The Vice Chancellor, Belgaum V. Asst. Commissioner of Income Tax, Belgaum

ITA 70/PAN/2012

• Counselvise Citation: 7024114 RSA 2012
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 12-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DILIP KUMAR CCIT
• Assessee Lawyers: AARVVIND KUBSAD
• Keywords: Reopening of assessment; Gift; Source of fund; Difference of opinion; Reason to believe; Change of opinion
• Section: 234B; 80G; 12A; 12AA; 27; 148

Judgement Text

IN THE IN COME TAX APPELLATE TRIBUNAL, PANAJI BENCH, GOA. BEFORE THE HONBLE ACCOUNTANT MEMBER, SHRI P.K. BANSAL & HONBLE JUDICIAL MEMBER, SHRI D.T. GARASIA I.T.A NOS.65 TO 70(PNJ)/2012 (ASSESSMENT YEARS: 2004 - 05 TO 2009 - 10) VISVESWARAYA TECHNOLOGICAL UNIVERSITY BELGAUM. APPELLANT VS ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE - 1, BELGAUM. RESPONDENT ASSESSEE BY : SHRI AARVVIND KUBSAD, CA REVENUE BY : SHRI DILIP KUMAR, CCIT, DR DATE OF HEARING : 04/ 0 4/ 2013 DATE OF PRONOUNCEMENT : 21 /06/2013 O R D E R PER SHRI D.T.GARASIA, JM THIS APPEAL HAS BEEN FILED BY TH E ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT( A),BELGAUM DATED 04 - 09 - 2012 FOR THE ASSESSMENT YEARS 2004 - 05 TO 2009 - 10 RESPECTIVELY. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ALL APPEAL S FOR A.Y 2004 - 05 TO 2009 - 10 RESPECTIVELY ; 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME - TAX(A) ERRED IN UPHOLDING THE ASSESSMENT AS MADE BY THE ASSESSING AUTHORITY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT BEING A NON - TAXABLE ENTITY, THERE WAS NO OBLIGATION ON ITS PART TO FILE THE RETURN OF INCOME AND CONSEQUENTLY HE - 2 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) OUGHT TO HAVE REFRAINED FROM UPHOLDING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT. 3. THE CONDITIONS PRECEDENT BEING ABSENT, THE REOPENING OF THE ASSESSMENT U/S. 147 IS BAD IN LAW. 4. THERE BEING NO OMISSION MUCH LESS AN OMISSION OF DECLARATION OF INCOME IN THE RELEVANT ASSESSMENT YEAR IN THE RETURN OF INCOME FILED BY THE APPELLANT, THE REOPENING OF THE ASSESSMENT U/S. 147 WAS WITHOUT JURISDICTION AND CONSEQUENTLY THE REASSESSMENT IS LIABLE TO BE ANNULLED. 5. WITHOUT PREJUDICE THE LEARNED COMMISSIONER (A) ERRED IN HOLDING THAT THE APPELLANT IS DIFFERENT FROM THE GOVERNMENT/ STATE AND CONSEQUENTLY NOT PROTECTED UNDER ARTICLE 289(1) OF TH E CONSTITUTION OF INDIA AND ACCORDINGLY LIABLE TO BE PROCEEDED UNDER THE INCOME - TAX ACT, 1961. 6. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT UNDER THE VIS WESHWARAIAH TECHNOLOGICAL UNIVERSITY ACT, 1994 IT IS PROVIDED THAT THE APPELLANT IS A CORPORATE ENTITY AND ACCORDINGLY IT HAS DISTINCT IDENTITY OF ITS OWN AND THEREFORE COULD NOT BE CONSIDERED TO BE 'STATE'. 7. THE LEARNED COMMISSIONER (A) FAILED TO APPRECIATE THAT T HE CONSTITUTION OF THE APPELLANT WAS NOT UNDER ANY ENACTMENT TO CONSIDER AS DIFFERENT FROM GOVERNMENT SINCE IT IS BEING GOVERNED AND MONITORED ONLY BY THE EXECUTIVE COMMITTEE APPOINTED BY THE GOVERNMENT AND ALL ITS ACTIVITIES AND FINANCIAL AFFAIRS ARE UNDE R THE CONTROL OF THE GOVERNMENT AND ITS ACCOUNTS ARE TABLED IN THE ASSEMBLY FOR WHICH LEGISLATURE APPROVAL WHICH WOULD GO TO SHOW THAT THE APPELLANT IS A PART OR WING OF THE GOVERNMENT AND THUS THE APPELLANT ENJOYS THE IMMUNITY FROM THE TAXATION BY VIRTUE OF ART.289(L) OF THE CONSTITUTION OF INDIA. 8. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE CASE LAW CITED BY THE ASSESSING AUTHORITY WERE DISTINGUISHABLE AND ON THE OTHER HAND THE CASES CITED BY THE APPELLANT DIRECTLY APPLY TO THE ISSUE BEFORE HIM. 9. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT WAS, EVEN ASSUMING LIABLE TO BE CONSIDERED FOR TAXATION UNDER THE ACT, WAS EXEMPTED FOR THE RELEVANT YEARS U/S.10(23C)(IIIAB) OF THE ACT. 10. THE LEARNED COMMISSIO NER (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT'S CLAIM FOR SEC. 80G OF THE ACT WAS BEING ALLOWED - 3 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) BY THE REVENUE AFTER CONSIDERING ITS ELIGIBILITY U/S.10(23C) OF THE ACT ALL ALONG AFTER SATISFYING WITH ITS ACCOUNTS OPERATIONS WHICH WOULD CLEARLY SHOW THAT THE APPELLANT WAS EXEMPTED U/S.10(23C) OF THE ACT AND ON MERE CHANGE OF OPINION THE ASSESSING AUTHORITY ERRED IN HOLDING THE APPELLANT WAS TAXABLE UNDER THE ACT. 11. THE LEARNED COMMISSI ONER (A) OUGHT TO HAVE APPRECIATED THAT THE FAILURE OF THE APPELLANT TO OBTAIN THE REGISTRATION U/S.12A OF THE ACT WAS NOT CONCLUSIVE TO HOLD THAT THE APPELLANT WAS NOT ENTITLED TO THE BENEFIT U/S. 10(23C)(IIIAB) OF THE ACT. 12. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT WAS WHOLLY OR SUBSTANTIALLY FUNDED BY THE STATE GOVERNMENT WHICH SATISFIES THE CONDITION PROVIDED U/S.10(23C)(IIIAB) OF THE ACT AND ACCORDINGLY THE APPELLANT WAS ENTITLED TO THE BENE FIT OF EXEMPTION AS CLAIMED BY IT. 13. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE APPRECIATED THAT THE CONTRIBUTION/ FUNDING BY THE GOVERNMENT NEED NOT BE DIRECTLY OUT OF ITS CONSOLIDATED FUND AND EVEN THE DIRECTION TO COLLECT CET FEES WHICH WAS OTHERWISE PART OF GOVERNMENT FUND WAS ALSO CONTRIBUTION BY THE GOVERNMENT AND THERE WAS SUBSTANTIAL CONTRIBUTION BY THE GOVERNMENT T O JUSTIFY THE CLAIM OF EXEMPTION U/S. 10(23C)(IIIAB) OF THE ACT AS MADE BY THE APPELLANT. 14. THE LEARNED COMMISSIONER (A) ERRED IN HOLDING THAT THE APPELLANT WAS PROFIT MOTIVATED BY MERELY RELYING ON THE FINANCIAL SURPLUS YEAR AFTER YEAR WITHOUT APPRECIATING THAT THE FEES STRUCTURE WAS PROVIDED ONLY BY THE GOVERNMENT WHICH IS RUNNING THE UNIVERSIT Y THROUGH ITS EXECUTIVE COMMITTEE AND THE FEE STRUCTURE WAS DETERMINED BY THE GOVERNMENT ACCORDING TO ITS POLICY AND EVERY RUPEE COLLECTED IS MEANT FOR THE UPLIFTMENT OF THE UNIVERSITY AND THUS THE MERE SURPLUS WOULD NOT REFLECT PROFIT MOTIVE AS ALLEGED BY THE ASSESSING AUTHORITY AND CONFIRMED BY THE GOVERNMENT. 15. THE LEARNED COMMISSIONER (A) FAILED TO CONSIDER THE FACT THAT SIMILAR GOVERNMENT UNIVERSITIES WERE NOT TAXED UNDER THE ACT AND HE HAD GONE WRONG IN TREATING THE APPELLANT AT PAR WITH PRIVATE UNI VERSITIES TO JUSTIFY THE ASSESSMENT ON IT AND ACCORDINGLY THE ORDER OF THE COMMISSIONER (A) IS OPPOSED TO LAW AND LIABLE TO BE SET ASIDE. 16. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE CONSIDERED THE VARIOUS SUBMISSIONS MADE BY THE APPELLANT AND OUGHT TO - 4 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) H AVE REFRAINED FROM UPHOLDING THE IMPUGNED ASSESSMENT AS MADE BY THE ASSESSING AUTHORITY. 17. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE FOLLOWED THE JUDGMENT OF THE APPELLATE TRIBUNAL IN THE CASE OF NATIONAL LAW SCHOOL UNIVERSITY WHICH WAS IN ALL FORCE WIT H THE CASE OF THE APPELLANT AND ALSO JUDICIAL PRONOUNCEMENT OF THE HON'BLE HIGH COURT OF KARNATAKA. 18. WITHOUT PREJUDICE THE COMMISSIONER (A) ERRED IN CONFIRMING THE INTEREST LEVIED U/S.234A AND 234B OF THE ACT BY THE ASSESSING AUTHORITY. 19. WITHOUT PREJ UDICE THE ADDITIONS ARE EXCESSIVE, ARBITRARY AND UNREASONABLE AND OUGHT TO BE REDUCED SUBSTANTIALLY. 20. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 3 . THE SHORT FACTS OF THE CASE ARE AS UNDER : 3.1 THE ASSESSEE, VISVESWARAYA TECHNOLOGICAL UNIVERSITY (VTU) IS A UNIVERSITY ESTABLISHED UNDER SECTION 3 OF VTU ACT, 1994 WITH EFFECT FROM 01 - 04 - 1998 VIDE KARNATAKA GOVERNMENTS NOTIFICATION NO.ED 2 VTU 898 DAT ED 25 - 03 - 1998. THE ASSESSEE IS HAVING JURISDICTION ALL OVER THE STATE OF KARNATAKA WITH PRIMARY OBJECTIVE OF ENSURING PROPER AND SYSTEMATIC INSTRUCTION, TEACHING, TRAINING AND RESEARCH IN DEVELOPMENT OF ENGINEERING TECHNOLOGY AND ALLIED SCIENCES. 3.2 THE ASSESSEE UNIVERSITY FILED ITS RETURN DECLARING NIL INCOME, AS IT CONSIDERED THAT IT IS COVERED U/S 10(23C)(II IA B) OF THE IT ACT AND HENCE ITS INCOME IS NOT LIABLE TO TAX. THE AO , AFTER NOTICING THE RETURNS FILED , ISSUED NOTICE U/S 148 OF THE IT ACT. IN RESPONSE TO THE NOTICE , THE ASSESSEE CLAIMED EXEMPTION U/S 10(23C)(IIIAB) OF THE IT ACT, 1961 WHICH WAS DENIED BY THE AO HOLDING THAT THE ASSESSEE IS NOT WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT AND NOT ELIGIBLE TO CLAIM EXEMPTION. - 5 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) 3.3 MATTER CA RRIED TO CIT(A) AND CIT(A) HAS CONFIRMED THE ACTION OF AO BY OBSERVING AS UNDER : 12. I HAVE EXAMINED THE SUBMISSIONS MADE BY THE ASSESSEE. THE MAIN CONTENTION OF THE APPELLANT MADE IN THE ABOVE SUBMISSIONS IS THAT THE ENTIRE FUNDS RAISED BY THE APPELLANT, WHETHER DIRECTLY CONTRIBUTED BY THE GOVERNMENT OR RAISED FROM OTHER SOURCES AS PER GOVERNMENT DIRECTIVES, SHOULD BE CONSIDERED FOR EVALUATING THE COMPLIANCE WITH THE PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE I.T. ACT. THE SECOND CONTENTION OF THE ASSESSEE IS THAT THE INCOME TAX ACT DOES NOT MANDATE THAT FUNDS SHOULD NECESSARILY FLOW DIRECTLY FROM THE GOVERNMENT AND ALL THAT THE SECTION WARRANTS IS THAT FUNDING SHOULD BE DONE BY THE GOVERNMENT. CONSIDERING THE FACTS OF THE CASE, THE CONTENTION OF THE ASSESSEE SEEMS TO BE LACKING IN FORCE. THE CLAIM OF THE ASSESSEE THAT ALL KINDS OF FUNDS INCLUDING FUNDS DIRECTLY RECEIVED FROM THE GOVERNMENT AS WELL AS THROUGH OTHER MEANS SHOULD BE CONSIDERED TOGE THER AS THE FINANCIAL ASSISTANCE FROM THE GOVERNMENT IS NOT CORRECT. SECTION 10(23C)(IIIAB) STATES THAT THE UNIVERSITY OR THE EDUCATIONAL INSTITUTION SHOULD BE WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THIS IMPLIES THAT THE SECTION ONLY REFERS TO DIRECT FINANCING BY THE GOVERNMENT. THE CLAIM OF THE ASSESSEE THAT FEES FROM THE STUDENTS AND OTHER CHARGES COLLECTED BY THE UNIVERSITY AS PER THE DIRECTIONS ISSUED BY THE GOVERNMENT, SHOULD ALSO BE CONSIDERED AS FUNDING BY GOVERNMENT, CANNOT BE ACCEPTED. IT IS SIGNIFICANT TO NOTE THAT IF SUCH INTERPRETATION IS ACCEPTED TO BE CORRECT IT WOULD IMPLY THAT ALL KINDS OF INSTITUTIONS, INCLUDING PRIVATE INSTITUTIONS, WHERE FEES ARE ALSO COLLECTED AS PER THE GUIDELINES PRESCRIBED BY THE GOVERNMENT, WOULD ALSO BE HELD AS INSTITUTIONS SUBSTANTIALLY FINANCED BY THE GOVERNMENT AND WOULD ALSO BE ELIGIBLE TO CLAIM TAX RELIEF UNDER THE SAME PROVISION. OBVIOUSLY THIS IS CONTRARY TO THE INTENT OF THE LEGISLATION, WHICH SHOULD ALSO BE CONSIDERED FOR INTERPRETING THE STATUTE. SIMILARLY THE CLAIM OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE I.T. ACT DOES NOT MANDATE THAT FU NDS SHOULD FLOW DIRECTLY FROM THE GOVERNMENT, IS NOT CORRECT INTERPRETATION OF THE LEGAL PROVISION. IT IS SETTLED PRINCIPLE OF TAX JURISPRUDENCE THAT THE PROVISIONS REGARDING EXEMPTIONS AND CONCESSIONS NEED TO BE CONSTRUED STRICTLY IN ACCORDANCE WITH THE W RITTEN LANGUAGE OF THE STATUTE. THERE IS NO ROOM FOR ANY INTENDMENT. THE PLAIN MEANING OF THE PROVISION NEEDS TO BE APPLIED. THEREFORE, WHEN SECTION 10(23C)(IIIAB) STATES THAT THE UNIVERSITY OR THE EDUCATIONAL INSTITUTION IS TO BE SUBSTANTIALLY FINANCED BY THE GOVERNMENT, THE PLAIN MEANING OF THIS SECTION SHOULD BE ADOPTED FOR INTERPRETATION. EMPHASIS SHOULD THEREFORE BE GIVEN TO THE PHRASE 'BY THE GOVERNMENT', WHICH WOULD MEAN THAT FINANCIAL ASSISTANCE PROVIDED BY THE GOVERNMENT DIRECTLY TO THE INSTITUTIO N OR UNIVERSITY. THE INTERPRETATION CLAIMED BY THE ASSESSEE WOULD LEAD TO ABSURD SITUATIONS WHICH ARE NOT CONTEMPLATED OR ENVISAGED BY THE LEGISLATURE. - 6 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) WITH REGARD TO INTERPRETATION OF PROVISIONS OF THE INCOME TAX ACT, IT IS RELEVANT TO REFER TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF IPCA LABORATORY LTD. 135 TAXMAN 594, SC), WHERE IT IS HELD THAT - 'EVEN THOUGH A LIBERAL INTERPRETATION HAS TO BE GIVEN TO SUCH A PROVISION, THE INTERPRETATION HAS TO BE AS PER THE WORDINGS OF THIS SEC TION. IF THE WORDINGS OF THE SECTION ARE CLEAR THEN BENEFITS, WHICH ARE NOT AVAILABLE UNDER THE SECTION, CANNOT BE CONFERRED BY IGNORING OR MISINTERPRETING WORDS IN THE SECTION.' IN VIEW OF THE ABOVE DISCUSSION, IN MY CONSIDERED VIEW, THE CONTENTION OF THE APPELLANT THAT SECTION 10(23C)(IIIAB) DOES NOT NECESSARILY CONTEMPLATE THAT THE FUND SHOULD FLOW DIRECTLY FROM THE GOVERNMENT, IS NOT CORRECT AND HENCE THE SAME IS REJECTED. 12.1 THE ASSESSEE HAS ALSO CLAIMED THAT ALL THE FUNDS DIRECTLY RECEIVED BY THE UNIVERSITY FROM THE GOVERNMENT AS WELL AS ALL SUCH FUNDS COLLECTED BY WAY OF FEES AND OTHER CHARGES FROM THE STUDENTS AND AFFILIATED COLLEGES, ARE AUDITED AND MONITORED BY THE GOVERN MENT AND, THEREFORE, THE SAME SHOULD BE CONSIDERED AS FUNDING BY THE GOVERNMENT. THIS ARGUMENT OF THE ASSESSEE IS ALSO DEVOID OF ANY MERIT AND LOGIC. IT IS COMMON KNOWLEDGE THAT IN A VARIETY OF OTHER CASES INCLUDING THAT OF NGOS AND CO OPERATIVE SOCIETIES, ETCETERA, THE GOVERNMENT MONITORS AND CONTROLS THE FINANCIAL AFFAIRS OF SUCH BODIES IN DIFFERENT WAYS, INCLUDING AUDIT. THE PURPOSE OF SUCH MONITORING OR AUDIT OF THE ACCOUNTS DOES NOT NECESSARILY IMPLY THAT SUCH ORGANIZATIONS ARE SUBSTANTIALL Y FINANCED BY THE GOVERNMENT AND ONLY BECAUSE OF THAT THE ACCOUNTS AND FINANCIAL AFFAIRS ARE MONITORED AND CONTROLLED BY THE GOVERNMENT. THEREFORE, THE CLAIM OF THE APPELLANT THAT SINCE THE FINANCIAL AFFAIRS OF THE UNIVERSITY ARE CONTROLLED AND MONITORED B Y THE GOVERNMENT, ALL THE FUNDS RECEIVED BY THE UNIVERSITY INCLUDING THE FUNDS COLLECTED DIRECTLY BY THE UNIVERSITY FROM THE STUDENTS AND OTHER AFFILIATED COLLEGES, SHOULD BE CONSIDERED AS GOVERNMENT FUNDING, IS NOT CORRECT. THE APPELLANT HAS ALSO NOT SUBS TANTIATED THIS CLAIM BY ANY JUDICIAL AUTHORITY ON THIS SPECIFIC ISSUE. THEREFORE, I DO NOT FIND ANY FORCE IN THE CONTENTION OF THE ASSESSEE AS DISCUSSED ABOVE AND THEREFORE, THE SAME IS REJECTED. 