6 2 LACS ON 13/3/2013 TO INDUS UNIVERSITY. FURTHER PERUSAL OF A NOTHER BANK ACCOUNT NO.029976200000433 OF IIDFC BANK SHOWS THAT AN AMOUNT OF RS.31 LACS ON 1/8/2012 WAS PAID TO BHANDA RI ITA NO.2934/AHD/2014 5 CHARITABLE TRUST. THIS ACCOUNT ALSO SHOWS THAT FOR EVERY SALARY PAYMENT OF INDUS UNIVERSITY, FUNDS HAVE BEEN RECEIV ED FROM BHANDARI CHARITABLE TRUST AND THEN PAYMENTS HAVE BE EN MADE. FURTHER PERUSAL OF THIS ACCOUNT SHOWS THAT AN AMOUN T OF RS.34 LACS ON 12/9/2012, RS.LL LACS ON 15/9/2012 WAS PAID TO BHANDARI CHARITABLE TRUST. THIS CLEARLY SHOWS THAT ENTIRE FU NDS ARE INTER- MINGLED. IT IS SIMPLY NOT THAT IN THE TIMES OF NEED , THE UNIVERSITY IS TAKING FUNDS BUT IT IS ALSO GIVING HUGE AMOUNTS OF FUNDS TO BHANDARI CHARITABLE TRUST. THE FUNDS OF UNIVERSITY SHOULD TOTALLY BE INDEPENDENT BUT HERE IT SEEMS THAT BETWE EN THE UNIVERSITY AND BHANDARI CHARITABLE TRUST, THERE ARE CONSTANT FUND TRANSFERS LIKE CURRENT ACCOUNT. THIS IS SERIOU S ISSUE IN THE LIGHT OF THE FACT THAT THE CONTROL OF THE UNIVERSIT Y IS FULLY WITH BHANDARI CHARITABLE TRUST AS STATED ABOVE. 4. WE HAVE HEARD SHRI DIVETIA FOR THE APPELLANT AND LD.CIT-DR FOR THE REVENUE. WHILE IMPUGNING ORDER OF THE LD.DIT(E), S HRI DIVETIA TOOK US THROUGH VARIOUS PROVISIONS OF GPUA AND POINTED OU T THAT THE LD.DIT(E) FAILED TO COMPREHEND COMPLETE SCHEME OF ESTABLISHME NT OF A PRIVATE UNVIERISTY. HE ALSO POINTED OUT THAT UNDER SIMILAR CIRCUMSTANCES REGISTRATION TO RAI UNIVERSITY, SARODA POST, DHOLKA, AHMEDABAD W AS DENIED BY THE DIT, BUT ON APPEAL, IT WAS ALLOWED BY THE TRIBUNAL. HE PLACED ON RECORD COPY OF TRIBUNALS ORDER IN ITA NO.1246/AHD/2014. THE TRIB UNAL VIDE ITS ORDER DATED 10.6.2015 ALLOWED APPEAL OF THE ASSESSEE AND DIRECTED THE DIT(E) TO GRANT REGISTRATION TO THE ASSESSEE-UNIVERSITY. ACC ORDING TO SHRI DIVETIA, CONDITIONS ENUMERATED BY THE LD.DIT(E) IN THE PRESE NT CASE WERE IDENTICAL IN THAT CASE. 5. ON THE OTHER HAND, THE LD.CIT-DR CONTENDED THAT IN THE CASE OF RAI UNIVERSITY ITS SPONSORING BODY WAS ENJOYING REGISTR ATION UNDER SECTION 12AA OF THE ACT, WHEREAS IN THE CASE OF THE ASSESSEE BC T WAS NOT HAVING REGISTRATION UNDER SECTION 12AA. THIS SPONSORING B ODY COULD DISSOLVE THE UNIVERSITY AND NOWHERE IT WAS PROVIDED THAT WHAT WI LL HAPPEN TO THE ASSETS OF ITA NO.2934/AHD/2014 6 ASSESSEE ON DISSOLUTION OF THE UNIVERSITY AS WELL A S TRUST. THUS, THE LD.DIT HAS RIGHTLY REJECTED GRANT OF REGISTRATION TO THE A SSESSEE. 