13. PROFIT MOTIVE OF THE UNIVERSITY: - IN THE CONTEXT OF GRANTING EXEMPTION UNDER SECTION 10(23C)(IIIAB) OF THE I.T. ACT, IT IS ALSO IMPORTANT TO NOTE THAT THE UNIVERSITY HAS BEEN GENERATING HUGE SURPLUS FROM OUT OF ITS COLLECTIONS MADE FROM THE STUDENTS AND OTHER AFFILIATED COLLEGES, YEAR AFTER YEAR. IT IS REL EVANT TO NOTE THAT ONE OF THE PRIMARY CONDITION PRESCRIBED IN SECTION 10(23C)(IIIAB) IS THAT THE UNIVERSITY OR EDUCATIONAL INSTITUTION SHOULD EXIST SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT. HOWEVER, IN THE PRESENT CASE OF VTU, THE UNIV ERSITY HAS BEEN COLLECTING SUBSTANTIAL AMOUNTS EVERY YEAR WHICH HAS RESULTED IN ACCUMULATION OF A SUBSTANTIAL AMOUNT OF SURPLUS, WHICH IS STATED TO BE TO THE TUNE OF RS. 549 CRORES AS ON 31/3/2012. THIS SURPLUS HAS BEEN GENERATED FROM OUT OF THE - 7 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) DIRECT CO LLECTIONS MADE BY THE UNIVERSITY AS WELL AS INTEREST EARNED FROM THE SUBSTANTIAL BANKS DEPOSITS MADE OUT OF THE SURPLUS MONEY . IT HAS ALSO BEEN OBSERVED THAT THE UNIVERSITY HAS BEEN COLLECTING SUBSTANTIAL AMOUNT OF MONEY UNDER VARIOUS HEADS SUCH AS CONVOCATION, EXAMINATION FEES, E - LEARNING FEES, ET CETERA. IT IS ALSO NOTICED THAT THE CORRESPONDING EXPENDITURES INCURRED UNDER SUCH HEADS IS VERY NOMINAL AS A RESULT OF WHICH THE UNIVERSITY HAS GENERATED SUBSTANTIAL AMOUNT OF SURPLUS. THIS IS EVIDENT FROM THE DETAILS OF RECEIPTS AND EXPENDITURES OF THE U NIVERSITY, AS FURNISHED IN THE REMAND REPORT OF THE ASSESSING OFFICER, WHICH IS REPRODUCED IN THE FORM OF A TABLE BELOW. NATURE OF FEES F.Y. AMOUNT OF FEES COLLECTED AMOUNT OF EXPENDITURE INCOME BALANCE /PROFIT CONVOCATION 2009 - 10 RS.2,72,40,1 87 RS.27,07 ,672 RS.2,45,32,51 5 EXAMINATION FEES RS,32,79,37,115 RS.17,66,43,156/ - (REMUNERATION TO EXAMINERS AND OTHERS, SQUAD EXPENSES, TA DA IN CONNECTION WITH EXAM, RS.15,12,93,959 CONVOCATION 2010 - 11 RS. 3,41,31,767 RS.4,22,595 RS. 3,37O9,173 EXAMINATIONFEES RS.34,09,71278 RS.12,18,68,114 + RS.4,81,88,886 (REMUNERATION TO EXAMINERS AND OTHERS, SQUAD EXPENSES, TA DA IN CONNECTION WITH EXAM, RS.17,09,14,278 E LEARNING FEES RS.12,88,58695 RS. NIL RS. 12,88,58,695. FROM THE ABOVE, IT IS EVIDENT THAT THE UNIVERSITY HAS BEEN CHARGING MORE FEES THAN REQUIRED FOR PROVIDING SPECIFIC SERVICES TO THE STUDENTS. THE FACT THAT THE ASSESSEE HAS BEEN COLLECTING MUCH MORE THAN THE REQUIRED AMOUNT OF MONEY, YEAR AFTER YEAR UNDER VARIOUS HEADS, STRONGLY INDICATES THAT THE ACTIVITIES OF THE UNIVERSITY ARE NOT CHARITABLE. IF THE PURPOSE OF ESTABLISHING THE UNIVERSITY WAS TO PROMOTE TECHNICAL EDUCATION BY ADMINISTERING ENGINEERING AND TECHNICAL COLLEGES, THERE WAS NO NECESSITY TO C OLLECT SUCH HIGH AMOUNT OF FEES, NOT ONLY FROM THE AFFILIATED COLLEGES BUT ALSO FROM THE STUDENTS, TO GENERATE HUGE AMOUNT OF SURPLUS WHICH IS INVESTED IN BANK DEPOSITS GENERATING FURTHER INTEREST INCOME FOR THE ASSESSEE. THE FACT THAT THE ASSESSEE HAS EAR NED SUBSTANTIAL AMOUNT OF INTEREST INCOME FROM THE FIXED DEPOSITS SHOWS THAT EARNING MORE INCOME IS ONE OF THE OBJECTIVES OF THE UNIVERSITY AND THEREFORE, THE INTENTION TO EARN PROFIT CANNOT BE RULED OUT. IN VIEW OF THE ABOVE, IT CANNOT BE SAID THAT THE U NIVERSITY EXISTS SOLELY FOR THE PURPOSE OF - 8 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) PROMOTING EDUCATION. THEREFORE, THE ASSESSEE IS ALSO NOT ELIGIBLE ON THIS ACCOUNT TO CLAIM EXEMPTION UNDER SECTION 10(23C)(IIIAB) OF THE IT ACT. IN VIEW OF THE ABOVE DISCUSSIONS AND TAKING INTO CONSIDERATION THE FACTS OF THE CASE AND JUDICIAL DECISIONS OF VARIOUS AUTHORITIES, AS DISCUSSED ABOVE, I AM OF THE CONSIDERED OPINION THAT THE ASSESSEE DOES NOT FULFIL ALL THE STIPULATED CONDITIONS TO BE ELIGIBLE FOR THE CLAIM OF DEDUCTION UNDER SECTION 10(23C)(IIIAB). AS DISCUSSED EARLIER, THE ASSESSEE IS ALSO NOT ELIGIBLE UNDER THE PROVISIONS OF SECTION 10(23C)(IIIAB) OF THE INCOME TAX ACT SINCE THE AGGREGATE ANNUAL RECEIPTS OF THE UNIVERSITY EXCEEDS RS.1.00CRORE. THE ASSESSEE HAS ALSO NOT CLAIMED THAT IT HAS APPROVAL OF THE PRESCRIBED AUTHORITY TO CLAIM DEDUCTION U/S 10(23C)(VI) OF THE INCOME TAX ACT. THEREFORE, CONSIDERING THE ABOVE, I AM OF THE CONSIDERED VIEW THAT THE INCOME OF THE ASSESSEE IS CLEARLY CHARGEABLE TO TAX IN ACCORDANCE WITH THE PROVISIONS OF THE INCO ME TAX ACT FOR ALL THE SIX ASSESSMENT YEARS FROM AY: 2004 - 05 TO 2009 - 10. THE ACTION OF THE AO IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE IT ACT IS THEREFORE, CONFIRMED. 4. GROUND NO S . 1 , 8, 19 AND 20 ARE GENER AL IN NATURE, THEREFORE, DO NOT REQUIRE ANY ADJUDICATION. 5. GROUND NO. 2, 3 AND 4 REGARDING RE - OPENING OF THE ASSESSMENT U/S 147 OF THE ACT. BOTH THE PARTIES HAVE FILED WRITTEN SUBMISSION S . 5.1 WITH REGARD TO GROUND NO.2 , 3 AND 4 WHICH RELATE TO RE - OPE NING OF ASSESSMENT BY THE AO , THE ASSESSEE STATED THAT T HE UNIVERSITY HAS ALL ALONG BEEN GRANTED THE RECOGNITION U/S 80G OF THE ACT, CONTINUOUSLY SINCE ITS INCEPTION TILL DATE. THE ASSESSEE HAS BEEN FILING ALL THE RELEVANT INFORMATION/FINANCIAL RECORDS WI TH THE DEPARTMENT ALONGWITH THE APPLICATION FOR GRANT OF 80G AND THAT THE DEPARTMENT HAS BEEN IN THE KNOWLEDGE OF THE FINANCIAL AFFAIRS OF THE ASSESSEE TILL DATE. THE SAME HAVE BEEN PERUSED BEFORE GRANT OF EXEMPTION U/S 80G. IN THE APPLICATION IN FORM 1 0G , THE ASSESSEE HAS ALL ALONG BEEN SUPERSCRIBING THAT THE UNIVERSITY IS EXEMPT FROM TAX U/S 10(23C)(IIAB). THE DEPARTMENT HAS NEVER DISPUTED THE FACT THAT THE ASSESSEE IS ENTITLED FOR EXEMPTION U/S 10(23C)(IIAB) OF THE ACT, TILL THE PASSING THE ORDER U/S 80G DATED 18 - 03 - 2011. IT WAS FOR THE FIRST TIME THE DEPARTMENT - 9 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) DISPUTED ON THE RENEWAL OF RECOGNITION U/S 80G MADE BY THE ASSESSEE DATED 28 - 04 - 2010, BY HOLDING THAT THE VTU IS NOT SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE AO ISSUED NOTICE U/S 148 F OR THE AY: 2004 - 05 TO 2009 - 2010 AND REQUIRED THE ASSESSEE TO FILE THE RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEARS. IN RESPONSE TO THE NOTICE, THE ASSESSEE FILED THE RETURNS DECLARING NIL INCOME, CLAIMING EXEMPTION U/S 10(23C)(IIIAB). THE AO IN AP PLICATION MADE BY THE ASSESSEE FURNISHED THE REASONS FOR REOPENING THE ASSESSMENTS. THE REASONS RECORDED BY THE AO ARE ONLY REASONS TO SUSPECT AND NOT REASONS TO SUSPECT AND NOT REASON TO BELIEVE. THERE WAS NIL INCOME ESCAPING THE ASSESSMENT FOR THE AFO RESAID ASSESSMENT YEARS, AS THERE WAS NO NEW MATERIAL HAS BEEN BROUGHT BY THE AO FOR REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. THE COUNSEL ALSO ADVANCED HIS SUBMISSIONS THAT WHEN THE ENTIRE INCOME OF THE ASSESSEE WAS EXEMPT U/S 10(23C)(II IAB) OF THE IT ACT AND THERE BEING NIL INCOME WHICH IS OTHERWISE TAXABLE EXCEEDED THE TAXABLE MINIMUM THE ASSESSEE HAD NO OBLIGATIONS TO FILE THE INCOME TAX RETURNS. THAT THE VERY FACT THAT THERE WAS NO INCOME LIABLE TO TAX FOR THE RELEVANT ASSESSMENT YEA RS CANNOT GIVE ROOM FOR AO TO INVOKE PROVISIONS OF SEC.147 WAS BAD IN LAW. 5.2 REVENUES SUBMISSION : A) THE REOPENING OF ASSESSMENTS MADE BY THE ASSESSING OFFICER IS CORRECT. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE IN RESPECT OF ASSESSMENT YEARS 2004 - 05 TO 2009 - 10 HAD FAILED TO FILE THE RETURN OF INCOME. IN RESPECT OF EACH OF THIS ASSESSMENT YEARS IT WAS FOUND THAT THE ASSESSEE HAD GENERATED SURPLUS INCOME AS WELL AS INTEREST INCOME WHICH WAS LIABLE TO TAX. THEREFORE, HE PROCEEDED TO INITIATE PR OCEEDINGS U/S. 148 OF THE ACT AFTER RECORDING THE REASONS. THE ASSESSEE FILED A RETURN OF INCOME. THE ASSESSEE OBJECTED THAT THE REOPENING OF ASSESSMENT WAS NOT JUSTIFIED. B) SECTION 139(4C) (W.E.F. 01.04.2003) & (4D) (W.E.F . 01.04.2006) OF THE I.T. ACT CLEARLY CONTEMPLATES THAT A RETURN OF INCOME HAS TO BE FILED BY A - 10 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) UNIVERSITY. ASSESSEE HAS FAILED TO DO SO. SEPARATE REASONS HAS BEEN RECORDED FOR REOPENING OF ASSESSMENTS. ASSESSEE WAS BOUND TO HAVE FILED RETURN OF INCOME. PREAMBLE : SECTION 10(22) OF THE ACT EXEMPTED INSTITUTIONS ONCE IT CARRIED ON EDUCATIONAL ACTIVITIES FROM THE PROVISIONS OF THE INCOME TAX ACT. LEGISLATURE FOUND THAT THE EDUCATIONAL INSTITUTIONS WAS MISUSING THIS ABSOLUTE EXEMPTION GRANTED. THEREFORE, THE LEGISLATURE HAS W.E.F. 1 ST OF APRIL 1999 DELETED SECTION 10(22) AND BROUGHT IN NUMBER OF NEW PROVISIONS COMMENCING WITH SECTION 10(23C)(IIIAB) ONWARDS INCLUDING THE PROVISOS THERETO . THE PROVISION S WHICH ARE RELEVANT IN THE FACTS OF PRESENT CASE ARE SECTIONS 10(23C)(IIIAB)(IIIAD) AND (V I) OF THE ACT AND THE PROVISOS THERETO . IN THE LIGHT OF TH E S E AMEND ED PROVISIONS , THE CONTENTIONS RAISED BY THE ASSESSEE HAS TO BE EXAMINED. 5. 3 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT DURING THE COURSE OF RENEWAL OF APPROVAL GRANTED U/S 80G , IT WAS NOTICED BY THE AO THAT THE ASSESSEE HAD NEITHER FILED ITS RETURN OF INCOME NOR IT HAS BEEN APPROVED U /S 10(23C) OR REGISTERED U/S 12A OF THE INCOME TAX ACT. IT WAS NOTICED BY THE AO THAT THE UNIVERSITY WAS NOT FILING ITS RETURN OF INCOME THOUGH THERE WAS HUGE SURPLUS AS PER STATEMENT OF INCOME BY WAY OF VARIOUS TYPES OF FEES, INTEREST ON FDS ETC. IT WAS ALSO NOTICED THAT RECOGNITION U/S 8 0G WAS WITHDRAWN. FURTHER, THE AO FOUND THAT THE FUNDS FINANCED BY THE GOVERNMENT OF KARNATAKE TO THE UNIVERSITY WAS NOT EVEN 1% OF THE GROSS RECEIPT OF THE UNIVERSITY. THEREFORE, SPECIFIC CONDITION THAT THE ASSESSEE SHOULD RECEIVE SUBSTANTIAL FINANCE FR OM THE GOVERNMENT FOR BEING ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) WAS NOT SATISFIED IN THE CASE OF THE ASSESSEE. BASED ON THIS SPECIFIC FINDING, AO HAS ISSUED NOTICE FOR RE - OPENING THE ASSESSMENT FOR THE YEAR. WE FIND THAT IN THE PRESENT CASE, IT IS NOT DISPUTED - 11 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THAT NO RETURN OF INCOME WAS FILED BY THE ASSESSEE. THE ASSESSEE BEING A UNIVERSITY DID NOT HAVE NECESSARY APPROVAL U/S 10(23C)(V) OF THE INCOME TAX ACT. CONSIDERING THE AMOUNT OF RECEIPT OF THE UNIVERSITY, THE ASSESSEE WAS NOT ELIGIBLE TO C LAIM RELIEF U/S 10(23C)(IIIAB). TAKING ALL THESE THINGS INTO ACCOUNT IT IS LOGICAL AND REASONABLE FOR AO TO BELIEVE THAT INCOME OF THE UNIVERSITY CHARGEABLE TO TAX INDEED ESCAPED ASSESSMENT. WE FIND THAT THE HON'BLE SUPREME COURT IN THE CASE OF KRISHNA P RIVATE LTD. VS. CIT 221 ITR 538 HELD THAT AT THE TIME OF RE - OPENING THE AO IS NOT REQUIRED TO ESTABLISH THE ESCAPEMENT OF INCOME. SEC. 10(23 C ) (VI) SAYS THAT ANY INCOME RECEIVED BY ANY PERSON ON BEHALF OF ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXI STING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT AND WHICH IS WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT OR ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR PURPOSE OF PROFIT IF THE AGGREGATE ANNUAL RECEIPT OF SUCH UNIVERSITY OR EDUCATIONAL INSTITUTION DOES NOT EXCEED THE AMOUNT OF ANNUAL RECEIPT AS MAY BE PRESCRIBED. THE AMOUNT PRESCRIBED IS RS. 1 CRORE. THE UNIVERSITY OR EDUCATIONAL INSTITUTION MUST EXIST SOLELY FOR EDUCAT IONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT AND WHICH IS APPROVED BY PRESCRIBED AUTHORITY. THE PRESCRIBED AUTHORITY MAY BE CHIEF COMMISSIONER OR DIRECTOR GENERAL. WE FIND THAT THE LEGISLATURE HAS BROUGHT NEW PROVISIONS COMMENCING WITH SEC. 10(23C)(II IAB) ONWARDS INCLUDING THE PROVISO THEREOF . IN THIS CASE, SEC. 10(23C)(IIIAB), 10(23C)(IIIAD) AND 10(23C)(V) OF THE INCOME TAX ACT IS APPLICABLE. WE FIND THAT SEC. 139(4C) (W.E.F. 1.4.2003) AND SEC. 4D (W.E.F. 1.4.2006) OF THE INCOME TAX ACT CLEARLY CONT EMPLATES THAT RETURN OF INCOME HAS TO BE FILED BY THE UNIVERSITY. THE ASSESSEE FAILED TO DO SO. THE AO HAS RE - OPENED THE ASSESSMENT BY STATING THE REASONS WHICH IS ON PAPER BOOK 44 WHICH READS AS UNDER : 'THE REASON FOR NOT FILING THE INCOME TAX RETUR NS THE FINANCE OFFICER OF THE UNIVERSITY HAS INFORMED THAT THE UNIVERSITY IS EXEMPT FROM FILING RETURN OF INCOME U/S. 10(23C) OF THE INCOME TAX ACT. HOWEVER, THE CASE OF THE ASSESSEE IS NOT FALLING UNDER ANY OF THE CLAUSES OF SECTION 10(23C). - 12 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) EVEN THOUGH THE ASSESSE IS EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, IT IS NOT WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE ABOVE UNIVERSITY HAS RECEIVED ANNUAL GRANT OF RS. 10 LAKHS AND FEES OF RS. 5,89,44,000 / - WHICH IS NOT AT ALL SUBSTANTIAL CONSIDERING THE TOTAL RECEIPTS OF THE UNIVERSITY. THE UNIVERSITY IS RECEIVING CERTAIN AMOUNTS FROM GET, BEING THE FEE PAID BY THE STUDENTS. THIS IS ONLY AH ARRANGEMENT TO COLLECT FEE FROM THE STUDENTS AND INSTEAD OF DIREC TLY RECEIVING THE FEE, THE UNIVERSITY IS RECEIVING IT THROUGH GET. THE AMOUNT RECEIVED FROM GET CANNOT BE ATTRIBUTED TO MEAN FINANCE FROM THE GOVERNMENT. EVEN IF THE AMOUNT RECEIVED FROM THE ABOVE AGENCY IS CONSIDERED, IT IS FORMING ONLY 4.99% OF THE GROSS RECEIPTS, WHICH CAN NOT BE SAID TO BE SUBSTANTIAL. IN VIEW OF THIS, ASSESSEE'S CASE IS NOT FALLING UNDER CLAUSE (IIIAB) OF SECTION 10(23C). THE ANNUAL RECEIPTS FOR THE SUBJECT ASSESSMENT YEAR ARE TO THE TUNE OF RS. 117,93,00,782/ - WHICH ARE MORE THAN THE AMOUNT OF ANNUAL RECEIPTS PRESCRIBED UNDER CLAUSE (IIIAD) I.E. RS. 1 CRORE (VIDE RULE 2BG). HENCE, ASSESSEE'S CASE DO NOT FALL UNDER CLAUSE ( IIIAD). FURTHER, THE ABOVE UNIVERSITY HAS NOT BEEN APPROVED BY THE PRESCRIBED AUTHORITY, I.E., THE CHIEF COMMISSIONER OF INCOME TAX, PANAJI, UNDER CLAUSE (VI). IN VIEW OF THIS THE ASSESSEE'S CASE DO NOT FALL UNDER THE ABOVE CLAUSE AS WELL. IN VIEW OF THE ABOVE LEGAL POSITION, THE ASSESSEE IS NOT EXEMPT FROM FILING THE INCOME TAX RETURNS. A PERUSAL OF THE INCOME - EXPENDITURE STATEMENT OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2008 - 09 INDICATES THAT THE INCOME OF THE ASSESSEE OVER THE EXPENDITURE FOR THE ASSES SMENT YEAR IS RS. 60,86,39,128/ - . SINCE, THE ASSESSEE HAS NOT FILED THE INCOME TAX RETURN, THE INCOME TO THE EXTENT OF RS'. 60,86,39,1287 - HAS ESCAPED ASSESSMENT.' WE FIND FROM THE NOTICE THAT ASSESSEE HAS NOT FILED THE RETURN ON THE GROUND THAT UNIVERSIT Y IS EXEMPT FOR FILING OF RETURN OF INCOME U/S 10(23C) OF THE INCOME TAX ACT. HOWEVER, THE CASE OF THE ASSESSEE IS NOT FALLING UNDER ANY OF THE CLAUSES OF SEC. 10(23C). WE HAVE EXAMINED THIS REASONING AND WE FIND THAT THIS REASONING IS VALID REASON FOR R E - OPENING OF THE ASSESSMENT. THE SECTION 147 SAYS THAT THE AO HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY SUBJECT TO PROVISIONS OF SEC. 148 TO 153, ASSESS AND RE - ASSESS SUCH INCOME AND ALSO - 13 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) AN Y OTHER INCOME CHARGEABLE TO TAX WHICH HAS BEEN ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDING UNDER THIS SECTION. EXPLANATION II OF SEC. 147 SAYS THAT FOR THE PURPOSE OF THE SECTION, THE FOLLOWING SHALL BE DEE MED TO HAVE BEEN CASES WHERE THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT NAMELY, A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UN DER THIS ACT DURING THE PREVIOUS YEAR EXCEEDS THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME TAX ACT. WE FIND THAT IN THE CASE OF THE ASSESSEE NO RETURN WAS FILED AS ADMITTED BY THE ASSESSEE BUT AS PER THE REASONS RECORDED IN THE NOTICE, THE ASSESSEE IS REQUIRED TO FILE THE RETURN. EVEN FILING OF RETURN IS MANDATORY IN THE CASE OF AN ASSESSEE WHO CLAIMS E XEMPTION U/S 10(22) PRIOR TO THE INSERTION OF SEC. 139(4C). IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR OF INCOME - TAX (EXEMPTIONS) VS. MALAD JAIN YUVAK MANDAL MEDICAL RELIEF CENTRE AND SUSHMAVATI EDUCATIONAL TRUST, 250 ITR 488 IN WHICH VIDE ORDER DT. 30.3.2001 IT WAS HELD AS UNDER : . THERE IS NO REASON WHY AN ASSESSEE WHO CLAIMS EXEMPTION OF INCOME UNDER SECTION 10(22) SHOULD NOT FILE THE RETURN BECAUSE THE ASSESSEES CLAIM FOR EXEMPTION HAS TO BE DECIDED BY THE DE PARTMENT ONLY AFTER THE RELEVANT MATERIAL IS PLACED BEFORE IT BY FILING THE RETURNS. SECTION 10(22) REFERS TO INCOME OF AN EDUCATIONAL INSTITUTION WHICH DOES NOT FORM PART OF THE TOTAL INCOME. HOWEVER, READING SECTION 10(22) AS A WHOLE, IT IS CLEAR THAT IN ORDER TO AVAIL OF THE SAID EXEMPTION, THE TRUST SHOULD HAVE EXISTED DURING THE RELEVANT PERIOD SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT AND IN ORDER TO ENABLE THE ASSESSING OFFICER TO ASCERTAIN WHETHER THE ASSESSEE EXISTED SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT PURPOSES, THE RETURN IS REQUIRED TO BE FILED. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF THANTHI TRUST VS. WEALTH - TAX OFFICER & ANR., 235 ITR 625 IN WHICH IT WAS HELD THAT WHERE THE EXEMPTION HAS BEEN CLAIMED BY THE TRUST, IT IS BOUND TO - 14 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) FILE THE RETURN. ONLY THEN THE OFFICER CAN EXAMINE WHETHER THE TRUST IS ENTITLED FOR EXEMPTION OR NOT. WE ALSO FIND THE SUPPORT FOR RE - OPENING THE ASSESSMENT FROM THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD. 291 ITR 500 (SC) WHEREIN THEY HAVE HELD THAT RE - ASSESSMENT PROCEEDING CAN BE VALIDLY INITIATED WHERE THE RETURN OF INCOME IS PROCESSED U/S 143(1) AND NO SCRUTINY ASSESSMENT IS UNDERTA KEN. IN T HE CASE OF THE ASSESSEE , THE ASSESSEE HAS NOT FILED THE RETURN. THEREFORE, AO IS JUSTIFIED IN RE - OPENING THE ASSESSMENT. WE ALSO GET SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF AMERICAN HOTELS AND LODGING ASSOCIATION EDUCA TIONAL INSTITUTE VS. GENERAL BOARD OF DIRECT TAXES AND OTHERS, 301 ITR 86 WHEREIN THE SUPREME COURT HAS HELD AS UNDER: 2 6. ACTUAL EXISTENCE OF THE EDUCATIONAL INSTITUTION WAS THE PRECONDITION OF THE APPLICATION FOR INITIAL APPROVAL UNDER S. 10(22). ON GRANT OF APPROVAL UNDER S. 10(22), SS. 11 AND 13 DID NOT APPLY. THEREFORE, EARLIER PRIOR TO 1ST APRIL, 1999 WHEN EXEMPTION WAS GIVEN TO THE APPELLANT, THERE WAS NO ASSESSMENT NOR DEMAND. SEC. 10(22) HAD AN AUTOMATIC EFFECT. ONCE AN APPLICANT INSTITUTION CAME WITHIN THE PHRASE 'EXISTS SOLELY FOR EDUCATIONAL PURPOSES** FOR PROFIT' NO OTHER CONDITIONS LIKE APPLICATION OF INCOME WERE REQUIRED TO BE COMPLIED WITH. THE PRESCRIBED AUTHORITY WAS ONLY REQUIRED TO EXAMINE THE NATURE, ACTIVITIES AND GENUINENESS OF THE INSTITUTION. THE ABOVE PHRASE WAS THE ONLY REQUIREMENT FOR APPROVAL. THE MERE EXISTENCE OF PROFIT/ SURPLUS DID NOT DISQUALIFY THE INSTITUTION IF PURPOSE OF ITS EXISTENCE WAS NOT PROFIT - MAKING BUT EDUCATIONAL ACTIVITIES AS S. 10(22) BY ITS VERY NATURE CONTEMPLATED INCOME OF SUCH INSTITUTION TO BE EXEMPTED. UNDER S. 10(22) THE TEST WAS RESTRICTED TO THE CHARACTER OF THE RECIPIENT OF INCOME, VIZ., WHETHER IT HAD THE CHARACTER OF EDUCATIONAL INSTITUTION IN INDIA, ITS CHARACTER OUTSIDE INDIA WAS IRRELEVANT FOR D ECIDING WHETHER ITS INCOME WOULD BE EXEMPT UNDER S. 10(22). 2 7 . THE MOO T QUESTION IN S. 10(22) WAS WHETHER THE ACTIVITIES OF THE APPLICANT CAME WITHIN THE DEFINITION OF 'INCOME OF EDUCATIONAL INSTITUTION'. UNDER S. 10(22) ONE HAD TO CLOSELY ANALYSE THE ACTIVITIES OF THE INSTITUTE, THE OBJECTS OF THE INSTITUTE AND ITS SOURCE OF INCOME AND ITS UTILIZATION. EVEN IF ONE OF THE OBJECTS ENABLED THE INSTITUTE TO UNDERTAKE COMMERCIAL ACTIVITY, THE INSTITUTE WOULD NOT BE ENTITLED TO - 15 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) APPROVAL UNDER S. 10(22). THE SAID SECTION INTER ALIA EXCLUDES THE INCOME OF THE EDUCATIONAL INSTITUTE FROM THE TOTAL INCOME. 2 8 . IN ASSTT. CIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA) IT HAS BEEN HELD BY THIS COURT THAT TEST OF PREDOMINANT OBJECT OF THE ACTIVITY IS TO BE SEEN WHETHER IT EXISTS SOLELY FOR EDUCATION AND NOT TO EARN PROFIT. HOWEVER, THE PURPOSE WOULD NOT LOSE ITS CHARACTER MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIVITY. THAT, IT IS NOT POSSIBLE TO CARRY ON EDUCATIONAL ACTIVITY IN SUCH A WAY THAT THE EXPENDITURE EXACTLY BALANCES THE INCOME AND THE RE IS NO RESULTANT PROFIT, FOR, TO ACHIEVE THIS, WOULD NOT ONLY BE DIFFICULT OF PRACTICAL REALIZATION BUT WOULD REFLECT UNSOUND PRINCIPLES OF MANAGEMENT. IN ORDER TO ASCERTAIN WHETHER THE INSTITUTE IS CARRIED ON WITH THE OBJECT OF MAKING PROFIT OR NOT IT IS DUTY OF THE PRESCRIBED AUTHORITY TO ASCERTAIN WHETHER THE BALANCE OF INCOME IS APPLIED WHOLLY AT EXCLUSIVELY TO THE OBJECTS FOR WHICH THE APPLICANT IS ESTABLISHED. X XXXXXXXXXXX 3 1 . WE SHALL NOW CONSIDER THE EFFECT OF INSERTION OF PROVISOS TO S. 10(23C)( VI) VIDE FINANCE ACT, 1998. SEC. 10(23C)(VI) IS ANALOGOUS TO S. 10(22). TO THAT EXTENT, THE JUDGMENTS OF THIS COURT AS APPLICABLE TO S. 10(22) WOULD EQUALLY APPLY TO S. 10(23C)(VI). THE PROBLEM ARISES WITH THE INSERTION OF THE PROVISOS TO S. 10(23C)(VI). W ITH THE INSERTION OF THE PROVISOS TO S. 10(23C)(VI) THE APPLICANT WHO SEEKS APPROVAL HAS NOT ONLY TO SHOW THAT IT IS AN INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES [WHICH WAS ALSO THE REQUIREMENT UNDER S. 10 (22)] BUT IT HAS NOW TO OBTAIN INITIAL APPROVAL FROM THE PRESCRIBED AUTHORITY, IN TERMS OF S. 10 (23C)(VI) BY MAKING AN APPLICATION IN THE STANDARDIZED FORM AS MENTIONED IN THE FIRST PROVISO TO THAT SECTION. THAT CONDI TION OF OBTAINING APPROVAL FROM THE PRESCRIBED AUTHORITY CAME TO BE INSERTED BECAUSE S.10(22) WAS ABUSED BY SOME EDUCATIONAL INSTITUTIONS/UNIVERSITIES. THIS PROVISO WAS INSERTED ALONG WITH OTHER PROVISOS BECAUSE THERE WAS NO MONITORING MECHANISM TO CHECK A BUSE OF EXEMPTION PROVISION. WITH THE INSERTION OF THE FIRST PROVISO, THE PRESCRIBED AUTHORITY IS REQUIRED TO VET THE APPLICATION. THIS VETTING PROCESS IS STIPULATED BY THE SECOND PROVISO. IT IS IMPORTANT TO NOTE THAT THE SECOND PROVISO ALSO INDICATES THE POWERS AND DUTIES OF THE PRESCRIBED AUTHORITY. WHILE CONSIDERING THE APPROVAL APPLICATION IN THE SECOND PROVISO, THE PRESCRIBED AUTHORITY IS EMPOWERED BEFORE GIVING APPROVAL TO CALL FOR SUCH DOCUMENTS INCLUDING ANNUAL ACCOUNTS OR INFORMATION FROM THE APPLI CANT TO CHECK THE GENUINENESS OF THE ACTIVITIES OF THE APPLICANT INSTITUTION. EARLIER THAT POWER WAS NOT THERE WITH THE PRESCRIBED AUTHORITY. UNDER THE THIRD PROVISO, THE PRESCRIBED AUTHORITY HAS TO ASCERTAIN WHILE JUDGING THE GENUINENESS OF THE ACTIVITIES OF THE APPLICANT INSTITUTION AS TO WHETHER THE APPLICANT APPLIES ITS INCOME WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT - 16 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) IS CONSTITUTED/ESTABLISHED. UNDER THE TWELFTH PROVISO, THE PRESCRIBED AUTHORITY IS REQUIRED TO EXAMINE CASES WHERE AN APPLICANT DOES NOT APPLY ITS INCOME DURING THE YEAR OF RECEIPT AND ACCUMULATES IT BUT MAKES PAYMENT THEREFROM TO ANY TRUST OR INSTITUTION REGISTERED UNDER S. 12AA OR TO ANY FUND OR TRUST OR INSTITUTION OR UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION AND TO THAT EXTEN T THE PROVISO STATES THAT SUCH PAYMENT SHALL NOT BE TREATED AS APPLICATION OF INCOME TO THE OBJECTS FOR WHICH SUCH TRUST OR FUND OR EDUCATIONAL INSTITUTION IS ESTABLISHED. THE IDEA UNDERLYING THE TWELFTH PROVISO IS TO PROVIDE GUIDANCE TO THE PRESCRIBED AUT HORITY AS TO THE MEANING OF THE WORDS 'APPLICATION OF INCOME TO THE OBJECTS FOR WHICH THE INSTITUTION IS ESTABLISHED'. THEREFORE, THE TWELFTH PROVISO IS THE MATTER OF DETAIL. THE MOST RELEVANT PROVISO FOR DECIDING THIS APPEAL IS THE THIRTEENTH PROVISO. UND ER THAT PROVISO, THE CIRCUMSTANCES ARE GIVEN UNDER WHICH THE PRESCRIBED AUTHORITY IS EMPOWERED TO WITHDRAW THE APPROVAL EARLIER GRANTED. UNDER THAT PROVISO, IF THE PRESCRIBED AUTHORITY IS SATISFIED THAT THE TRUST, FUND, UNIVERSITY OR OTHER EDUCATIONAL INST ITUTION ETC. HAS NOT APPLIED ITS INCOME IN ACCORDANCE WITH THE THIRD PROVISO OR IF IT FINDS THAT SUCH INSTITUTION, TRUST OR FUND ETC. HAS NOT INVESTED/DEPOSITED ITS FUNDS IN ACCORDANCE WITH THE THIRD PROVISO OR THAT THE ACTIVITIES OF SUCH FUND OR INSTITUTION OR TRUST ETC. ARE NOT GENUINE OR THAT ITS ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE CONDITIONS SUBJECT TO WHICH APPROVAL IS GRANTED THEN THE PRESCRIBED AUTHORITY IS EMPOWERED TO WITHDRAW THE APPROVAL EARLIER GRANTED AFTER COMPLYING WITH THE PROCEDURE MENTIONED THEREIN. 3 2 . HAVING ANALYSED THE PROVISOS TO S. 10(23C)( VI) ONE FINDS THAT THERE IS A DIFFERENCE BETWEEN STIPULATION OF CONDITIONS AND COMPLIANCE THEREOF. THE THRESHOLD CONDITIONS ARE ACTUAL EXISTENCE OF AN EDUCATIONAL INSTITUTION AND APPROVAL OF THE PRESCRIBED AUTHORITY FOR WHICH EVERY APPLICANT HAS TO MOVE AN APPLICATION IN THE STANDARDIZED FORM IN TERMS OF THE FIRST PROVISO. IT IS ONLY IF THE PREREQUISITE CONDITION OF ACTUAL EXISTENCE OF THE EDUCATIONAL INSTITUTION IS FULFILLED THAT THE QUESTION OF COMPLIANCE OF REQUIREMENTS IN THE PROVISOS WOULD ARISE. WE FI ND MERIT IN THE CONTENTION ADVANCED ON BEHALF OF THE APPELLANT THAT THE THIRD PROVISO CONTAINS MONITORING CONDITIONS/REQUIREMENTS LIKE APPLICATION, ACCUMULATION, DEPLOYMENT OF INCOME IN SPECIFIED ASSETS WHOSE COMPLIANCE DEPENDS ON EVENTS THAT HAVE NOT TAKE N PLACE ON THE DATE OF THE APPLICATION FOR INITIAL APPROVAL. WE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT AND THAT OF HON'BLE MUMBAI HIGH COURT , WE ARE OF THE VIEW THAT THE AO HAS VALIDLY GIVEN THE REASON FOR ISSUING THE NOTICE U/S 148 OF THE IT ACT, 1961 FOR THE A.Y 2008 - 09. THE ASSESSEE IS REQUIRED TO GET THE INITIAL APPROVAL FROM PRESCRIBED - 17 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) AUTHORITY IN TERMS OF SEC. 10(23C)(V) BY MAKING AN APPLICATION IN THE STANDARDIZED FORM AS MENTIONED IN THE FIRST PROVISO TO THAT SECTION. THE A SSESSEE HAS NOT OBTAINED ANY APPROVAL U/S 10(23C) OF THE INCOME TAX ACT . THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF SUPREME COURT, WE ARE OF THE VIEW THAT REVENUE AUTHORITIES ARE JUSTIFIED IN INVOKING THE PROVISIONS OF SEC. 147 OF THE IT ACT. APPE AL OF THE ASSESSEE IS DISMISSED ON THIS ISSUE FOR A.Y 2004 - 05 TO 2009 - 10 RESPECTIVELY . 6. GROUND NO. 5, 6, 7 ARE RELATING TO IMMUNITY FROM TAXATION BY VIRTUE OF ARTICLE 289(1) OF THE CONSTITUTION. THESE GROUNDS ARE DISPOSED BY THIS COMMON ORDER. 6.1 THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE - UNIVERSITY WHICH IS CONSTITUTED BY THE STATE GOVERNMENT EFFECTIVELY BRINGING INTO EXISTENCE AN ENACTMENT TO INCORPORATE UNIVERSITY IN THE STATE OF KARNATAKA FOR THE DEVELOPMENT OF ENGINEERING, T ECHNOLOGY AND ALLIED SCIENCES. IT WAS ALSO STATED THAT IT WAS NOT A SOCIETY. 6.1.1 THE COUNSEL SUBMITTED THAT UNDER ARTICLE 21A OF THE CONSTITUTION OF INDIA - RIGHT TO EDUCATION THE GOVERNMENT HAS TO PROVIDE AFFORDABLE EDUCATION. TO DISCHARGE ITS OBLIGATION UNDER THE CONSTITUTION, THE GOVERNMENT HAS ENACTED THE VTU ACT. FOR ADMINISTERING ITS POLICY ON THE TECHNICAL EDUCATION IN THE STATE OF KARNATAKA. 