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 2(15) AND 12AA HAVE DIRECT BEAR ING ON THE CONTROVERSY. THEREFORE, WE DEEM IT APPROPRIATE TO TAKE NOTE OF R ELEVANT PART OF THE PROVISIONS, WHICH READS AS UNDER: SECTION 2(15) CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, [YOGA,] MEDICAL RELIEF, [PRESERVATION OF ENVIRONMENT (INCL UDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST,] AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY [PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES T HE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDE RATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRY ING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVI TIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIES, OF THAT PREVIOUS YEAR;]] X X X X X SECTION 12AA 12AA. (1) THE PRINCIPAL COMMISSIONER OR COMMISSIONE R, ON RECEIPT OF AN APPLICATION FOR REGISTRATION OF A TRUST OR INSTI TUTION MADE UNDER CLAUSE (A) OR CLAUSE (AA) [OR CLAUSE (AB)] OF SUB- SECTION (1)] OF SECTION 12A, SHALL ITA NO.2934/AHD/2014 7 (A) CALL FOR SUCH DOCUMENTS OR INFORMATION FROM TH E TRUST OR INSTITUTION AS HE THINKS NECESSARY IN ORDER TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF THE TRUST OR INSTITUTI ON AND MAY ALSO MAKE SUCH INQUIRIES AS HE MAY DEEM NECESSARY IN THI S BEHALF; AND (B) AFTER SATISFYING HIMSELF ABOUT THE OBJECTS OF THE TRUST OR INSTITUTION AND THE GENUINENESS OF ITS ACTIVITIES, HE (I) SHALL PASS AN ORDER IN WRITING REGISTERING TH E TRUST OR INSTITUTION; (II) SHALL, IF HE IS NOT SO SATISFIED, PASS AN ORD ER IN WRITING REFUSING TO REGISTER THE TRUST OR INSTITUTION, AND A COPY OF SUCH ORDER SHALL BE SENT TO THE APPLI CANT : PROVIDED THAT NO ORDER UNDER SUB-CLAUSE (II) SHALL BE PASSED UNLESS THE APPLICANT HAS BEEN GIVEN A REASONABLE OPPORTUNITY O F BEING HEARD. XX XX XX XX XX 7. A PERUSAL OF SECTION 2(15) OF THE INCOME TAX ACT WOULD INDICATE THAT IT PROVIDES MEANING OF EXPRESSION CHARITABLE PURPOSE AND IN THAT STRIDE, THE ACTIVITY PERFORMED BY AN ASSESSEE FOR FALLING IN TH E AMBIT OF CHARITABLE PURPOSE HAVE BEEN DIVIDEND IN TWO CATEGORY. THE F IRST CATEGORY IS RELIEF TO POOR, EDUCATION, YOGA, MEDICAL RELIEF . WHICH ARE PER SE FOR CHARITABLE PURPOSE AND SECOND CATEGORY IS ADVANCEMENT OF ANY O THER OBJECT OF GENERAL PUBLIC UTILITY. IN THE CASE OF SECOND CATEGORY PRO VISO TO THIS SECTION IS ATTRACTED. THIS PROVISO CONTEMPLATES THAT IF AN ASSESSEE IS DOING ADVANCEM ENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY, THE N IT IS TO BE SEEN WHETHER SUCH OBJECTS OF GENERAL PUBLIC UTILITY ARE BEING CARRIED OUT IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. IF