6.1.2 THE LEARNED COUNSEL DREW OUR ATTENTION THAT THE CONSTITUTION OF THE VTU IS BY ENACTMENT OF THE LEGISLATURE AND HENCE, THE SAME CONSTITUTED STATE. THE VTU ACT MANDATES (SEC.26 OF THE SAID ACT) THAT AN AUDIT OF ACCOUNTS SHALL BE CONDUCTED BY SUCH AUDITORS AS THE GOVERNMENT MAY DIRECT. SUCH AUDITED ACCOUNTS ARE TO BE PLACED BEFORE THE STATE LEGISLATURE AND PASSED. THE KIND ATTENTION OF THE BENCH WAS ALSO DRAWN TO CHAPTER VIII (PAGE 18 OF THE PAPER BOOK) WHEREIN THE ACT GIVES POWERS FOR STATUTES, ORDINANCES, REGULATIONS AND RULES WHICH IS NORMALLY ARE THE POWERS OF THE - 18 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) STATE. IT WAS FURTHER SUBMITTED THAT STATE UNDER ARTICLE 12 WHICH READS AS UNDER; STATE UNDER ARTICLE 12 OF THE CONS TITUTION OF INDIA, THE ENTITY SHOULD HAVE BEEN CREATED BY A STATUTE OR UNDER A STATUTE AND FUNCTIONING WITHY LIABILITY AND OBLIGATIONS TO THE PUBLIC. FURTHER THE STATUTE CREATING THE ENTITY SHOULD HAVE VESTED THAT THE ENTITY WITH POWER TO MAKE LAW OR ISSU E BINDING DIRECTIONS AMOUNTING TO LAW WITHIN THE MEANING OF ARTICLE 13(2) GOVERNING ITS RELATIONSHIP WITH OTHER PEOPLE OR THE AFFAIRS OF OTHER PEOPLE - THEIR RIGHTS, DUTIES LIABILITIES OR OTHER LEGAL RELATIONS. IF CREATED UNDER A STATUTE, THEN THERE MUST E XIST SOME OTHER STATUTE CONFERRING ON THE ENTITY SUCH POWERS. IN EITHER CASE, IT SHOULD HAVE BEEN ENTRUSTED WITH SUCH FUNCTIONS AS ARE GOVERNMENT OR CLOSELY ASSOCIATED THEREWITH BY BEING OF PUBLIC IMPORTANCE OR BEING FUNDAMENTAL TO THE LIFE OF THE PEOPLE AND HENCE GOVERNMENTAL. SUCH AUTHORITY WOULD BE THE STATE, FOR ONE, WHO ENJOYS THE POWERS AND PRIVILEGES OF THE STATE MUST ALSO BE SUBJECTED TO LIMITATIONS AND OBLIGATIONS OF THE STATE. 6.1.3 TO SUPPORT HIS SUBMISSIONS THE ATTENTION WAS INVITED TO TWO J UDGMENTS OF THE APEX COURTS AS MENTIONED INPAGE - 52 OF THE PAPER BOOK SUBMITTED. A) PRADEEPKUMARBISWASVS INDIAN INSTITUTE OF CHEMICAL BIOLOGY; AND B) INDIA SAINIK SCHOOL ASSOCIATION VS DEFENCE MINISTER CUM CHAIRMAN BOARD OF GOVERNORS, SAINIK SCHOOLS. ASSESSEE IS THE STATE GOVERNMENT AND THEREFORE ARTICLE 289 OF THE CONSTITUTION OF INDIA APPLIES AND THE SAME CANNOT BE BROUGHT TO TAX. 6.2 ON THE OTHER HAND, REVENUE SUBMITTED THAT A. ASSESSEE UNIVERSITY HAS BEEN ADMITTEDLY CONSTITUTED UNDER A SEPAR ATE ENACTMENT CALLED THE VISVESVARAYA TECHNOLOGY UNIVERSITY ACT, 1994. AS PER THE PROVISIONS OF THIS ACT - 19 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) SECTION 2 (5) GOVERNMENT MEANS THE STATE GOVERNMENT. SECTION 2(13) UNIVERSITY MEANS THE VISVESVARAYA TECHNOLOGICAL UNIVERSITY ESTABLISHED UNDER SE CTION 3 OF THIS ACT. SECTION 3(2) THE UNIVERSITY SHALL BE A BODY CORPORATE BY THE NAME SPECIFIED IN SUB - SECTION (1) AND SHALL HAVE PERPETUAL SUCCESSION AND A COMMON SEAL. IT SHALL HAVE POWER TO ACQUIRE, HOLD AND DISPOSE OF PROPERTY, BOTH MOVABLE AND IMMO VABLE AND SHALL SUE AND BE SUED BY THE SAID NAME. B. ADMITTEDLY, FROM THE PROVISIONS OF THE ASSESSEES OWN ENACTMENT THE STATE GOVERNMENT IS SEPARATE FROM THE ASSESSEE UNIVERSITY. THEREFORE IT IS NOT OPEN TO THE ASSESSEE TO CONTEND IT IS THE STATE GOVERNMENT ITSELF. FURTHER, THE SECTION 3(2) OF ITS ACT CLEARLY FIXES A PERPETUAL SUCCESSION AND A COMMON SEAL. THIS CLEARLY CONTEMPLATES THAT THE ASSESSEE HAS A SEPARATE IDENTITY OF ITS OWN AND THE SAME CANNOT MERGED WITH THA T OF THE STATE GOVERNMENT. C. SECONDLY, THE ASSESSEE UNIVERSITY IS GOVERNED BY THE UNIVERSITY GRANT COMMISSION ACT, 1956. THE ASSESSEE UNIVERSITY HAS BEEN ACCORDED PERMISSION BY THIS COMMISSION UNDER THE UGC ACT. THIS ACT DEFINES: - SECTION 2 (F) - UNIVERSITY MEANS A UNIVERSITY ESTABLISHED OR INCORPORATED BY OR UNDER A CENTRAL ACT, A PROVINCIAL ACT OR A STATE ACT, AND INCLUDES ANY SUCH INSTITUTION AS MAY, IN CONSTITUTION WITH THE UNIVERSITY CONCERNED, BE RECOGNIZED BY THE COMMISSION IN ACCORDANCE WITH THE REGULATIONS MADE IN THIS BEHALF UNDER THIS ACT. D. IT BECOMES CLEAR FROM THE ASSESSEES OWN ENACTMENT AS WELL AS THE UGC ACT THAT THE ASSESSEE UNIVERSITY IS A SEPARATE ENTITY FROM THAT OF THE STATE GOVERNMENT. THIS ASSESSEE IS A PERSON WHICH IS LIABLE TO TAX UNDER THE PROVISIONS OF THE INCOME TAX ACT. ARTICLE 289 OF THE CONSTITUTION OF INDIA IS NOT APPLICABLE TO THE ASSESSEE. SECTION 2(31) R.W.S. 4 OF THE I.T. ACT IS APPLICABLE TO THE ASSESSEE. 6.3 H AV ING HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES , W E FIND THAT THE ASSESSEE HAS CLAIMED THAT THE ASSESSEE VTU UNIVERSITY IS A STATE AND BY - 20 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) VIRTUE OF ARTICLE 289(1) OF THE CONSTITUTION OF INDIA , IT IS EXEMPT FROM TAX. WE HAVE EXAMINED THE PROVISIONS OF VTU ACT, 1994 RELATING TO CREATION OF THE UNIVERSITY. FROM THE FACTS OF THE CASE , IT IS CLEARLY EVIDENT THAT VTU UNIVERSITY WAS ESTABLISHED U/S 3 OF THE VISVESWARAYA TECHNOLOGICAL UNIVERSITY ACT, 1994 W.E.F. 1.4.1998. SINCE THE UNIVERSITY WAS ESTABLISHED UN DER THE PROVISIONS OF VTU ACT, 1994 , IT IS APPARENT THAT IT IS A CREATION OF LAW. THEREFORE, IT CANNOT BE CONSIDERED TO BE STATE AS CONTENDED BY THE ASSESSEE. SECTION 3(2) OF THE VTU ACT CLEARLY STIPULATES THAT THE UNIVERSITY SHALL BE A BODY CORPORATE. THEREFORE, THERE IS NO AMBIGUITY ABOUT THE FACT THAT THE UNIVERSITY HAS BEEN ESTABLISHED BY LAW AS A BODY CORPORATE HAVING A DISTINCT AND SEPARATE ENTITY WITH IDENTITY OF ITS OWN AND THEREFORE IT CANNOT BE CONSIDERED TO BE A STATE. THE ENTITIES CREATED BY LAWS ENACTED EITHER BY PARLIAMENT OR STATE LEGISLATURE CANNOT BECOME A STATE. WE FIND THAT THE AO HAS RELIED ON DECISIONS GIVEN BELOW WHEREIN IT HAS BEEN HELD THAT BODY CORPORATE ESTABLISHED UNDER SPECIFIC ENACTMENT CANNOT BE HELD TO BE STATE. I. BAR COUNCIL OF UTTAR PRADESH V. CIT, LUCKNOW 143 ITR 584 (ALL) IN THIS CASE, THE BAR COUNCIL OF UTTAR PRADESH, IS A BODY CORPORATE ESTABLISHED UNDER THE ADVOCATES ACT, 1961, WHICH IS AN ENACTMENT OF THE PARLIAMENT OF INDIA. SECTION 5 OF THE ADVOCATES ACT, 1961 , PROVIDES THAT EVERY BAR COUNCIL SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL, WITH POWER TO ACQUIRE AND HOLD PROPERTY, BOTH MOVABLE AND IMMOVABLE, AND TO CONTRACT AND MAY BE, IN THE NAME BY WHICH IT IS KNOWN, SUE AND BE SUED. IN THIS CASE, FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. BAR COUNCIL OF MAHARASHTRA [1981] 130 ITR 28 (SC) , IT WAS HELD AS UNDER. BY VIRTUE OF SECTION 5 OF THE ADVOCATES ACT, BAR COUNCIL OF A STATE IS A BODY CORPORATE HAVIN G PERPETUAL SUCCESSION AND A COMMON SEA!, WITH POWER TO ACQUIRE AND HOLD PROPERTY, BOTH MOVABLE AND IMMOVABLE. THAT APART, A BAR COUNCIL MAY SUE OR BE SUED BY THE NAME BY WHICH IT IS KNOWN. THUS, IT IS CLEARLY A JURISTIC PERSON AND WOULD BE COVERED BY THE EXPRESSION ARTIFICIAL JURIDICAL PERSON . THE ASSESSEE WAS, THEREFORE, A PERSON WITHIN THE MEANING OF SECTION 2(31) AND AS SUCH WAS A TAXABLE ENTITY. THE VISVESWARAYYA TECHNOLOGICAL. UNIVERSITY IS A CREATION MADE OUT OF VTU ACT, 1994. SECTION 3(2) OF CHA PTER II OF THE VTU ACT STATES AS UNDER - - 21 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THE UNIVERSITY SHALL BE A BODY CORPORATE BY THE NAME SPECIFIED IN SUB - SECTION (1) AND SHALL HAVE PERPETUAL SUCCESSION AND A COMMON SEAL. IT SHALL HAVE POWER TO ACQUIRE, HOLD AND DISPOSE OF PROPERTY, BOTH MOVABLE A ND IMMOVABLE, AND SHALL SUE AND BE SUED BY THE SAID NAME. FROM THE ABOVE IT IS CLEARLY SEEN THAT THE PROVISIONS OF SECTION 3(2) OF THE VTU ACT ARE IDENTICAL TO THE PROVISIONS OF SECTION 5 OF THE ADVOCATES ACT, 1961. IN THIS CASE IT HAS BEEN CLEARLY STATE D THAT THE UNIVERSITY SHALL BE - SHALL BE A BODY CORPORATE SHALL HAVE PERPETUAL SUCCESSION SHALL HAVE A COMMON SEAL SHALL HAVE POWER TO ACQUIRE, HOLD AND DISPOSE OF PROPERTY, AND SHALL SUE AND BE SUED FROM THE ABOVE, IT IS RELEVANT TO NOTE THAT ALL THE CHARACTERISTIC FEATURE OF THE UNIVERSITY ARE IDENTICAL TO THAT OF THE BAR COUNCIL, AS PRESCRIBED IN SECTION 5 OF THE ADVOCATES ACT. IN THE ABOVE REFERRED DECISION IT HAS BEEN CLEARLY HELD THAT THE BAR COUNCIL SHALL BE A BODY CORPORATE AND THEREFORE IT IS CLEARLY A JURISTIC PERSON AND WOULD BE COVERED BY THE EXPRESSION ARTIFICIAL JURIDICAL PERSON . FOLLOWING THIS DECISION THERE SHOULD BE NO DOUBT THAT VTU, ESTABLISHED AS A BODY CORPORATE UNDER THE VTU ACT, 1994, IS CLEARLY COVERED BY THE EXPRESSION ARTIFICIAL JURIDICAL PERSON AND AS SUCH WAS A TAXABLE ENTITY. II. GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION V. CIT 151 ITR 255 (GUJ) AS PER THE RATIO OF THE DECISION OF GUJARAT HIGH COURT IN THIS CASE, THE STATE IS ENTIRELY DIFFERENT FROM ENTITIES WHICH ARE CREATED BY LAWS ENACTED EITHER BY PARLIAMENT OR BY STATE LEGISLATURES FOR DIFFERENT AND DISTINCT PURPOSES. THEY ARE SEPARATE ENTITIES IN LAW . THEY SUE AND ARE SUED IN THEIR OWN CAPACITIES AND FOR ANY CONTRACTUAL LIABILITY. IN THIS CASE, THE ASSESSEE H AS CLAIMED THAT THE INCOME WAS NOT LIABLE TO BE TAXED UNDER THE I.T. ACT, IN VIEW OF ARTICLE 289(1) OF THE CONSTITUTION WHICH WAS REJECTED BY THE HIGH COURT. BEFORE THE HONBL.E SUPREME COURT, THE ASSESSEE ONLY PRESSED ITS CLAIM FOR EXCLUSION OF INCOME UND ER SECTION 10(20A) WHICH WAS ALLOWED BY THE HONBLE SUPREME COURT. BUT THE CLAIM REGARDING THE EXEMPTION OF INCOME UNDER ARTICLE 289(1) OF THE CONSTITUTION WAS NOT PURSUED BEFORE THE SUPREME COURT. THEREFORE, THE DECISION RENDERED BY THE HONBLE GUJARAT HI GH COURT WITH REGARD TO THIS ISSUE HAS BECOME FINAL. III. ADITYAPUR INDUSTRIAL AREA DEVELOPMENT AUTHORITY V. UNION OF INDIA AND OTHERS 262 ITR 289 (JHARKHAND) IN THIS CASE, THE HONBLE JHARKHAND HIGH COURT HAS HELD THAT THE PROPERTIES OF A STATUTORY CORP ORATION OR A GOVERNMENT OWNED COMPANY OR OTHER AUTHORITY ESTABLISHED - 22 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) BY THE GOVERNMENT ARE NOT THE PROPERTIES OF THE GOVERNMENT FOR THE PURPOSE OF ARTICLE 285 OR ARTICLE 289 OF THE CONSTITUTION OF INDIA. IN THE PRESENT CASE, VTU IS ALSO A AUTONOMOUS BODY E STABLISHED BY THE GOVERNMENT OF KARNATAKA AND THEREFORE, FOLLOWING THIS DECISION OF THE HONBLE JHARKHAND HIGH COURT, IT CANNOT BE HELD TO THE STATE AS CLAIMED BY THE APPELLANT. 9.1 FROM THE ABOVE DECISIONS OF THE HONBLE COURTS, IT IS CLEAR THAT STATE IS DIFFERENT FROM STATUTORY AUTHORITIES ESTABLISHED BY THE GOVERNMENT. THEREFORE, VTU, WHICH IS CREATED BY LAW ENACTED BY THE KARNATAKA STATE LEGISLATURE, AS A BODY CORPORATE FOR A DIFFERENT AND DISTINCT PURPOSE, CANNOT BE CONSIDERED AS STATE. FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. BAR COUNCIL OF MAHARASHTRA , AS DISCUSSED IN THE CASE OF BAR COUNCIL OF UTTAR PRADESH V. CIT (SUPRA), VTU IS CLEARLY A JURISTIC PERSON AND WOULD BE COVERED BY THE EXPRESSION ARTIFICIAL JURIDI CAL PERSON . THEREFORE, VTU IS CLEARLY A TAXABLE ENTITY AND NO EXEMPTION CAN BE CLAIMED BY VIRTUE OF ARTICLE 289(1) OF THE CONSTITUTION OF INDIA , BY STATING THAT THE UNIVERSITY IS STATE. IN VIEW OF THE ABOVE, THE ASSESSEES CONTENTIONS ARE NOT TENABLE IN LAW AND THEREFORE, THE SAME ARE DISMISSED. 6.3.1 THE LD. AR RELIED UPON THE DECISION OF PRADEEP KUMAR BISWAS VS. INDIAN INSTITUTE OF CHEMICAL 992 OF 2002 WHEREIN IT IS HELD THAT WHERE A PUBLIC BODY OR AUTHORITY IS CREATED WHICH HAS PUBLIC AND STATUTORY DUTIES TO PERFORM AND WHICH PERFORMS THOSE DUTIES AND CARRIES OUT THESE TRANSACTIONS FOR THE BENEFIT OF THE PUBLIC AND NOT FOR PRIVATE PROFIT SUCH AN AUTHORITY IS NOT PRECLUDED FROM MAKING A PROFIT FOR PUBLIC BENEFIT. THE HON'BLE SUPREME COURT HAS ALSO HE LD THAT THE FORMATION OF CORPORATION, THE FINANCIAL SUPPORT WAS GIVEN BY THE CENTRAL GOVERNMENT, UTILIZATION OF FINANCE SO PROVIDED, THE NATURE OF SERVICES RENDERED AND NOTED THAT DESPITE THE FACT THAT EACH OF THE CORPORATION RUN ON PROFIT EARNED BY IT, NE VERTHELESS, THE STRUCTURE OF EACH OF THE CORPORATIONS SHOWED THAT THESE CORPORATIONS REPRESENTED THE VOICE AND HANDS OF THE CENTRAL GOVERNMENT. THE COURT CAME TO THE CONCLUSION THAT ALTHOUGH THE EMPLOYEES OF THESE CORPORATIONS WERE NOT IN SERVICE OF THE U NION OR STATE, THESE BODIES ARE AUTHORITIES WITHIN THE MEANING OF ARTICLE 12 OF THE CONSTITUTION OF INDIA. THE COURT HAS HELD THAT THESE CORPORATIONS ARE STATE BUT THE EMPLOYEES OF THESE CORPORATIONS ARE NOT EMPLOYEES OF THE STATE OR GOVERNMENT. WE FIND THAT THIS JUDGEMENT RELATES TO THE RIGHTS OF THE - 23 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) EMPLOYEES BUT IT DOES NOT TALK THAT FINANCIAL INSTITUTIONS ARE ENTITLED FOR EXEMPTION BY VIRTUE OF ARTICLE 289 OF THE CONSTITUTION OF INDIA. SIMILARLY, WE FIND THAT THE JUDGEMENT IN ALL INDIA SAINIK SCHOOL VS. DEFENCE MINISTER 1989 AIR 88(SC) RELATES TO RIGHTS OF EMPLOYEES AND DOES NOT TALK ABOUT THE EXEMPTION BY VIRTUE OF ARTICLE 289(1) OF THE CONSTITUTION OF INDIA. IN VIEW OF THIS, WE ARE OF THE VIEW THAT THESE DECISIONS ARE NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. WE FIND FROM THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION VS. CIT 151 ITR 255 THAT THE ASSESSEE CLAIMED THAT THEIR INCOME WAS NOT LIABLE TO TAX UNDER THE INCOME TAX ACT IN V IEW OF ARTICLE 289(1) OF THE CONSTITUTION OF INDIA WHICH WAS REJECTED BY THE HON'BLE COURT. THEREFORE, WE ARE OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR IMMUNITY TO PAY TAX UNDER ARTICLE 289(1) OF THE CONSTITUTION OF INDIA. 6.3.2 LOOKING TO THE FA CTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT CIT(A) HAS EXAMINED THE PROVISIONS OF VTU ACT, 1994 RELATING TO CREATION OF THE UNIVERSITY. FROM THE FACTS IT IS CLEAR THAT VTU IS ESTABLISHED U/S 3 OF THE VTU ACT, 1994 WITH EFFECT FROM 01 - 04 - 1998. SINCE THE UNIVERSITY WAS ESTABLISHED UNDER THE PROVISIONS OF VTU ACT, 1994 , IT IS APPARENT THAT IT IS THE CREATION OF LAW AND THEREFORE, IT CANNOT BE CONSIDERED AS STATE AS CONTENDED BY THE ASSESSEE. SEC.3(2) OF THE VTU ACT CLEARLY STIPULATES THAT THE UNIVERSITY SHALL BE A BODY CORPORATE. THEREFORE, THERE IS NO AMBIGUITY ABOUT THE FACT THAT THE UNIVERSITY HAS BEEN ESTABLISHED BY LAW AS A BODY CORPORATE HAVING A DISTINCT AND SEPARATE IDENTITY OF ITS OWN AND T HEREFORE, IT CANNOT BE CONSIDERED TO BE STATE. WE FIND THAT IN CASE OF BAR COUNCIL OF UTTAR PRADESH VS CIT (143 ITR 584) WHEREIN IT IS HELD THAT THE BAR COUNCIL OF UTTAR PRADESH IS A BODY CORPORATE ESTABLISHED UNDER ADVOCATE ACT, 1961 WHICH IS AN ENACTM ENT OF THE PARLIAMENT OF INDIA. SEC.5 OF THE ADVOCATES ACT, 1961 PROVIDES THAT EVERY BAR COUNCIL SHALL BE A BODY CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL, WITH POWER TO ACQUIRE AND HOLD PROPERTY BOTH MOVABLE AND IMMOVABLE AND TO CONTRACT A ND MAY BE IN THE - 24 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) NAME BY WHICH IT IS KNOWN, SUE AND BE SUED. IN THE PRESENT CASE, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS BAR COUNCIL OF MAHARASHTRA 130 ITR 28(SC) HELD THAT BY VIRTUE OF SEC.5 OF THE ADVOCATES ACT, BAR COUNCIL OF A STATE IS A BOD Y CORPORATE HAVING PERPETUAL SUCCESSION AND A COMMON SEAL, WITH POWER TO ACQUIRE AND HOLD PROPERTY, BOTH MOVABLE AND IMMOVABLE. THAT APART, A BAR COUNCIL MAY SUE OR BE SUED BY THE NAME BY WHICH IT IS KNOWN. THUS, IT IS CLEARLY A JURISTIC PERSON AND WOU LD BE COVERED BY THE EXPRESSION ARTIFICIAL JURIDICAL PERSON THE ASSESSEE WAS THEREFORE, A PERSON WITHIN THE MEANING OF SEC.2( 3 1) AND AS SUCH WAS A TAXABLE ENTITY. THE VTU IS A CREATION MADE OUT OF VTU ACT, 1994. SEC.3(2) OF CHAPTER - II OF THE VTU ACT ST ATES AS UNDER : THE UNIVERSITY SHALL BE A BODY CORPORATE BY THE NAME SPECIFIED IN SUB - SECTION(1) AND SHALL HAVE PERPETUAL SUCCESSION AND A COMMON SEAL. IT SHALL HAVE POWER TO ACQUIRE, HOLD AND DISPOSE OF PROPERTY BOTH MOVABLE AND IMMOVABLE AND SHALL SUE AND BE SUED BY THE SAID NAME. AS PER THIS, IT IS CLEARLY SEEN THAT PROVISIONS OF SEC.3(2) OF THE VTU ACT ARE IDENTICAL TO THE PROVISIONS OF SEC.5 OF THE ADVOCATES ACT, 1961. THEREFORE, IT IS RELEVANT TO NOTE THAT ALL HE CHARACTERISTICS, FEATURES OF UNIVERSITY ARE IDENTICAL TO THAT OF THE BAR COUNCIL. THEREFORE, FOLLOWING THE AFORESAID DECISION, WE HOLD THAT VTU IS ESTABLISHED AS A CORPORATE BODY UNDER VTU ACT, 1994 IS CLEARLY A JURISTIC PERSON AND WOULD BE COVERED BY THE EXPRESSION ARTIFICIAL JU RIDICAL PERSON AND AS SUCH WAS A TAXABLE ENTITY. WE FIND FROM THE CASE OF GUJARAT IND. DEVELOPMENT CORPN. VS CIT (151 ITR 25) (GUJ)WHEREIN IT IS HELD THAT STATE ENTITY IS DIFFERENT FROM ENTITIES WHICH CREATED BY LAW ENACTED EITHER BY PARLIAMENT OR BY THE STATE LEGISLATURE FOR DIFFERENT AND DISTINCT PURPOSES AND THEY ARE SEPARATE ENTITIES IN LAW. THEY SUE AND ARE SUED IN THEIR OWN CAPACITIES AND FOR ANY CONTRACTUAL LIABILITY. THEREFORE, THE HONBLE HIGH COURT HAS HELD THAT THEY ARE LIABLE TO BE TAXED AND THEY ARE NOT UNDER THE PURVIEW OF ARTICLE 289(1) OF THE CONSTITUTION OF INDIA. A SIMILAR VIEW WAS FOUND IN THE CASE OF ADITYAPUR IND. AREA DEVELOPMENT AUTHORITY VS UNION OF INDIA & OTHERS 262 ITR 289 (JHA.) WHEREIN THE HONBLE HIGH COURT - 25 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) HAS HELD THAT THE PROPERTY OF A STATUTORY CORPORATION OR A GOVT. OWNED CO., OR OTHER AUTHORITY ESTABLISHED BY THE GOVT. ARE NOT THE PROPERTIES OF THE GOVT. FOR THE PURPOSE OF ARTICLE 285 OR ARTICLE 289 OF THE CONSTITUTION OF INDIA. THEREFORE, WE ARE OF THE VIEW, THAT AS P ER THE CONSTITUTION OF INDIA AND ALSO AS PER THE DECISION OF THE HONBLE HIGH COURT THE ASESSSEE VTU IS CREATED BY AN ENACTMENT OF STATUTE OF KARNATAKA AS A BODY CORPORATE FOR DIFFERENT AND DISTINCT CANNOT BE CONSIDERED AS A STATE. WE REJECT THE CLAIM OF THE ASSESSEE. 6. 3 . 3 WE ALSO HOLD THAT HE ASSESSEE WAS CREATED UNDER THE UGC ACT, 1956 AND THE ASSESSEE IS A UNIVERSITY, A SEPARATE ENTITY FROM THE STATE GOVERNMENT. THE ASSESSEE IS A PERSON WHICH IS LIABLE TO BE TAXED UNDER THE PROVISIONS OF IT ACT, 196 1. HENCE, WE DISMISS GROUND NOS. 5, 6 AND 7 OF ALL APPEAL S RELEVANT TO A.Y 2004 - 05 TO 2009 - 10 RESPECTIVELY . 7. GROUND NO. 9, 10, 11, 12, 13, 14, 15, 16, 17 ARE RELATED TO CLAIM OF ELIGIBILITY U/S 10(23C) (IIIAB) OF THE INCOME TAX ACT. 7. 1 THE ASSESSE E HAS FILED THE WRITTEN SUBMISSION REGARDING THE CLAIM OF ELIGIBILITY U/S 10(23C)(IIIAB) OF THE ACT. BOTH THE PARTIES HAVE FILED THE WRITTEN SUBMISSION BY STATING AS GROUND NO. 3 BUT IN THE GROUNDS OF APPEAL, THE ASSESSEE HAS TAKEN GROUND NO. 9, 10, 11, 1 2, 13, 14, 15, 16, 17. AS FAR AS THESE GROUND S ARE CONCERNED THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE UNIVERSITY WAS ENTITLED TO EXEMPTION U/S 10(23C)(IIIAB ) OF THE IT ACT. FOR THIS HE HAS DRAWN THE ATTENTION OF THE BENCH OF THE THREE LIMBS OF THE SAID SECTION WHICH ARE TO BE SATISFIED TO BE ELIGIBLE FOR THE EXEMPTION. 1. UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR THE EDUCATIONAL PURP OSES. 2. NOT FOR THE PURPOSES OF PROFIT 3. WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT - 26 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) 7. 2 .1 THE AO VIDE HIS LETTER DATED 18 - 11 - 2011 IN PARA - 3 (PG 44 OF THE PAPER BOOK) OF THE SAID LETTER HAS CONFIRMED THAT THE ASSESSEE IS EXISTING SOLELY FOR T HE EDUCATIONAL PURPOSES AND NOT FOR THE PURPOSES OF PROFIT AND HAS CITED THE REASON FOR REOPENING OF THE ASSESSMENT AS IT IS NOT WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT. 7. 2 .2 THE COUNSEL SUBMITTED THAT THE WORD SUBSTANTIAL IS A NOT DEFINED I N THE INCOME TAX ACT. THE WORDS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT HAS BEEN CONSIDERED BY THE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT & ANOTHER VS M/S NATIONAL EDUCATION SOCIETY, SHIMOGA IN ITA NO.808/2009 DATED 08 - 07 - 20 10 . THE HONB LE HIGH COURT OBSERVED AS UNDER : 4. THE WORD SUBSTANTIAL HAS NOT BEEN DEFINED UNDER THE IT ACT. HOWEVER, IT HAS BEEN THE SUBJECT MATTER OF INTERPRETATION BY VARIOUS COURTS IN VARIOUS CONTEXTS. THE AUTHORITIES IS DECIDING WHAT CONSTITUTES A SUBSTANTIAL PORTION OF THE FINANCE HAVE BEEN NOTE OF THE STATUTORY PROVISIONS CONTAINED IN THE BANKING REGULATION ACT, 1949 WHERE A PERSON WHO HAS THE BENEFICIAL INTEREST OF MORETHAN 10% OF THE TOTAL CAPITAL SUBSCRIBED BY ALL THE PARTNERS OF THE FIRM HAS ALSO BEEN DE FINED IN EXPLANATION TO SEC.40A(2)(A) OF THE IT ACT WHERE A PERSON WHO IS HAVING VOTING POWER OF NOT LESS THAN 20% IN THE CASE OF THE COMPANY IS DEEMED TO HAVE SUBSTANTIAL INTEREST IN THE BUSINESS OF THE COMPANY. 5. IN THE CASE OF ASSESSE ITSELF, WHEN THE GRANT WAS MORE THAN 50%, EXEMPTION HAS BEEN EXTENDED TO THE ASSESSEE. IT IS IN THIS CONTEXT, IN THE ABSENCE OF ANY DEFINITION FOR THE WORD, SUBSTANTIAL IN THE ACT, WHAT IS TO BE SEEN IS WHAT IS THE TOTAL RECEIPTS AND FROM WHAT SOURCE. IN THAT CONTEXT W E HAVE TO FIND OUT WHETHER THE GRANT OF 36.42% OF TOTAL RECEIPTS CONSTITUTES SUBSTANTIAL FINANCE BY THE GOVERNMENT. 7.2. 3 THUS, THE LEARNED COUNSEL SUBMITTED THAT FROM THE ABOVE JUDGMENT THAT EVEN 10% WOULD CONSTITUTE SUBSTANTIAL. HE FURTHER DREW OUR AT TENTION TO PAGE - 69 OF THE PAPER BOOK, COLUMN - 14 OF THE CHART WHEREIN THE PERCENTAGE OF THE GROSS RECEIPTS TO THE RECEIPTS OF THE UNIVERSITY DIRECTLY RECEIVED EXCEEDS 10% OF THE GROSS RECEIPTS FROM THE GOVERNMENT CONSTITUTED SUBSTANTIAL FUNDING BY THE GOVE RNMENT. THE AMOUNTS RECEIVED FROM THE - 27 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) COMMON ENTRANCE TEST CELL (THE GOVERNMENT OF KARNATAKA) FOR THE FEES COLLECTED FROM THE STUDENTS ON BEHALF OF THE GOVERNMENT BY KARNATAKA EXAMINATION AUTHORITY, IS GRANTED TO THE UNIVERSITY (COLUMN 2 TO 4) BASED ON THE SEAT MATRIX FIXED BY IT, PLUS THE GRANTS BY BUDGETARY ALLOCATION (COL.5) AND THE FEES RECEIVED AS PER THE GOVERNMENT ORDER (COL.6) CONSTITUTED THE RECEIPTS DIRECTLY FROM THE GOVERNMENT FOR WHICH PERCENTAGE IS SHOWN IN COL.14. 7.2. 4 THE COUNSEL ALSO DREW OUR ATTENTION TO PAGES 105 TO 112 OF THE PAPER BOOK WHEREIN THE FEES RECEIVED FROM THE GOVERNMENT OF KARNATAKA FOR DIFFERENT YEARS UNDER CONSIDERATIONS HAS BEEN CONFIRMED BY WAY OF LETTERS RECEIVED FROM THE COMMON ENTRANCE TEST CELL AND/OR KARNATAKA EXAMI NATION AUTHORITY(GOVT. OF KARNATAKA). THE ATTENTION WAS ALSO DRAWN TO PAGE - 132 AND 133 WHEREIN THE FEES HAS BEEN FIXED BY A GOVERNMENT ORDER FOR POST GRADUATION COURSES AND THE SAID FEES HAVE BEEN COLLECTED AS PER THE DIRECTIONS OF THE GOVERNMENT. 7.2. 5 THE LEARNED COUNSEL ALSO DREW OUR ATTENTION TO SEC.23(3)(B) OF THE VTU ACT ( PAGE 16 OF THE PAPER BOOK WHEREIN THE ACT MANDATES THAT THE STATE GOVERNMENT SHALL, EVERY YEAR MAKE AN - LAPSABLE GRANT TO THE UNIVERSITY A GRANT NOT LESS THAN ESTIMATE EXPENDITUR E ON PAY AND ALLOWANCES OF THE STAFF, CONTINGENCIES, SUPPLIES AND SERVICES OF THE UNIVERSITY. THE COUNSEL FURTHER EXPLAINED THAT THE GOVT. HAS NO OPTION NOT TO REIMBURSE THE SALARY, CONTINGENCIES ETC., U/S 23(3)(B) UNLIKE SEC.23(3)(C). THE GOVT HAS AN O PTION TO GIVE MORE, BUT NOT LESS. THE LEGISLATIVE MANDATE HAS TO BE OBEYED BY GOVT. THE SUMS HAVE ACCRUED TO THE VTU EVERY YEAR UNDER THE STATUTE AND VTU IS ELIGIBLE TO RECEIVE THE YEARLY ACCRUAL FROM THE GOVT. 7.2. 6 FOR WORKING OUT THE PERCENTAGE OF GRA NT TO THE TOTAL RECEIPT, A CHART INCORPORATING THE SALARY/ALLOWANCES RECEIVABLE BY THE UNIVERSITY WAS SUBMITTED TO THE BENCH INCORPORATING THE AMOUNT RECEIVABLE (IN COL.5A) OF THE SAID CHART AND THUS AFTER CONSIDERING THE AMOUNT RECEIVABLE BY THE UNIVERSIT Y AS PER SEC.23(3)(B) THE PERCENTAGE OF THE RECEIPTS FROM THE GOVT. - 28 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) EXCEEDED 20%(AS PER COL.14) WHICH CONSTITUTED SUBSTANTIAL FUNDING BY THE GOVERNMENT. THE COUNSEL ALSO DREW OUR ATTENTION OF THE BENCH TO THE FACT NOT O N LY THE FINANCE OF THE UNIVERSITY BUT THE ENTIRE ADMINISTRATION, SUPERVISION AND CONTROL OF THE UNIVERSITY VESTED WITH THE GOVERNMENT AS THE GOVERNOR OF KARNATAKA IS THE CHANCELLOR OF THE ASSESSEE UNIVERSITY. THE OFFICERS OF THE ASSESSEE UNIVERSITY ARE NOMINATED/APPOINTED IN ACCORDANCE WITH SEC.10 OF CHAPTER - V OF THE SAID ACT ARE AS FOLLOWS; 1) THE CHANCELLOR 2) THE PRO - CHANCELLOR 3) THE VICE CHANCELLOR 4) THE REGISTRAR 5) THE REGISTRAR (EVALUATION) 6) THE FINANCE OFFICER 7) THE DIRECTORS OF REGIONAL OFFICES 8) SUCH OTHER OFFICERS IN THE SERVICE OF THE UNIVERSITY AS MAY BE DECLARED BY THE STATUTES TO THE OFFICERS OF THE UNIVERSITY. 7.2. 7 THE CHANCELLOR IS THE GOVERNOR OF THE STATE OF KARNATAKA AND HE IS THE HEAD OF THE ASSESSEE UNIVERSITY. THE PRO - CHANCELLOR IS THE MINISTER IN - CHA RGE OF HIGHER EDUCATION IN KARNATAKA. THE VICE CHANCELLOR IS BEING APPOINTED BY THE CHANCELLOR. SIMILARLY, ALL OTHER OFFICERS ARE APPOINTED BY THE CHANCELLOR OR PRO - CHANCELLOR OF THE EXECUTIVE COMMITTEE. THE EXECUTIVE COMMITTEE IS AGAIN CONSTITUTED BY T HE GOVERNMENT (ALL APPOINTEES ARE NOMINATED BY THE GOVERNOR) PAGE 12 OF THE PAPER BOOK. 7.2. 8 THE FINANCE COMMITTEE CONSTITUTED AS PER THE VTU ACT IS ALSO HEADED BY THE VICE CHANCELLOR, AND ALL THE MEMBERS OF THE FINANCE COMMITTEE ARE DRAWN FROM THE GOVER NMENT SECRETARY TO THE GOVERNMENT, DEPT OF EDUCATION AND SECRETARY TO GOVERNMENT, DEPT OF FINANCE, ONE MEMBER EACH DRAWN FROM THE EXECUTIVE COUNCIL AND THE ACADEMIC SENATE WHO ARE - 29 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) NOMINATED BY THE CHANCELLOR, FINANCE OFFICER WHO IS DRAWN FROM THE STATE A CCOUNTS DEPARTMENT. 7.2. 9 ALL THE FUNCTIONS OF THE UNIVERSITY ARE CONTROLLED BY THE EXECUTIVE COUNCIL, CONSTITUTED BY THE GOVERNMENT. 7.2.1 0 THE FEES FIXED BY THE EXECUTIVE COUNCIL (ACADEMIC FEES AND EXAMINATION FEES ETC) ARE ALSO WITH THE CONSENT OF THE GOVERNMENT AND HENCE, FORMS PART OF THE RECEIPTS FROM THE GOVERNMENT. 7.2.1 1 THE COUNSEL ALSO DREW OUR ATTENTION TO THE UTILISATION OF THE SURPLUS FUNDS OF THE UNIVERSITY. A NOTE ON THE UTILISATION OF THE FUNDS OF THE UNIVERSITY (PAPER BOOK PG 101 TO 10 4) WHEREIN A DETAILED ACCOUNT OF THE UTILISATION OF THE SURPLUS OF THE UNIVERSITY HAS BEEN ENUMERATED DEPICTING THAT THE UTILISATION IS ONLY FOR THE PURPOSE OF EDUCATION. 7.2.1 2 THE SEEMINGLY LARGE FUNDS WITH VTU ARE TRANSIENT. THERE HAS BEEN AN IMMEDIAT E DISBURSAL OF FUNDS FOR PROJECTS AND COLLEGES TRANSFERRED TO VTU UNDER THE DIRECTIONS OF THE GOVERNMENT. KIND ATTENTION OF THE BENCH WAS DRAWN TO THE CHART IN PAGE - 91 OF THE PAPER BOOK COL.5 WHEREIN THE INTEREST INCOME HAS BEEN VARYING FROM FINANCIAL YE AR 2002 - 03 RS.7.47 CRS TO ASSESSMENT YEAR: 2005 - 06 TO RS.0.54 CRORE AND SUBSEQUENTLY INCREASED. THE COUNSEL EXPLAINED THAT THE FUNDS ARE KEPT APART FOR THE PURPOSE OF UTILISATION BY VTU AS DECIDED BY THE GOVERNMENT PENDING DISBURSEMENT FOR VARIOUS APPRO VED PROJECTS. THE PRIMARY OBJECTIVE TO INVEST THE SURPLUS FUNDS IN BANKS IS TO ENSURE THAT THE FUNDS ARE BOOKED FOR THE APPROVED PROJECTS AND NOT TO EARN INCOME FROM THE SAME. THE INTEREST EARNED IS ONLY INCIDENTAL. 