IT IS BEING CARRIED OUT I N THIS MANNER, THEN PROVISO TO SECTION 2(15) WOULD BE APPLICABLE ON SUCH INSTIT UTIONS. IT IS PERTINENT TO OBSERVE THAT THE ASSESSEE IS A UNIVERSITY AND DOES NOT ENGAGE IN ADVANCEMENT OF ANY GENERAL PUBLIC UTILITY. THUS, IN THE CASE O F ASSESSEE PROVISO IS NOT APPLICABLE. ITS ACTIVITIES FALL WITHIN THE MEANING OF EXPRESSION CHARITABLE PURPOSE PROVIDED IN SECTION 2(15) OF THE ACT, BECA USE, IT IS SOLELY ENGAGED IN IMPARTING EDUCATION. A BARE PERUSAL OF SECTION 12A A WOULD INDICATE THAT ITA NO.2934/AHD/2014 8 WHEN ANY TRUST OR INSTITUTION WOULD APPLY FOR GRANT OF REGISTRATION UNDER SECTION 12AA THEN THE LD.COMMSSIONER SHALL CALL FOR SUCH DOCUMENTS OR INFORMATION FROM TRUST OR INSTITUTION AS THEY MAY B E NECESSARY TO SATISFY HIMSELF ABOUT THE GENUINENESS OF ACTIVITIES OF TRUS T OR INSTITUTION AND MAY ALSO MAKE SUCH INQUIRY AS HE MAY DEEM NECESSARY IN THIS BEHALF. IF THE LD.DIT(E) IS SATISFIED ABOUT THE OBJECTS OF THE TRUST OR INST ITUTION AND GENUINENESS OF ACTIVITIES, HE SHALL PASS AN ORDER IN WRITING REGIS TERING THE TRUST OR INSTITUTION. IF HE HAS NOT SATISFIED THEN HE WOULD REJECT REGIST RATION APPLICATION. THUS, WE HAVE TO EVALUATE WHETHER REASONS ASSIGNED BY THE LD .DIT(E) ARE SUFFICIENT TO DEMONSTRATE DOUBT ON THE GENUINENESS OF ASSESSEES OBJECTS. LET US TAKE INTO CONSIDERATION FOUR REASONS ASSIGNED BY THE LD.DIT(E ) FOR REFUSING THE REGISTRATION. THE FIRST REASONS ASSIGNED BY THE LD .DIT(E) IS THAT THE UNIVERSITY IS NOT INDEPENDENT BUT IS FULLY CONTROLLED BY SPONS ORING BODY TRUST WHICH HAS BEEN DENIED EXEMPTION UNDER SECTION 12A AND IF IT I S NOT AN INDEPENDENT BODY, ITS EXISTENCE AS A LEGAL JURISTIC PERSON GETS COMPROMISED. TO OUR MIND, THE LD.DIT(E) FAILED TO APPRECIATE PROVISIONS OF GU JARAT PRIVATE UNIVERSITY ACT, 2009. HE MADE REFERENCE TO CLAUSE 2 OF CHAPTE R 3 OF SUCH ACT BUT READ THE SCHEME OF THE ACT IN A SELECTIVE MANNER. THERE IS NO DISPUTE THAT IN FURTHERANCE OF OBJECTS CONTEMPLATED UNDER GPUA, T HE ASSESSEE-UNIVERSITY HAS BEEN ESTABLISHED. ACCORDING TO SUB-SECTION (4) OF GPUA, OBJECTS OF THE UNIVERSITY ESTABLISHED WOULD BE TO CREATE, ORGANIZE , PRESERVE AND DISSEMINATE KNOWLEDGE IN THE FIELDS OF SCIENCE, TECHNOLOGY, HUM ANITIES, SOCIAL SCIENCE, EDUCATION, MANAGEMENT, COMMERCE, LAW ETC. IT MEANS BEFORE APPROVING ITS FIRST STATUTE AND ESTABLISHING ASSESSEE AS A PRIVAT E UNIVERSITY, SCREENING BODY HAVE VISUALIZED OBJECTS OF THE ASSESSEE-UNIVERSITY AND ONLY THEREAFTER APPROVAL WAS GRANTED. AS FAR AS REFERENCE MADE BY THE LD. DIT WITH REGARD TO