7.2.1 3 THE HON'BLEBLE BENCH DIRECTED T HE ASSESSEE COUNSEL TO SUBMIT A DETAILS ACCOUNT OF THE YEAR WISE GROSS RECEIPTS AND THE EXPENDITURE AND THE SURPLUS GENERATED BY THE UNIVERSITY. THE CHART WAS ALSO ENCLOSED WITH THE SYNOPSIS. - 30 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) 7.2.1 4 THE COUNSEL ALSO DREW OUR ATTENTION TO THE JUDGMENT OF CO - ORDINATE BENCH IN NATIONAL LAW SCHOOL OF INDIA UNIVERSITY VS ADDL. DIRECTOR OF INCOME - TAX (EXMP.)IN I.T. ACT NO.1424(B)/2008 AND C.O.NO.111(B)/2009 IN I.T. ACT NO.1424(B)/2008 THE HON'BLEBLE I.T.A.T. HAS CONCLUDED THAT THE EXEMPTION U/S 10(23C)(IIIAB) SHOULD BE GRANTED BASED ON THE FOLLOWING BROAD PARAMETERS. - THAT THE UNIVERSITY HAS COME INTO EXISTENCE BY AN ACT OF LEGISLATURE - THE INITIALLY LAND/FUNDS FOR SETTING UP THE UNIVERSITY HAS BEEN GRANTED BY THE GOVT. OF KARNATAKA. - THAT THE FUNDS ARE COLL ECTED ARE STRICTLY ACCORDING TO THE ACT WHICH IS PASSED BY THE LEGISLATURE WHICH HAS A STATUTORY SANCTION - THE UNIVERSITY SOLELY EXISTS FOR EDUCATIONAL PURPOSES AND NOT FOR PROFIT. - THE SOURCE OF RECEIPTS IF IT IS AS PER THE ACT, IT CANNOT BE SAID THAT T HE UNIVERSITY IS FINANCED BY PRIVATE SOURCE. - THE WORD WHOLLY OR SUBSTANTIALLY HAS NOT BEEN EXPLAINED I N THE IT ACT, IN RELATION TO EXEMPTION U/S 10(23C)(IIIAB) HENCE IT IS NOT REQUIRED UNDER LAW THAT THE ENTIRE FUNDS REQUIRED TO RUN THE UNIVERSITY HAS TO BE GRANTED BY THE GOVERNMENT - THE UNIVERSITY HAS TO GENERATE INCOME FOR MEETING ITS EXPENSES AND SALARIES ETC., AND IF THAT IS BEING DONE INCOME GENERATED BY THE UNIVERSITY CANNOT DISQUALIFY FOR EXEMPTION U/S 10(23C)(IIIAB). 7.2.1 5 ALL THE ABOVE PARAMETERS ENUMERATED IN THE SAID DECISION ARE SATISFIED BY THE ASSESSEE. - THE UNIVERSITY IS SET UP BY THE ACT OF LEGISLATURE. VTU ACT IS FOR GOVERNING THE UNIVERSITY AND VTU IS NOT CREATURE UNDER THE ACT. - 31 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) - THE FUNDS FOR PURCHASE OF LAND R S.3.00 CORES INITIALLY AND FOR SETTING UP THE INFRASTRUCTURE RS.2.00 CRORE HAS BEEN GRANTED BY THE GOVERNMENT OF KARNATAKA. - THE UNIVERSITY EXISTS SOLELY FOR EDUCATIONAL PURPOSES ONLY AND NOT FOR PROFIT. THE FACT THAT THE UNIVERSITY EXISTS SOLELY FOR ED UCATIONAL PURPOSES WAS NOT DISPUTED BY THE ASSESSING OFFICER. - THAT THE UNIVERSITY IS DIRECTLY IN RECEIPT OF THE MONEY FROM THE GOVERNMENT AS PER THE SEAT MATRIX DECIDED EVERY YEAR BY THE GOVERNMENT AND THE RATE OF FEES IS AS PER THE GOVT. ORDER ONLY.(FR OM KARNATAKA EXAMINATION AUTHORITY/COMMON ENTRANCE TEST CELL (GOVT.) - APART FROM DIRECT AID FROM THE GOVERNMENT THE UNIVERSITY IS COLLECTING THE FEES ETC., FROM COLLEGES, AS DECIDED BY THE EXECUTIVE COUNCIL WHICH HAS THE SANCTION OF THE LEGISLATURE THROU GH THE VTU ACT WHICH IS A STATUTORY SANCTION AND IS ALSO AID ED BY THE GOVERNMENT. 7.2.1 6 APPLYING THE PRINCIPLES LAID DOWN BY THE I.T.A.T. (SUPRA) THAT THE ASSESSEE CASE IS SQUARELY COVERED BY THE SAID DECISION. HENCE, THE INCOME OF THE UNIVERSITY IS ELI GIBLE FOR EXEMPTION U/S 10(23C) (IIIAB) SHOULD BE GRANTED. 7.2.1 7 THE COUNSEL HAS ALSO DRAWN THE ATTENTION OF ANOTHER JUDGMENT OF THE CO - ORDINATE BENCH IN DDIT(EX) VS IIM BANGALORE (2009) 313 ITR (AT) 79 (BANG.) WHICH WAS SUBSEQUENTLY UPHELD BY THE HONBLE HIGH COURT IN THE SAID JUDGMENT PARA - 13 ENUMERATED THE WORD FINANCED FINANCED HERE M E ANS THAT THE INSTITUTE WAS SET UP WITH THE FINANCES MADE AVAILABLE BY THE GOVERNMENT. SUCH REQUIREMENT IS MET IN THIS CASE. AFTER SETTING UP INFRASTRUCTURE THE INSTITUT E STARTED IMPARTING EDUCATION AND CHARGED FEES AS PRESCRIBED BY THE GOVERNMENT. THE ASSESSING OFFICER HAS TAKEN A VERY NARROW MEANING OF THE WORK FINANCED. THE RATIO OF JUDGMENTS APPLIES TO THE ASSESSEES CASE. THE INITIAL FUNDS FOR CREATING THE INFRASTR UCTURES HAVE BEEN - 32 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) PROVIDED BY THE GOVERNMENT. IN THE SUBSEQUENT YEARS ALSO THE GOVERNMENT HAS MADE SUBSTANTIALLY FINANCED THE ASSESSEE THROUGH THE PAYMENTS FROM KARNATAKA EXAMINATION AUTHORITY/COMMON ENTRANCE TEST CELL, GANTS ETC., 7.3 REVENUES SUBMISSIO N 7.3.1 SECTION 10(23C)(IIIAB) OF THE ACT IS NOT APPLICABLE TO THE ASSESSEE. THEREFORE THE ASSESSING OFFICER CAN BRING THE ASSESSEE IN TAX. A. THE ASSESSING OFFICER AS WELL AS THE APPELLATE COMMISSIONER HAS ANALYZE THE CLAUSE IN THE SECTION AND FOUND THAT THE ASSESSEE DOES NOT SATISFY THE CONDITION WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT . IN ORDER TO ARRIVE AT THIS CONCLUSION THE AUTHORITIES BELOW HAVE TAKEN ON RECORD THE PERCENTAGE OF GRANT RECEIVED BY THE UNIVERSITY FROM THE STATE GOVERNMENT. THE TABLE NOTICING THIS GRANT AS WELL AS THE PERCENTAGE IS EXTRACTED BELOW: ASST. YEAR ANNUAL RECEIPTS GRANT PERCENTAGE 2004 - 05 RS.53,58,31,778 RS.10,00,000 0.18% 2005 - 06 RS.51,77,33,746 RS.10,00,000 0.19% 2006 - 07 RS.68,67,43,812 RS. 7,50,000 0.10% 2007 - 08 RS.77,60,14,761 RS.10,00,000 0.12% 2008 - 09 RS.117,93,00,782 RS.10,00,000 0.08% 2009 - 10 RS.120,61,76,395 RS.10,00,000 0.082% THE MEANING ASSIGNED TO THE WORDS WHOLLY AND SUBSTANTIALLY SHOULD BE NOTICED. DICTIONARY REFERRED TO WHOLLY SUBSTANTIALLY OXFORD ENGLISH DICTIONARY 7 TH EDITION 1. COMPLETE; ENTIRE, 2. USED TO EMPHASIZE A LARGE EXTENT OR 1. CONSIDERABLY 2. FOR THE MOST PART; MAINLY: THINGS WILL - 33 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) NUMBER: A WHOLE RANGE OF ISSUES. 3. IN ONE PIECE. REMAIN SUBSTANTIALLY THE SAME B LACKS LAW DICTIONARY NOT PARTIALLY; FULLY; COMPLETELY. 1. THE ESSENCE OF SOMETHING; THE ESSENTIAL QUALITY OF SOMETHING, AS OPPOSED TO IS MERE FORM 2. ANY MATTER. PATENTS. THE SAME ESSENTIAL THING AS THE PATENTED ITEM, SO THAT IF TWO DEVICES DO THE SAME WORK IN SUBSTANTIALLY THE SAME WAY, WEBSTERS UNABRIDGED DICTIONARY 1. COMPRISING THE FULL QUANTITY AMOUNT EXTENT, NUMBER, ETC., WITHOUT DIM I NUTION OR EXCEPTION; ENTIRE, FULL OR TOTAL: HE ATE THE WHOLE PIE? 1. OF AMPLE OR CONSIDERABLE AMOUNT, QUANTITY, SIZE, ETC.: A SUBSTANTIAL SUM OF MONEY. B. IF THE PROVISION IN ITS MOST SIMPLIFIED FORM AS UNDERSTOOD FROM THE MEANING GIVEN BY THE DICTIONARY IT WOULD BECOME CLEAR THAT THE GOVERNMENT SHOULD HAVE CONTRIBUTED A MAJOR PORTION OF THE FUNDS TO THE UNIVERSITY FOR RUNNING IT. HOWEVER, FROM THE TABLE IT CAN BE NOTICED THAT THE GOVERNMENT HAS NOT PROVIDED EVEN 1% OF THE TOTAL TURNOVER FOR RUNNING A UNIVERSITY. HENCE, IT I S SUBMITTED THAT THE UNIVERSITY IS NOT FINANCED BY THE GOVERNMENT WHOLLY OR SUBSTANTIALLY. FURTHER THE JUDGMENTS OF THE HONBLE HIGH COURT OF KARNATAKA HAS CLEARLY HELD THAT WHOLLY & SUBSTANTIALLY FINANCED BY THE GOVERNMENT WOULD MEAN: - SL NO. HIGH COUR T JUDGMENT PERCENTAGE 1. ITA.NO.529/2008 DD. 24.08.2010 CIT VS. INDIAN INSTITUTE OF MANAGEMENT 37% OF TOTAL GRANT 2. ITA NO.808/2009 DD 08.07.2010 CIT VS. M/S. NATIONAL EDUCATION SOCIETY 36.42% OF TOTAL GRANT 3. ITA NO.412/2009 DD 12.01.2011 CIT VS. M/S. NATIONAL EDUCATION SOCIETY 40 - 42% OF TOTAL GRANT - 34 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THE ISSUE STANDS COVERED BY THE JURISDICTIONAL HIGH COURT JUDGMENT. C. SECONDLY, SECTION 23A OF THE COMPANIES ACT, EXPLAINS SUBSTANTIALLY TO MEAN ATLEAST 51% OF THE TOTAL VOTING POWER. IF THIS MEANING IS AP PLIED TO SECTION 10(23C)(IIIAB) OF THE ACT , IT WOULD BECOME CLEAR THAT THE PERCENTAGE OF INCOME BEING DEPLOYED BY THE UNIVERSITY WHEN COMPARED WITH THE ACTUAL GRANT MADE BY THE GOVERNMENT, THE PRESCRIBED FIGURE AS PER THE COMPANIES ACT CANNOT BE MET. THI S SUBSTANTIALLY INTERESTED CAME UP FOR CONSIDERATION BEFORE THE APEX COURT IN CIT VS. AMRUTANJAN LTD., (1964) 53 ITR 218 (SC). THEREFORE, IT IS SUBMITTED THAT THE RUNNING OF THE INSTITUTION CANNOT BE TERMED AS FINANCIALLY SUPPORTED BY THE GOVERNMENT WHOLL Y OR SUBSTANTIALLY. D. THIRDLY, FINANCED BY GOVERNMENT IS A GRANT OR SUBSIDY GIVEN BY THE GOVERNMENT TO RUN THE UNIVERSITY. THE GRANT OR SUBSIDY MADE BY THE GOVERNMENT HAS BEEN INTERPRETED BY THE APEX COURT UNDER DIFFERENT CIRCUMSTANCES WHICH WOULD HELP IN UNDERSTANDING THE TERMINOLOGY, SO AS TO APPLY THE SAME TO THE FACTS OF THE PRESENT CASE. E. FOURTHLY , ( NEW GROUND RAISED BY THE ASSESSEE ) IT IS NOW CONTENDED THAT FINANCED BY THE GOVERNMENT SHOULD BE UNDERSTOOD AS INDEPENDENT FEES COLLECTED BY THE UNIVERSITY SHOULD ALSO BE TERMED AS FINANCED BY THE GOVERNMENT. F. IT IS RESPECTFULLY SUBMITTED THAT INSTITUTIONS ARE CREATED BY THE STATE GOVE RNMENT UNDER SEPARATE ENACTMENT SO THAT IT COULD ACT INDEPENDENTLY. FURTHER, WHEN THESE INSTITUTIONS HAVE BEEN PERMITTED TO CARRY ON ITS ACTIVITY BY GENERATING ITS OWN INCOME I.E. THROUGH COLLECTION OF FEES, IT WOULD NOT BE TERMED AS GOVERNMENT FINANCE. COLLECTION OF FEES IS DONE BY PRIVATE INSTITUTIONS / UNIVERSITIES ALSO. IF THE SAME ANALOGY IS APPLIED THEN THESE PRIVATE UNIVERSITIES WOULD ALSO BECOME GOVERNMENT FINANCED - 35 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) INSTITUTIONS. THIS IS NOT THE INTENTION OF THE LEGISLATURE. THE INTENTION OF THE LEGISLATURE IS TO REGULATE, MONITOR AND NOT GRANT A FREE HAND TO SUCH INSTITUTIONS. THE INSTITUTIONS ARE BOUND TO COMPLY WITH THE REGULATIONS. VTU ACT, SECTION 3 : THE GOVERNMENT SHALL, EVERY YEAR, MAKE NONLAPSABLELUMPSUM GRANTS TO THE UNIVERSITY AS FOLLOWS: (A) A GRANT IS NOT LESS THAN NET EXPENDITURE INCURRED IN THE FINANCIAL YEAR IMMEDIATELY PROCEEDING THE APPOINTED DAY IN RESPECT OF THE ACTIVITIES OF THE COLLEGES OF ENGINEERING, TECHNOLOGY AND ALLIED SCIENCES WHICH ARE TR ANSFERRED TO THE UNIVERSITY, AND THE DIVISIONS OF THE UNIVERSITY; (B) A GRANT NOT LESS THAN THE ESTIMATE EXPENDITURE ON PAY AND ALLOWANCES OF THE STAFF, CONTINGENCIES, SUPPLIES, AND SERVICES OF THE UNIVERSITY; (C) A GRANT TO MEET SUCH ADDITIONAL ITEMS OF EXPENDITU RE RECURRING AND NONRECURRING AS THE GOVERNMENT MAY DEEM NECESSARY FOR THE PROPER FUNCTIONING AND DEVELOPMENT OF THE UNIVERSITY . UGC ACT, 1956 SECTION 12A(2)(D) : ALL OTHER RELEVANT FACTORS, THE COMMISSION IS SATISFIED THAT IT IS NECESSARY THAT IT IS NECE SSARY SO TO DO SO IN THE PUBLIC INTEREST, IT MAY, AFTER CONSULTATION, WITH THE UNIVERSITY OR UNIVERSITIES CONCERNED SPECIFY BY REGULATIONS THE MATTERS IN RESPECT OF WHICH FEES MAY BE CHARGED, AND THE SCALE OF FEES IN ACCORDANCE WITH WHICH FEES SHALL BE CHA RGED IN RESPECT OF THOSE MATTERS ON AND FROM SUCH DATE AS MAY BE SPECIFIED IN THE REGULATIONS IN THIS BEHALF, BY ANY COLLEGE PROVIDING FOR SUCH COURSE OF STUDY FROM, OR IN RELATION TO, ANY STUDENT IN CONNECTION WITH HIS ADMISSION TO, AND PROSECUTION OF, SU CH COURSE OF STUDY : PROVIDED THAT DIFFERENT MATTERS AND DIFFERENT SCALES OF FEES MAY BE SO SPECIFIED IN RELATION TO DIFFERENT UNIVERSITIES OR DIFFERENT CLASSES OF COLLEGES OR DIFFERENT AREAS. UGC ACT, 1956 SECTION 12A(3) : WHERE REGULATIONS OF THE NATUR E REFERRED TO IN SUB - SECTION (2) HAVE BEEN MADE IN RELATION TO ANY COURSE OF STUDY, NO COLLEGE PROVIDING FOR SUCH COURSE OF STUDY SHALL - 36 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) (A) LEVY OR CHARGE FEES IN RESPECT OF ANY MATTER OTHER THAN A MATTER SPECIFIED IN SUCH REGULATIONS; (B) LEVY OR CHARGE ANY FE ES IN EXCESS OF THE SCALE OF FEES SPECIFIED IN SUCH REGULATIONS, OR (C) ACCEPT, EITHER DIRECTLY OR INDIRECTLY, ANY PAYMENT OTHERWISE THAN BY WAY OF FEES; OR ANY DONATION OF GIFT (WHETHER IN CASH OR KIND), FROM, OR IN RELATION TO, ANY STUDENT IN CONNECTION WITH HIS ADMISSION TO, AND PROSECUTION OF, SUCH COURSE OF STUDY. G. THE FINANCE PROVIDED BY STATE GOVERNMENT WAS CONSIDERED BY THE APEX COURT IN TMA PAI FOUNDATION VS. STATE OF KARNATAKA (2002) 8 SCC 481 WHERE IT WAS HELD: - PARA 52 : THERE CANNOT BE A BETTE R EXPOSITION THAN WHAT HAS BEEN OBSERVED BY THESE RENOWNED EDUCATIONISTS WITH REGARD TO AUTONOMY IN EDUCATION. THE AFORESAID PASSAGE CLEARLY SHOWS THAT THE GOVERNMENTAL DOMINATION OF THE EDUCATIONAL PROCESS MUST BE RESISTED. ANOTHER PITHY OBSERVATION OF THE COMMISSION WAS THAT STATE AID WAS NOT TO BE CONFUSED WITH STATE CONTROL OVER ACADEMIC POLICIES AND PRACTICES. THE OBSERVATIONS REFERRED TO HEREINABOVE CLEARLY CONTEMPLATE EDUCATIONAL INSTITUTIONS SOARING TO GREAT HEIGHTS IN PURSUIT OF INTELLECTUAL EXC ELLENCE AND BEING FREE FROM UNNECESSARY GOVERNMENTAL CONTROLS. PARA 56 : AN EDUCATIONAL INSTITUTION IS ESTABLISHED FOR THE PURPOSE OF IMPARTING EDUCATION OF THE TYPE MADE AVAILABLE BY THE INSTITUTION. DIFFERENT COURSES OF STUDY ARE USUALLY TAUGHT BY TEAC HERS WHO HAVE TO BE RECRUITED AS PER QUALIFICATIONS THAT MAY BE PRESCRIBED. IT IS NO SECRET THAT BETTER WORKING CONDITIONS WILL ATTRACT BETTER TEACHERS. MORE AMENITIES WILL ENSURE THAT BETTER STUDENTS SEEK ADMISSION TO THAT INSTITUTION. ONE CANNOT LOSE SIGHT OF THE FACT THAT PROVIDING GOOD AMENITIES TO THE STUDENTS IN THE FORM OF COMPETENT TEACHING FACULTY AND OTHER INFRASTRUCTURE COSTS MONEY. IT HAS, THEREFORE, TO BE LEFT TO THE INSTITUTION, IF IT CHOOSES NOT TO SEEK ANY AID FROM - 37 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THE GOVERNMENT, TO DET ERMINE THE SCALE OF FEE THAT IT CAN CHARGE FROM THE STUDENTS. ONE ALSO CANNOT LOSE SIGHT OF THE FACT THAT WE LIVE IN A COMPETITIVE WORLD TODAY, WHERE PROFESSIONAL EDUCATION IS IN DEMAND. WE HAVE BEEN GIVEN TO UNDERSTAND THAT A LARGE NUMBER OF PROFESSIONA L AND OTHER INSTITUTIONS HAVE BEEN STARTED BY PRIVATE PARTIES WHO DO NOT SEEK ANY GOVERNMENTAL AID. IN A SENSE, A PROSPECTIVE STUDENT HAS VARIOUS OPTIONS OPEN TO HIM/HER WHERE, THEREFORE, NORMALLY ECONOMIC FORCES HAVE A ROLE TO PLAY. THE DECISION ON THE FEE TO BE CHARGED MUST NECESSARILY BE LEFT TO THE PRIVATE EDUCATIONAL INSTITUTION THAT DOES NOT SEEK OR IS NOT DEPENDENT UPON ANY FUNDS FROM THE GOVERNMENT. ISLAMIC ACADEMY OF EDUCATION VS. STATE OF KARNATAKA (2003) 6 SCC 697 PARA 154 : THE FEE STRUCTUR E, THUS, IN RELATION TO EACH AND EVERY COLLEGE MUST BE DETERMINED SEPARATELY KEEPING IN VIEW SEVERAL FACTORS, INCLUDING FACILITIES AVAILABLE, INFRASTRUCTURE MADE AVAILABLE, THE AGE OF THE INSTITUTION, INVESTMENT MADE, FUTURE PLAN FOR EXPANSION AND BETTERME NT OF THE EDUCATIONAL STANDARD ETC. THE CASE OF EACH INSTITUTION IN THIS BEHALF IS REQUIRED TO BE CONSIDERED BY AN APPROPRIATE COMMITTEE. FOR THE SAID PURPOSE, EVEN THE BOOKS OF ACCOUNTS MAINTAINED BY THE INSTITUTION MAY HAVE TO BE LOOKED INTO. WHATEVER IS DETERMINED BY THE COMMITTEE BY WAY OF A FEE STRUCTURE HAVING REGARD TO RELEVANT FACTORS, SOME OF WHICH ARE ENUMERATED HEREINBEFORE, THE MANAGEMENT OF THE INSTITUTION WOULD NOT BE ENTITLED TO CHARGE ANYTHING MORE. PARA 155 : WHILE FIXING THE FEE STRU CTURE THE COMMITTEE SHALL ALSO TAKE INTO CONSIDERATION, INTER ALIA, THE SALARY OR REMUNERATION PAID TO THE MEMBERS OF THE FACULTY AND OTHER STAFF, THE INVESTMENT MADE BY THEM, THE INFRASTRUCTURE PROVIDED AND PLAN FOR FUTURE DEVELOPMENT OF THE INSTITUTION A S ALSO EXPANSION OF THE EDUCATIONAL INSTITUTION. FUTURE PLANNING OR IMPROVEMENT OF FACILITIES MAY BE PROVIDED FOR. AN INSTITUTION MAY WANT TO INVEST IN AN EXPENSIVE DEVICE (FOR MEDICAL COLLEGES) OR A POWERFUL COMPUTER - 38 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) (FOR TECHNICAL COLLEGE). THESE FACT ORS ARE ALSO REQUIRED TO BE TAKEN CARE OF. THE STATE MUST EVOLVE A DETAILED PROCEDURE FOR CONSTITUTION AND SMOOTH FUNCTIONING OF THE COMMITTEE. PARA 156 : WHILE THIS COURT HAS NOT LAID DOWN ANY FIXED GUIDELINES AS REGARDS FEE STRUCTURE, IN MY OPINION, RE ASONABLE SURPLUS SHOULD ORDINARILY VARY FROM 6% TO 15%, AS SUCH SURPLUS WOULD BE UTILIZED FOR EXPANSION OF THE SYSTEM AND DEVELOPMENT OF EDUCATION. H. THE OBSERVATIONS MADE BY THE APEX COURT CLEARLY BRINGS OUT THE FACT THAT STATE AID SHOULD NOT BE CONFUSED WITH STATE CONTROL OVER THE ACADEMIC POLICIES AND PRACTICES . FURTHER AN INSTITUTE / UNIVERSITY CAN HAVE ITS OWN SOURCE OF INCOME BY COLLECTING FEES. THIS COLLECTION OF FEES IS REGULATORY BY THE STATE GOVERNMENT BY APPOINTING A COMMITTEE (CET). THEREFORE RAISING FUNDS THROUGH FEES CANNOT BE TERMED AS GOVERNMENT FINANCE AS HELD BY THE APEX COURT IN THE ABOVE JUDGMENTS. SECTION 10(23C)(IIIAD) OF THE ACT WHICH WAS HELD NOT APPLICABLE TO THE ASSESSEE BY THE AUTHORITIES BELOW HAS NOT BEEN DISPUTED. ADMITTEDLY, THE ASSESSEE IS HAVING SELF GENERATED REVENUE OF RS . 1 CRORE. HENCE, THIS SECTION IS NOT APPLICABLE. SECTION 10(23C)(VI) OF THE ACT WHICH HAS BEEN HELD APPLICABLE TO THE ASSESSEE BY THE AUTHORITIES BELOW HAS NOT BE DISPUTED. THE ASSESSEE HAS HAVING NOT FALLEN UNDER CLAUSES (IIIAB) AND (IIIAD) OF THE ACT, WOULD FALL UNDER CLAUSE (VI) OF SECTION 10(23C) AND THE RESPECTIVE PROVISO THERETO OF THE ACT. THE ASSESSEE HAS NOT OBTAINED THE THRESHOLD PERMISSION AS CONTEMPLATED IN THE JUDGMENT. THEREFORE, ASSESSEE IS NOT ENTITLED TO CLAIM ANY BENEFIT AND THE O RDER OF ASSESSMENT IS FULLY JUSTIFIED. - 39 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THIS ISSUE STANDS COVERED BY THE JUDGMENT OF THE APEX COURT IN AMERICAN HOTELS 301 ITR 86. 7.4 WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE APPEAL RELATES TO ELIGIBILITY OF ASSESSEE FOR CLAIMING EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. FOR READY REFERENCE, SECTION 10(23C)(IIIAB) IS REPRODUCED BELOW : 10. IN COMPUTING THE TOTAL INCOME OF A PREVIOUS YEAR OF ANY PERSON, ANY INCOME FAL LING WITHIN ANY OF THE FOLLOWING CLAUSES SHALL NOT BE INCLUDED ( 23C ) ANY INCOME 47A RECEIVED BY ANY PERSON ON BEHALF OF (I) T HE PRIME MINISTER'S NATIONAL RELIEF FUND; OR (II) THE PRIME MINISTER'S FUND (PROMOTION OF FOLK ART); OR (III) THE PRIME MINISTER'S AID TO STUDENTS FUND; OR ( IIIA ) THE NATIONAL FOUNDATION FOR COMMUNAL HARMONY; OR ( IIIAB )ANY UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION EXISTING SOLELY FOR EDUCATIONAL PURPOSES AND NOT FOR PURPOSES OF PROFIT, AND WHICH IS WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT; 7.4. 1 AS PER THE PROVISIONS OF SEC. 10(23C)(IIIAB) OF THE ACT THE UN IVERSITY OR EDUCATIONAL INSTITUTION, TO BE ELIGIBLE FOR CLAIM OF DEDUCTION, SHOULD EXIST SOLELY FOR EDUCATIONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT. IT ALSO STIPULATES THAT EDUCATIONAL INSTITUTION SHOULD BE WHOLLY AND SUBSTANTIALLY FINANCED BY THE G OVERNMENT. CONSIDERING THE PROVISION OF THIS SECTION, THE QUESTION ARISES WHETHER, CONSIDERING THE GRANT RECEIVED BY THE UNIVERSITY FROM THE GOVERNMENT OF KARNATAKA IT CAN BE SAID THAT THE UNIVERSITY IS WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. WE FIND THAT THE DISPUTE RELATES TO INTERPRETATION OF THE PHRASE WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. WE HAVE TO RELY ON THE INTERPRETATION OF THIS PHRASE OBSERVED BY THEIR LORDSHIPS IN THE DECISION IN THE CASE OF CIT VS. NATIONAL EDUC ATION SOCIETY. THE HONBLE HIGH COURT HAS HELD THAT IF THE GOVERNMENT FUNDING IS MORE THAN 10%, THEN, IT CLEARLY FALLS WITHIN THE PROVISIONS OF SEC. 10(23C)(IIIAB) OF THE ACT. HAVING HEARD BOTH THE PARTIES, - 40 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) WE HAVE GONE THROUGH THE ORDER OF CIT(A) AND TH E AO. DURING THE COURSE OF HEARING BEFORE CIT(A), THE AO HAS GIVEN REMAND REPORT WHICH READS AS UNDER: IT IS SEEN THAT THE ASSESSEE UNIVERSITY HAS WRONGLY INTERPRETED THE SAID DECISION WHICH IS OF NO HELP TO THE ASSESSEES CASE. IN THIS CASE, IT IS OBSERVED THAT THERE WAS GOVERNMENT GRANT OF 36.42% OF THE TOTAL REVENUE, WHEREAS, IN THE ASSESSEES CASE, THE GRANT FINANCED BY THE GOVERNMENT IS NOT MORE THAN 1% AS DISCUSSED IN THE ASSESSMENT AS WELL AS IN THE REPORT SUBMITTED TO THE CIT(APPEALS), BELGAUM. THE ASSESSEES CONTENTION THAT ALL THE FUNDS GENERATED BY IT ARE DIRECTLY GOVERNED BY THE STATE GOVERNMENT DIRECTIVES CANNOT BE TREATED AS WHOLLY OR SUBSTANTIALLY FINANCE BY THE GOVERNMENT FOR THE REASONS MENTIONED IN THE ASST ORDER. THE ASSESSEE UNIVERSITY CANNOT INTERPRET THE PROVISION ON THE STATUTE TO SUIT ITS CONVENIENCE AS INITIALLY, IT HAS CLAIMED THAT THEY HAVE BEEN REGISTERED UNDER SECTION 12A WHICH IS FACTUALLY INCORRECT, GRANT OF RECOGNITION UNDER SECTION 80G ALSO CA NNOT AUTOMATICA LL Y EXEMPT ITS INCOME UNDER SECTION 11 UNLESS IT IS REGISTERED UNDER SECTION 12AA OR APPROVED UNDER SECTION 1O(23C) BY THE COMPETENT AUTHORITIES. THEREFORE, THE PLAIN READING OF SECTION 1O(23C)(IIIAB) PROVIDES THAT THERE SHOULD BE WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVERNMENT WHICH IS ABSENT IN THE ASSESSEES CASE AND HENCE, THE FACTS THAT CONSTITUTION BY THE GOVERNMENT, FINANCE AND FEES CONTROLLED BY THE GOVERNMENT, ETC CANNOT BE THE CRITERIA TO CONSIDER WHOLLY OR SUBSTANTIALLY FINANCE BY THE GOVERNMENT. WHAT IS REQUIRED IS THE FUNDS SHOULD BE GIVEN OUT OF CONSOLIDATED FUND OF A STATE AND NOT BY WAY OF GENERATION THROUGH VARIOUS COLLEGES ETC, EVEN THOUGH IT IS AS PER THE DIRECTIVES OF THE GOVERNMENT AND THE VTU IS NOT DEPOSITING THE SAID COLLECTED FEES IN THE CONSOLIDATED FUND OF THE STATE. 7.4. 2 HAVING GONE THROUGH THE ABOVE, WE ARE OF THE VIEW THAT THE PLAIN READING OF THE SECTION IMPLIES THAT THE PHRASE WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT SHOULD ONLY INCLUDE GRANT R ECEIVED FROM THE GOVERNMENT TO MEET THE DIRECT EXPENSES OF THE UNIVERSITY SUCH AS EXPENSES INCURRED TOWARDS SALARY, INFRASTRUCTURE AND FOR THE PURPOSE OF OTHER DEVELOPMENT ACTIVITIES OF THE UNIVERSITY. THE RECEIPTS OF THE UNIVERSITY BY WAY OF FEES AND OTH ER CHARGES COLLECTED FROM THE STUDENTS CANNOT BE CONSIDERED AS FINANCE OR GRANT RECEIVED FROM THE GOVERNMENT ONLY BECAUSE SAME ARE AS PER THE GUIDELINES PRESCRIBED BY THE GOVERNMENT. WE FIND THAT - 41 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) EVEN IN PRIVATE EDUCATIONAL INSTITUTION, FEES ARE COLLECTED AS PER DIRECTIVES AND GUIDELINES PRESCRIBED BY THE GOVERNMENT. T HE PRIVATE INSTITUTIONS CANNOT BE CONSIDERED AS RECEIVING GRANT FROM THE GOVERNMENT. THEREFORE, WE ARE OF THE VIEW THAT THE ENTIRE FEES COLLECTED AS PER THE DIRECTIVES OF THE GOVERNMENT CA NNOT BE CONSIDERED AS FINANCE RECEIVED FROM THE GOVERNMENT. 7.4. 3 W E HAVE TO EXAMINE THE FACTS IN THE CASE OF NATIONAL EDUCATION SOCIETY, SHIMOGA REGARDING RECEIPT OF GRANT FROM THE GOVERNMENT. IN THAT CASE FOR THE RELEVANT ASSESSMENT YEAR THE ASSESSEE H AD RECEIVED FEES AND OTHERS OF RS.9,79,09,465/ - AND GOVERNMENT GRANT WAS RS.5,61,51,398/ - . THE AO HAS WORKED OUT THE PERCENTAGE OF GOVERNMENT GRANT AS 36.42% OF THE TOTAL RECEIPTS AND HELD THAT IT WAS NOT SUBSTANTIALLY FINANCED BY THE GOVERNMENT. IN THAT CASE, THE HONBLE HIGH COURT HAS HELD THAT THE GRANT OF 36.42% OF THE TOTAL RECEIPT DOES CONSTITUTE SUBSTANTIAL FINANCIAL AID FROM THE GOVERNMENT. THEREFORE, THE HIGH COURT HAS UPHELD THE DECISION OF THE ITAT. IN VIEW OF THIS, THE ASSESSEES FACTS ARE T O BE EXAMINED. IN THE CASE OF THE ASSESSEE, THE ASSESSEE RECEIVED FIXED CONSOLIDATED AMOUNT FROM THE GOVERNMENT AS GRANT WHEREAS IN THE CASE OF NATIONAL EDUCATION SOCIETY, THE REVENUE DEFICIT OF THE INSTITUTION WAS MET BY THE GOVERNMENT BY WAY OF FINANCIA L ASSISTANCE. IN THE ASSESSEES CASE, THERE IS SUFFICIENT SURPLUS. THEREFORE, THE QUESTION OF REVENUE DEFICIT DOES NOT ARISE. 7.4. 4 IN THE CASE OF NATIONAL EDUCATION SOCIETY, SHIMOGA, THE PERCENTAGE OF GOVERNMENT GRANT WAS TAKEN AT 36.42% OUT OF TOTAL R ECEIPT BY THE SOCIETY AND THIS PERCENTAGE WAS COMPUTED BY THE AO WHICH WAS CONSIDERED BY CIT(A) AND ITAT AND ULTIMATELY THE HIGH COURT HAS ALSO TAKEN THE SAME PERCENTAGE OF GOVERNMENT GRANT OUT OF TOTAL RECEIPT OF THE SOCIETY FOR THE YEAR WHICH INCLUDES AL L KIND OF FEES AND OTHER RECEIPTS INCLUDING OTHER INCOME. WE HAVE GONE THROUGH THE ORDER OF THE HIGH COURT AND THE HIGH COURT HAS NOT HELD THAT TO ARRIVE AT THE PERCENTAGE, FEES AND OTHER INCOME HAS TO BE EXCLUDED. THEREFORE, WE ARE OF THE VIEW THAT IN T HE CASE OF THE - 42 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) ASSESSEE, THE PERCENTAGE IS LESS THAN 1% BECAUSE THE ASSESSEE IS RECEIVING GRANT AS UNDER : ASST. YEAR ANNUAL RECEIPTS GRANT PERCENTAGE 2004 - 05 RS.53,58,31,778 RS,1 0 ,00,000 0.18% 2005 - 06 RS.51,77,33,746 RS.1 0 ,00,000 0.19% 2006 - 07 RS.68,67,43,812 RS. 7,50,000 0.10% 2007 - 08 RS.77,60,14,761 RS.10,00,000 0.12% 2008 - 09 RS.117,93,00782 RS.10,00,000 0.08% 2009 - 10 RS. 120,61,76,395 RS. 10,00,000 0.082% 7.4. 5 WE FIND THAT THE GOVERNMENT OF KARNATAKA IS SANCTIONING AMOUNT OF RS. 10 LACS FOR THE DEVELOPMENT PURPOSE AS GIVEN TO OTHER UNIVERSITIES. THEREFORE, WE ARE OF THE VIEW THAT THE FACTS OF THE CASE OF NATIONAL EDUCATION SOCIETY IS DIFFERENT FROM THE FACTS OF THE ASSESSEES CASE. 7.4. 6 WE ARE ALSO OF THE VIEW THAT NOWHERE IT IS HELD BY ANY ITAT DECISION OR THE HIGH COURT DECISION THAT OTHER FEES OR DONATION, WHATEVER NAMED CALLED, COLLECTED OR RECEIVED BY THE ASSESSEE OTHER THAN GRANT HAS BEEN CONSIDERED AS GOVERNMENT GRANT FOR COMPUTING PERCENTAGE OF GOVERNMENT GRANT. THEREFORE, WE ARE OF THE VIEW THAT THE FEES COLLECTED BY KARNATAKA EXAMINATION AUTHORITY AND OTHER FEES COLLECTED BY AFFILIATED COLLEGES CANNOT BE CONSIDERED AS GOVERNMENT GRANT. THEREFORE, THE ASSESSEES CONTENTION IS NOT TENABLE IN LAW. 7.4. 7 THE LD. AR HAS ALSO RELIED UPON THE DECISION OF ITAT, BANGALORE IN CIT VS. IIM BANGALORE WHICH WAS UPHELD BY THE HONBLE HIGH COURT OF KARNATAKA IN ITA NO. 529 OF 2008. IN THE CASE OF CIT VS. IIM BANGALORE, THE HONBLEHIGH COURT OF KARNATAKA OBSERVED THAT THE TOTAL INCOME OF THE ASSESSEE FROM ALL THE SOURCES INCLUDING FEES FROM THE STUDENTS AND DONATION WAS RS.20.61 LACS OUT OF WHICH SUM OF RS.7.80 LACS WHICH REPRESENTS ONLY 37.85% OF THE TOTAL INCOME IS FINANCED BY THE CENTRAL GOVERNMENT. THE BALANCE OF RS.12.81 LACS WAS OTHER SOURCES OF INCOME BEING TUITION FEE, - 43 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) DONATIONS ETC. WHICH DOES NOT CONSTITUTE FINANCE BY THE GOVERNMENT. CONSIDERING THE ABOVE DECISION, WE ARE OF THE VIEW THAT THE ASSESSEE HAS GENERATED OTHER INCOME BY WAY OF FEES AND DONATION OR FEES COLLECTED BY KARNATAKA EXAMINATION AUTHORITY WHICH CANNOT BE CONSIDERED AS GOVERNMENT FINANCE. 7.4. 8 T HE ASSESSEE HAS ALSO TAKEN THE CONTENTION THAT AO WAS OF THE VIEW THAT THE GOVERNMENT CONTRIBUTION TO THE FUND BEING NOT SUBSTANTIAL, THE ASSESSE E IS NOT ELIGIBLE FOR EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. THE ASSESSEES CONTENTION IS THAT THE ENTIRE FUND RAISED BY THE ASSESSEE WAS DIRECTLY CONTRIBUTED BY THE GOVERNMENT OR RAISED FROM THE GOVERNMENT DIRECTIVE AND BEING CONTROLLED BY EXECUTIVE CO MMITTEE APPOINTED BY THE GOVERNMENT. THUS, THE ENTIRE FUNDING EITHER CONTRIBUTED OR MONITORED BY THE GOVERNMENT WOULD SATISFY THE CONDITION PROVIDED U/S 10(23C)(IIIAB) OF THE ACT. THE LD. AR ALSO CONTENDED THAT IN CASE OF THE ASSESSEE, FUNDING IS THROUGH GRANTS GIVEN BY THE GOVERNMENT AND ALSO COLLECTION MADE BY THE UNIVERSITY FROM THE COLLEGES AND OTHER SOURCES AS PER GOVERNMENT DIRECTIVE. SEC. 10(23C)(IIIAB) OF THE ACT ONLY REFERS TO FUNDING WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. NOWHERE IT IS SUGGESTED THAT THE FUND SHOULD COME DIRECTLY FROM THE GOVERNMENT. EVEN THE FUND COLLECTED ON ACCOUNT OF GOVERNMENT DIRECTIVE IS ALSO FINANCED BY THE GOVERNMENT SINCE THE ENTIRE FUNDING IS UNDER THE CONTROL OF THE GOVERNMENT WHICH MONITORS THE EXPEN DITURE WHICH IS ALSO GOT AUDITED THROUGH ACCOUNTANT GENERAL AND BEING PASSED BY THE LEGISLATURE FROM TIME TO TIME. UNDER THESE CIRCUMSTANCES, THE ASSESSEE IS ENTITLED FOR SEC. 10(23C)(IIIAB) OF THE ACT. 7.4. 