CLAUSE 2 OF CHAPTER 3 IS CONCERNED, THE LD.DIT HAS OBSERVED THAT BOARD OF GOVERNANCE AS WELL AS BOARD OF MANAGEMENT IS ENTIRELY CONTROLL ED BY SPONSORING BODY ITA NO.2934/AHD/2014 9 VIZ. BHANDARI CHARITABLE TRUST. HOWEVER, IN SECTIO N 13 OF GPUA IT HAS BEEN PROVIDED THAT OFFICERS OF UNIVERSITY VIZ. PRESIDENT , PROVOST, RGISTRAR, CHIEF FINANCE AND ACCOUNTS OFFICERS AND SUCH OTHER OFFICE R AS MAY BE DECLARED BY THE STATUTE TO BE THE OFFICERS OF THE ASSESSEE-UNIV ERSITY. PRESIDENT SHALL BE APPOINTED BY THE SPONSORING BODY IN CONSULTATION WI TH STATE GOVERNMENT FOR A PERIOD OF THREE YEARS BY FOLLOWING SUCH PROCEDURES AND ON SUCH TERMS AND CONDITIONS AS MAY BE PRESCRIBED BY THE STATUTE. TH E PRESIDENT SHALL PRESIDE AT THE MEETING OF THE GOVERNING BODY. THUS, IN THE AC T A MECHANISM HAS BEEN PROVIDED THAT THERE WILL BE SEARCH COMMITTEE AND IT WILL BE SEARCHING EMINENT PERSONALITIES AND PROFESSIONALS TO BE APPOINTED BY THE BOARD OF MANAGEMENT. AT EVERY STAGE THERE WOULD BE A CONSULTATION WITH T HE STATE GOVERNMENT. APART FROM THE ABOVE, IT IS PERTINENT TO OBSERVE TH AT HOW THIS ASPECT IS RELEVANT TO TEST GENUINENESS OF OBJECTS OF THE UNIVERSITY. OBJECTS OF THE UNIVERSITY ARE TO IMPART EDUCATION. WHETHER SUCH EDUCATION IS BEI NG IMPARTED IN A CONTROLLED MANNER, FINANCIALLY OR ADMINISTRATIVELY, THEN THOSE OBJECTS WOULD NOT CHANGE. IF SOME ACTIONS AT THE END OF THE ASSE SSEE ARE BEING TAKEN AGAINST THE PROVISIONS OF INCOME TAX ACT AND THEN SECTION 1 3 ETC. ARE ALREADY THERE TO KEEP A CHECK OF MISUSE OF POWERS. 8. NEXT REASONS ASSIGNED BY THE LD.DIT IS THAT UNIV ERSITY HAS SHOWN UNSECURED LOAN OF RS.3.15 CRORES FROM BHANDARI CHAR ITABLE TRUST. AGAIN, IT IS NOT A RELEVANT FACTOR TO DETERMINE GENUINENESS OF O BJECTS. ALL FINANCIAL AFFAIRS IF MISUSED CAN BE CONSIDERED AT THE TIME OF ASSESSM ENT PROCEEDINGS WITH THE HELP OF SECTION 13. SIMILARLY, IN REASON NO.4, THE LD.DIT MADE REFERENCE TO VARIOUS BANK STATEMENTS IN ORDER TO DEMONSTRATE AS TO HOW FUNDS HAVE BEEN PAID TO BCT OR BY THE BCT TO UNIVERSITY. AS OB SERVED EARLIER SECTION 13 OF THE INCOME TAX ACT CONTEMPLATES THAT IF CERTAIN ISSUES FALLING WITHIN THE AMBIT OF THIS SECTION ARE AVAILABLE IN CASE OF A CH ARITABLE INSTITUTION, THEN BENEFIT OF SECTION 11 WILL NOT AVAILABLE. FOR EXAM PLE, IF SOME UNDUE BENEFIT IS ITA NO.2934/AHD/2014 10 BEING ADVANCED TO PERSON, WHO IS CLOSELY ASSOCIATED WITH THE MANAGEMENT OR INSTITUTION, THEN, THE AO COULD ALWAYS DETERMINE FA IR MARKET VALUE OF THE SERVICES BY SUCH PERSON AND RESTRICT BENEFIT TO HIM IN ACCORDANCE WITH MARKET PRICE. BALANCE IF ANY WILL BE TAXABLE. IN THE PRE SENT CASE, EVEN IF THE ASSESSEE HAS TAKEN FUNDS FROM BCT IT WILL NOT BE AFFECT IT S OBJECTS, IF IT HAS EXTENDED SOME UNDUE BENEFITS TO BCT THEN SAFEGUARDS ARE AL READY THERE UNDER SECTION 13 OF THE INCOME TAX ACT. REGISTRATION CANNOT BE R EJECTED AT THE THRESHOLD ONLY UNDER AN ANTICIPATION THAT SOMETHING COULD BE CONTROLLED EITHER BY THE BCT OR SOME UNDUE BENEFIT WOULD BE GIVEN TO BCT . THESE ARE CONCERNS WHICH CAN ALWAYS BE LOOKED INTO AT THE TIME OF ASSE SSMENT PROCEEDINGS. 9. THIRD REASON GIVEN BY THE LD.DIT(E) IS THAT SECT IONS 41 AND 42 OF THE GUJARAT PRIVATE UNIVERSITY ACT AUTHORISE SPONSORING BODY TO DISSOLVE UNIVERSITY AND ON SUCH DISSOLUTION ASSETS COULD BE TAKEN BY SPONSORING BODY. SINCE BCT WAS NOT HAVING REGISTRATION UNDER SECTI ON 12 THEN ASSETS COULD BE MANIPULATED. WE ARE OF THE VIEW THAT THIS APPRE HENSION IS TOTALLY MISPLACED AND AGAINST SCHEME OF ASSESSMENT OF CHARI TABLE INSTITUTION PROVIDED IN SECTIONS 11 TO 13 OF THE INCOME TAX ACT, THOUGH SAFEGUARDS HAVE ALREADY PROVIDED IN SECTIONS 41 AND 42 OF GPUA. LET US T AKE NOTE OF THESE PROVISIONS WHICH READS AS UNDER: CHAPTER IX WINDING UP OF UNIVERSITY 41 (1) IF THE SPONSORING BODY PROPOSES TO DISSOLVE ITSELF ACCORDING TO THE PROVISIONS OF LAW GOVERNING ITS CONSTITUTION OR INCORPORATION, IT SHALL GIVE AT LEAST SIX MONTHS PRIOR NOTICE TO THE STATE GOVERNMENT. (2) THE STATE GOVERNMENT SHALL, ON RECEIPT OF SUCH NOTICE MAKE SUCH ARRANGEMENTS AS MAY BE NECESSARY, FOR THE ADMINISTR ATION OF THE UNIVERSITY FROM THE DATE OF DISSOLUTION OF THE SPON SORING BODY TILL THE COMPLETION OF SYLLABUS BY THE LAST BATCH OF STUDENT S ADMITTED TO THE UNIVERSITY AND MAY ALSO CAUSE THE FUNCTIONING OF TH E UNIVERSITY TO ITA NO.2934/AHD/2014 11 CONTINUE BY APPOINTING AN ADMINISTRATOR IN PLACE OF THE SPONSORING BODY, WHO SHALL BE ENTRUSTED WITH THE POWERS, DUTIE S AND FUNCTIONS OF THE SPONSORING BODY AS PRESCRIBED UNDER THIS ACT, 42. (1) THE SPONSORING BODY WHO INTENDS TO DISSOLVE THE UNIVERSITY SHALL GIVE A NOTICE TO THAT EFFECT IN THE PRESCRIBED MANNER TO THE STATE GOVERNMENT. THE STATE GOVERNMENT, AF TER DUE CONSIDERATION, MAY DISSOLVE THE UNIVERSITY IN THE M ANNER AS MAY BE PRESCRIBED; PROVIDED THAT THE DISSOLUTION OF THE UNIVERSITY SHA LL HAVE EFFECT ONLY AFTER THE LAST BATCHES OF STUDENTS OF THE REGULAR C OURSES HAVE COMPLETED THEIR COURSES AND THEY HAVE BEEN AWARDED DEGREES, D IPLOMAS OR, AS THE CASE MAY BE, AWARDS. (2) ON THE DISSOLUTION OF THE UNIVERSITY ALL THE AS SETS AND LIABILITIES OF THE UNIVERSITY SHALL VEST IN THE SPONSORING BODY IN THE MANNER AS MAY BE PRESCRIBED, (3) WHERE THE STATE GOVERNMENT DECIDES UNDER SUB-SE CTION (1) TO DISSOLVE THE UNIVERSITY, IT MAY VEST THE POWERS OF THE GOVERNING BODY IN THE PRESCRIBED MANNER TO OTHER SOCIETIES HAVING SIMILAR OBJECTS TILL THE DISSOLUTION OF THE UNIVERSITY TAKES EFFECT UNDE R THE PROVISO TO SUB- SECTION (1). 10. APART FROM ABOVE, IF A CHARITABLE INSTITUTION E NJOYING BENEFIT UNDER SECTION 12A IS BEING DISSOLVED THEN EITHER THOSE AS SETS WOULD BE GIVEN TO OTHER INSTITUTIONS BEING CHARITABLE TRUST AND ENJOY ING BENEFIT UNDER SECTION 12A, IN CASE THE ASSETS ARE BEING PARTED WITH EITHE R INDIVIDUAL ENTITY OR INSTITUTION, WHO ARE NOT HAVING CHARITABLE OBJECTS OR REGISTRATION UNDER SECTION 12A, THEN UNDER THE SCHEME OF THE ACT IT WILL FIRST SUFFER TAX, ONLY THEREAFTER, IT WILL VEST IN SUCH INDIVIDUAL OR ENTITY. THIS IS NO T A VALID REASON FOR REJECTING REGISTRATION UNDER SECTION 12A. THE ITAT IN THE CA SE OF RAI UNIVERSITY (SUPRA) HAS OBSERVED THAT AT THE TIME OF REGISTRATI ON, LD.DIT(E) HAS TO SATISFY WITH REGARD TO GENUINENESS OF THE ACTIVITIES OF THE TRUST, AND NOT ANYTHING ELSE. THE FINDING RECORDED IN PARA-9 IN THAT CASE IS WORT H TO NOTE. IT READS AS UNDER: ITA NO.2934/AHD/2014 12 9. IN THE INSTANT CASE, IN CASE OF DISSOLUTION OF UNIVERSITY, PROPERTY WOULD GO TO SPONSORING BODY THAT ITSELF IS REGISTER ED UNDER SECTION 12AA OF THE ACT, SUBJECTED TO THE RELEVANT PROVISIO NS OF THE ACT. UNDISPUTEDLY, THE EDUCATION IS INCLUDED INTO THE DE FINITION OF CHARITABLE PURPOSE AS PER SECTION 2(15) OF THE ACT. IT IS SETT LED POSITION OF LAW THAT AT THE TIME OF REGISTRATION U/S 12AA OF THE ACT, TH E DIT(E) HAS TO SATISFY WITH REGARD TO THE GENUINENESS OF ACTIVITIES OF THE TRUST. IN OUR CONSIDERED VIEW, THE DIT(E) OUGHT TO HAVE GIVEN SPE CIFIC FINDING WITH REGARD TO GENUINENESS OF THE ACTIVITIES OF THE UNIV ERSITY. THE DIT(E) HAS REJECTED THE APPLICATION ON THE GROUND THAT IN CASE OF DISSOLUTION THERE IS NO SAFEGUARD TO THE PROPERTIES CREATED BY THE UNIVERSITY. THERE IS NO FINDING THAT THE UNIVERSITY IS NOT IMPARTING EDUCATION, OR OTHERWISE IMPARTING OF SUCH EDUCATION ON THE BASIS OF COMMERCIAL CONSIDERATION. IT IS POINTED OUT BY THE ID. COUNSEL FOR THE ASSESSEE THAT AS PER THE GUJARAT GOVERNMENT GAZETTE NOTIFICATION UNDER THE PROVISIONS OF THE GUJARAT PRIVATE UNIVERSITIES ACT, 2009, THE UNIVERSITY CANNOT RUN COMMERCIALLY. THE ID. DR COULD NOT CONTR OVERT THE CONTENTION OF THE ID. COUNSEL FOR THE ASSESSEE THAT UNDER THE IDENTICAL FACTS OTHER UNIVERSITIES HAVE BEEN GRANTED REGISTRA TION U/S 12AA BY THE REVENUE. UNDER THESE FACTS, WE ARE OF THE VIEW THAT THE ID. DIT(E) WAS NOT JUSTIFIED IN DECLINING THE REGISTRATION TO THE ASSESSEE U/S.!2AA OF THE INCOME-TAX ACT, 1961. MOREOVER, THE ASSESSEE HAS PL ACED RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS. THE ID. DIT(E) HAS NOT ADVERTED ON THE SUBMISSION OF THE ASSESSEE THAT THE CASE OF THE ASSESSEE IS ALSO COVERED BY THE JUDGMENT OF HON'BLE HIGH COURT OF PU NJAB AND HARYANA IN THE CASE OF CIT VS. O.P. JINDAL GLOBAL UNIVERSIT Y (SUPRA), WHEREIN THE HON'BLE HIGH COURT HAS HELD AS UNDER:- '13. IN ITA NO.701 0/2010 TITLED CIT V. SURYA EDUCA TIONAL & CHARITBALE TRUST [2011] 203 TAXRNAN 53/15 TAXRNANN. COM 123 (PUN] & HAR.) IT HAS BEEN HELD BY THIS COURT THAT A T THE STAGE OF REGISTRATION UNDER SECTION 12AA OF THE ACT, THE EXT ENT AND NATURE OF ACTIVITIES ARE NOT REQUIRED TO BE EXAMINED. THAT QUESTION IS REQUIRED TO BE EXAMINED IN ASSESSMENT PROCEEDINGS. THE COURT OBSERVED AS UNDER: 'THEREFORE, THE OBJECT OF SECTION 12AA OF THE ACT, IS TO EXAMINE THE GENUINENESS OF THE OBJECTS OF THE TRUST, BUT NO T THE INCOME OF THE TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES. THE STAGE OF APPLICATION OF INCOME IS YET TO ARRIVE I.E. WHEN SU CH TRUST OR INSTITUTION FILES ITS RETURN. THEREFORE, WE FIND TH AT THE JUDGMENT REFERRED TO BY THE LEARNED COUNSEL FOR THE APPELLAN T ARE NOT ITA NO.2934/AHD/2014 13 APPLICABLE TO THE FACTS OF THE PRESENT CASE ARISING OUT OF THE QUESTION OF REGISTRATION OF THE TRUST AND NOT OF AS SESSMENT.' 14. THE ISSUE HAS BEEN EXAMINED THAT AT THE STAGE O F REGISTRATION AND FOR EXEMPTION UNDER SECTION 80G OF THE ACT, THE STATED OBJECT OF THE TRUST IS REQUIRED TO BE EXAMINED. WHETHER TH E FUNDS ARE PROPERLY APPLIED OR NOT, CAN BE EXAMINED BY THE ASS ESSING OFFICER AT THE TIME OF FRAMING THE ASSESSMENT.' THEREFORE, WE HEREBY SET ASIDE THE ORDER OF THE DIT (E) AND DIRECT HIM TO GRANT THE REGISTRATION TO THE ASSESSEE-UNIVERSIT Y. THUS, THE ASSESSEES APPEAL IS ALLOWED. 11. TAKING INTO CONSIDERATION ALL THESE FACTS AND C IRCUMSTANCES, WE ALLOW THIS APPEAL OF THE ASSESSEE AND SET ASIDE THE IMPUG NED ORDER. WE DIRECT THE LD.DIT(E) TO GRANT REGISTRATION TO THE ASSESSEE-UNI VERSITY UNDER SECTION 12AA OF THE INCOME TAX ACT, 1961. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 20 TH FEBRUARY, 2018 AT AHMEDABAD. SD/- SD/- ( AMARJIT SINGH ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER
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