9 WE HAVE EXAMINED THE SUBMISSION MADE BY BOT H THE PARTIES FOR THIS . THE MAIN CONTENTION OF THE ASSESSEE IS THAT ENTIRE FUNDS RAISED BY THE ASSESSEE WERE DIRECTLY CONTRIBUTED BY THE GOVERNMENT AND RAISED FROM OTHER SOURCES AS PER GOVERNMENT DIRECTIVE SHOULD BE CONSIDERED FOR EVALUATING THE COMPLIANC E OF PROVISIONS OF SEC. 10(23C)(IIIAB) OF THE ACT. THE SECOND - 44 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) CONTENTION OF THE ASSESSEE IS THAT INCOME TAX ACT DOES NOT MANDATE THAT FUND SHOULD NECESSARILY FLOW DIRECTLY FROM THE GOVERNMENT. ALL THAT THE SECTION WARRANTS IS THAT FUNDING SHOULD BE DONE BY THE GOVERNMENT. CONSIDERING THE CLAIM OF THE ASSESSEE THAT ALL KIND OF FUNDS INCLUDING FUNDS DIRECTLY RECEIVED FROM THE GOVERNMENT AS WELL AS THROUGH OTHER MEANS SHOULD BE CONSIDERED AS FINANCIAL ASSISTANCE FROM THE GOVERNMENT IS NOT CORRECT AS SEC. 10 (23C)(IIIAB) OF THE ACT STATES THAT UNIVERSITY OR EDUCATIONAL INSTITUTION SHOULD BE WHOLLY AND SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THUS, THE SECTION SAYS THAT DIRECT FINANCE BY THE GOVERNMENT. THE CLAIM OF THE ASSESSEE THAT FEES RECEIVED FROM THE S TUDENTS AND OTHER CHARGES COLLECTED BY THE UNIVERSITY AS PER DIRECTION ISSUED BY THE GOVERNMENT SHOULD BE CONSIDERED AS FUNDING FROM THE GOVERNMENT, CANNOT BE ACCEPTED. 7.4.1 0 THEREFORE, WE ARE OF THE VIEW THAT AS PER SEC. 10(23C)(IIIAB) OF THE ACT FUND S SHOULD DIRECTLY FLOW FROM THE GOVERNMENT AND NOT BY WAY OF OTHER MEANS. THE PLAIN READING OF THE PROVISIONS OF SEC. 10(23C)(IIIAB) OF THE ACT SHOWS THAT THE UNIVERSITY AND EDUCATIONAL INSTITUTIONS SHOULD BE SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE PLAIN MEANING OF THE SECTION SHOULD BE ADOPTED FOR INTERPRETATION. THE INTERPRETATION CLAIMED BY THE ASSESSEE WOULD LEAD TO ABSURD SITUATION WHICH IS NOT CONTEMPLATED OR ENVISAGED BY THE LEGISLATURE. 7.4.1 1 WE FIND THAT THE CIT(A) HAS RELIED UPON THE DECISION OF IPCA LABORATORY LTD. 135 TAXMAN 594, SC WHEREIN IT IS HELD THAT EVEN THOUGH A LIBERAL INTERPRETATION HAS TO BE GIVEN TO SUCH PROVISION, THE INTERPRETATION HAS TO BE MADE AS PER THE WORDINGS OF THIS SECTION. IF THE WORDINGS OF THIS SECTION ARE CLEAR, THEN, THE BENEFIT WHICH ARE NOT AVAILABLE UNDER THIS SECTION CANNOT BE CONFERRED BY IGNORING AND MIS - INTERPRETING THE WORDS IN THE SECTION. THEREFORE, IN OUR OPINION, THE ASSESSEES CONTENTION THAT SEC. 10(23C)(IIIAB) OF THE ACT DOES NOT NECESSARIL Y CONTEMPLATE THAT THE FUNDS SHOULD FLOW DIRECTLY FROM THE GOVERNMENT IS NOT CORRECT AND SAME IS REJECTED. - 45 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) 7.4.1 2 THE LAST ARGUMENT OF THE LD. AR IS THAT THE FUNDS RECEIVED BY THE ASSESSEEDIRECTLY FROM THE GOVERNMENT AS WELL AS BY WAY OF FEES AND OTHER CHARGES FROM STUDENTS AND AFFILIATED COLLEGES ARE AUDITED AND MONITORED BY THE GOVERNMENT. THEREFORE, SAME SHOULD BE CONSIDERED AS FUNDING BY THE GOVERNMENT. THIS ARGUMENT OF THE ASSESSEE IS ALSO DEVOID OF ANY MERIT OR LOGIC. WE FIND THAT FOR NGOS AND O THER COOPERATIVE SOCIETIES THE GOVERNMENT MONITORS AND CONTROLS THE FINANCIAL AFFAIRS OF SUCH BODY IN DIFFERENT WAYS INCLUDING AUDIT. THE PURPOSE OF MONITORING OR AUDIT OF ACCOUNT DOES NOT NECESSARILY IMPLY THAT SUCH ORGANIZATIONS ARE SUBSTANTIALLY FINANC ED BY THE GOVERNMENT ONLY BECAUSE THAT ACCOUNTS AND FINANCIAL AFFAIRS ARE MONITORED AND CONTROLLED BY THE GOVERNMENT. THEREFORE, THE CLAIM OF THE ASSESSEETHAT FINANCIAL AFFAIRS OF THE UNIVERSITY ARE CONTROLLED AND MONITORED BY THE GOVERNMENT AND ALL FUNDS RECEIVED BY THE UNIVERSITY INCLUDING FUNDS COLLECTED DIRECTLY BY THE UNIVERSITY FROM THE STUDENTS AND OTHER AFFILIATED COLLEGES ARE GOVERNMENT FUNDING CANNOT BE CONSIDERED. THEREFORE, WE DO NOT AGREE WITH THE SUBMISSION OF THE ASSESSEE. IN THE RESULT, T HE ASSESSEES CONTENTION IS NOT MAINTAINABLE. 7.4.1 3 WE HAVE TO DECIDE WHETHER THE ASSESSEE HAS PROFIT MOTIVE OR NOT. WE FIND THAT WHILE GRANTING EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT IT IS TO BE NOTED THAT THE UNIVERSITY HAS BEEN GENERATING HUGE SURPL US OUT OF ITS COLLECTION MADE FROM THE STUDENTS AND OTHER AFFILIATED COLLEGES YEAR AFTER YEAR. THE PRIMARY CONDITION PRESCRIBED IN SEC. 10(23C)(IIIAB) OF THE ACT IS THAT THE UNIVERSITY OR EDUCATIONAL INSTITUTION SHOULD EXIST SOLELY FOR THE EDUCATION PURPO SE AND NOT FOR THE PURPOSE OF PROFIT. HOWEVER, IN THE PRESENT CASE, THE ASSESSEE IS COLLECTING SUBSTANTIAL AMOUNT EVERY YEAR WHICH RESULTED IN ACCUMULATION OF SUBSTANTIAL AMOUNT OF SURPLUS WHICH IS STATED TO BE TO THE TUNE OF RS. 549 CRORES AS ON 31.3.200 0. THIS SURPLUS HAS BEEN GENERATED OUT OF DIRECT COLLECTION MADE BY THE UNIVERSITY AS WELL AS INTEREST EARNED FROM SUBSTANTIAL BANK DEPOSITS MADE OUT OF THE SURPLUS MONEY. WE - 46 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) FIND THAT THE UNIVERSITY HAS BEEN COLLECTING SUBSTANTIAL AMOUNT OF MONEY UNDER VARIOUS HEADS SUCH AS CONVOCATION, EXAMINATION FEES, E - LEARNING FEES ETC. IT IS NOTICED THAT THE CORRESPONDING EXPENDITURE INCURRED UNDER SUCH HEADS IS VERY NOMINAL, AS A RESULT OF WHICH THE UNIVERSITY HAS GENERATED SUBSTANTIAL AMOUNT OF SURPLUS. THIS IS EVIDENT FROM THE DETAILS OF RECEIPTS AND EXPENDITURE OF THE UNIVERSITY AS FURNISHED IN THE REMAND REPORT OF THE AO WHICH READS AS UNDER : NATURE OF FEES F.Y. AMOUNT OF FEES COLLECTED AMOUNT OF EXPENDITURE INCOME BALANCE / PROFIT CONVOCATION 2009 - 10 RS.2,72,40,1 87 RS.27,07,672 RS.2,45,32,51 5 EXAMINATION FEES RS,32,79,37,115 RS.17,66,43,156/ - (REMUNERATION TO EXAMINERS AND OTHERS, SQUAD EXPENSES, TA DA IN CONNECTION WITH EXAM, RS.15,12,93,959 CONVOCATION 2010 - 11 RS. 3,41,31,767 RS.4,22,595 RS. 3,3 7O9,173 EXAMINATIONFEES RS.34,09,71278 RS.12,18,68,114 + RS.4,81,88,886 (REMUNERATION TO EXAMINERS AND OTHERS, SQUAD EXPENSES, TA DA IN CONNECTION WITH EXAM, RS.17,09,14,278 E LEARNING FEES RS.12,88,58695 RS. NIL RS. 12,88,58,695. 7.4.1 4 WE FIND FROM THE ABOVE CHART THAT THE UNIVERSITY HAS BEEN CHARGING MORE FEES THAN REQUIRED FOR PROVIDING SPECIFIC SERVICES TO THE STUDENTS. THE FACT THAT THE ASSESSEE HAS BEEN COLLECTING MUCH MORE THAN REQUIRED AMOUNT OF MONEY YEAR AFTER YEAR UNDER THE VARI OUS HEADS STRONGLY INDICATES THAT THE ACTIVITIES OF THE UNIVERSITY ARE NOT CHARITABLE. IF THE PURPOSE OF ESTABLISHING THE UNIVERSITY WAS TO PROMOTE THE TECHNICAL EDUCATION BY ADMINISTERING ENGINEERING AND TECHNICAL COLLEGES WITHOUT PROFIT MOTIVE , THERE WA S NO NECESSITY TO COLLECT SUCH HIGH AMOUNT OF FUNDS NOT ONLY FROM THE AFFILIATED - 47 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) COLLEGES BUT ALSO FROM THE STUDENTS TO GENERATE HUGE AMOUNT OF SURPLUS WHICH IS INVESTED IN BANK DEPOSITS GENERATING FURTHER INTEREST FOR THE ASSESSEE. THE ASSESSEE HAS EARNE D SUBSTANTIAL AMOUNT OF INTEREST INCOME FROM FIXED DEPOSITS WHICH SHOWS THAT EARNING OF MORE INCOME IS ONE OF THE OBJECT OF THE UNIVERSITY. THEREFORE, THE INTENTION TO EARN PROFIT CANNOT BE RULED OUT. IN VIEW OF THIS, THE ASSESSEE IS NOT ELIGIBLE TO CLAI M EXEMPTION U/S 10(23C)(IIIAB) OF THE ACT. 7.4.1 5 WE ALSO FIND THE SUPPORT FROM THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF AMERICAN HOTELS & LODGING ASSOCIATION EDUCATIONAL INSTITUTE VS. CENTRAL BOARD OF DIRECT TAXES 301 ITR 86 WHEREIN THE SUPRE ME COURT HAS HELD AS UNDER : 3 1 . WE SHALL NOW CONSIDER THE EFFECT OF INSERTION OF PROVISOS TO S. 10(23C)(VI) VIDE FINANCE ACT, 1998. SEC. 10(23C)(VI) IS ANALOGOUS TO S. 10(22). TO THAT EXTENT, THE JUDGMENTS OF THIS COURT AS APPLICABLE TO S. 10(22) WOULD EQUALLY APPLY TO S. 10(23C)(VI). THE PROBLEM ARISES WITH THE INSERTION OF THE PROVISOS TO S. 10(23C)(VI). WITH THE INSERTION OF THE PROVISOS TO S. 10(23C)(VI) THE APPLICANT WHO SEEKS APPROVAL HAS NOT ONLY TO SHOW THAT IT IS AN INSTITUTION EXISTING SOLELY F OR EDUCATIONAL PURPOSES [WHICH WAS ALSO THE REQUIREMENT UNDER S. 10 (22)] BUT IT HAS NOW TO OBTAIN INITIAL APPROVAL FROM THE PRESCRIBED AUTHORITY, IN TERMS OF S. 10 (23C)(VI) BY MAKING AN APPLICATION IN THE STANDARDIZED FORM AS MENTIONED IN THE FIRST PROVI SO TO THAT SECTION. THAT CONDITION OF OBTAINING APPROVAL FROM THE PRESCRIBED AUTHORITY CAME TO BE INSERTED BECAUSE S.10(22) WAS ABUSED BY SOME EDUCATIONAL INSTITUTIONS/UNIVERSITIES. THIS PROVISO WAS INSERTED ALONG WITH OTHER PROVISOS BECAUSE THERE WAS NO MONITORING MECHANISM TO CHECK ABUSE OF EXEMPTION PROVISION. WITH THE INSERTION OF THE FIRST PROVISO, THE PRESCRIBED AUTHORITY IS REQUIRED TO VET THE APPLICATION. THIS VETTING PROCESS IS STIPULATED BY THE SECOND PROVISO. IT IS IMPORTANT TO NOTE THAT THE SECOND PROVISO ALSO INDICATES THE POWERS AND DUTIES OF THE PRESCRIBED AUTHORITY. WHILE CONSIDERING THE APPROVAL APPLICATION IN THE SECOND PROVISO, THE PRESCRIBED AUTHORITY IS EMPOWERED BEFORE GIVING APPROVAL TO CALL FOR SUCH DOCUMENTS INCLUDING ANNUAL ACCOUNTS OR INFORMATION FROM THE APPLICANT TO CHECK THE GENUINENESS OF THE ACTIVITIES OF THE APPLICANT INSTITUTION. EARLIER THAT POWER WAS NOT THERE WITH THE PRESCRIBED AUTHORITY. UNDER THE THIRD PROVISO, THE PRESCRIBED AUTHORITY HAS TO ASCERTAIN WHILE JUD GING THE GENUINENESS OF THE ACTIVITIES OF - 48 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THE APPLICANT INSTITUTION AS TO WHETHER THE APPLICANT APPLIES ITS INCOME WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT IS CONSTITUTED/ESTABLISHED. UNDER THE TWELFTH PROVISO, THE PRESCRIBED AUTHORITY IS REQUIRE D TO EXAMINE CASES WHERE AN APPLICANT DOES NOT APPLY ITS INCOME DURING THE YEAR OF RECEIPT AND ACCUMULATES IT BUT MAKES PAYMENT THEREFROM TO ANY TRUST OR INSTITUTION REGISTERED UNDER S. 12AA OR TO ANY FUND OR TRUST OR INSTITUTION OR UNIVERSITY OR OTHER EDU CATIONAL INSTITUTION AND TO THAT EXTENT THE PROVISO STATES THAT SUCH PAYMENT SHALL NOT BE TREATED AS APPLICATION OF INCOME TO THE OBJECTS FOR WHICH SUCH TRUST OR FUND OR EDUCATIONAL INSTITUTION IS ESTABLISHED. THE IDEA UNDERLYING THE TWELFTH PROVISO IS TO PROVIDE GUIDANCE TO THE PRESCRIBED AUTHORITY AS TO THE MEANING OF THE WORDS 'APPLICATION OF INCOME TO THE OBJECTS FOR WHICH THE INSTITUTION IS ESTABLISHED'. THEREFORE, THE TWELFTH PROVISO IS THE MATTER OF DETAIL. THE MOST RELEVANT PROVISO FOR DECIDING THIS APPEAL IS THE THIRTEENTH PROVISO. UNDER THAT PROVISO, THE CIRCUMSTANCES ARE GIVEN UNDER WHICH THE PRESCRIBED AUTHORITY IS EMPOWERED TO WITHDRAW THE APPROVAL EARLIER GRANTED. UNDER THAT PROVISO, IF THE PRESCRIBED AUTHORITY IS SATISFIED THAT THE TRUST, FUND , UNIVERSITY OR OTHER EDUCATIONAL INSTITUTION ETC. HAS NOT APPLIED ITS INCOME IN ACCORDANCE WITH THE THIRD PROVISO OR IF IT FINDS THAT SUCH INSTITUTION, TRUST OR FUND ETC. HAS NOT INVESTED/DEPOSITED ITS FUNDS IN ACCORDANCE WITH THE THIRD PROVISO OR THAT TH E ACTIVITIES OF SUCH FUND OR INSTITUTION OR TRUST ETC. ARE NOT GENUINE OR THAT ITS ACTIVITIES ARE NOT BEING CARRIED OUT IN ACCORDANCE WITH THE CONDITIONS SUBJECT TO WHICH APPROVAL IS GRANTED THEN THE PRESCRIBED AUTHORITY IS EMPOWERED TO WITHDRAW THE APPROV AL EARLIER GRANTED AFTER COMPLYING WITH THE PROCEDURE MENTIONED THEREIN. 7.4.1 6 RESPECTFULLY FOLLOWING THE DECISION, WE ARE OF THE VIEW THAT THE ASSESSEE HAS NOT APPLIED AS PER THIS DECISION FOR APPROVAL OF INSTITUTION U/S 10(23C) (VI) OF THE INCOME TAX ACT. DURING THE COURSE OF HEARING, LD. AR HAS FILED THE COPY OF THE DECISION OF INCOME TAX TRIBUNAL, CALCUTTA IN THE CASE OF SIKKIM MANIPAL UNIVERSITY VS. ACIT IN ITA NO. 1227 TO 1230/KOL/2011. WE HAVE GONE THROUGH THE DECISION AND IN THAT DECISION, THE TRIBUNAL HAS CONSIDERED WHETHER THE ASSESSEES UNIVERSITY IS SATISFYING ALL THE CONDITIONS PRESCRIBED U/S 10(23C)(IIIAB) OF THE ACT. IN THAT CASE, THE ASSESSEE HAS ALSO FILED AN APPLICATION IN FORM NO. 56D BEFORE CCIT, JALPAIGURI CLAIMI NG EXEMPTION OF INCOME U/S 10(23C)(V I ) OF THE ACT AND WHICH WAS REJECTED BY - 49 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) THE CHIEF COMMISSIONER. THEREFORE, THE TRIBUNAL HAS CONSIDERING ALL THE RELEVANT FACTS AND DECIDED THE APPEAL IN FAVOUR OF THE ASSESSEE WHEREAS THE CASE IN HAND THE ASSESSEE HAS N OT APPLIED FOR APPROVAL U/S 10(23C)(VI). THEREFORE, THIS JUDGEMENT WILL NOT BE HELPFUL TO THE ASSESSEE. 7.4. 17 DURING THE COURSE OF HEARING LD. AR HAS RELIED UPON THE DECISION OF ST. LAWRENCE EDUCATION SOCIETY VS. CIT & ORS. 197 TAXMAN 506 DELHI HIGH C OURT AND HARYANA STATE COUNSELLING SOCIETY VS. CHIEF COMMISSIONER OF INCOME TAX, 233 CTR (P&H HIGH COURT) 402 . IN BOTH THESE DECISIONS, THE HONBLE HIGH COURT S HA VE REMANDED THE MATTER FOR FRESH ADJUDICATION REGARDING EXEMPTION U/S 10(23C)(VI) OF THE IT A CT. THEREFORE, TH E S E DECISIONS WILL NOT HELP THE ASSESSEE. IN RESPECT OF DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF JAYPEE INSTITUTE OF INFORMATION TECHNOLOGY SOCIETY VS. DIRECTOR GENERAL OF INCOME TAX, 227 CTR 124 (DELHI) IT IS HELD THAT SOCIET Y RUNNING AN EDUCATION INSTITUTION IMPARTING EDUCATION IN SYSTEMATIC MANNER AND RECOGNISED AS A DEEMED UNIVERSITY BY UGC CANNOT BE DENIED EXEMPTION U/S 10(23C)(VI) FOR THE REASONS THAT ONE OF THE OBJECT INCLUDE UNDERTAKING EXTRA MURAL STUDIES, EXTENSION PR OGRAMMES AND FIELD OUTREACH ACTIVITIES TO CONTRIBUTE THE DEVELOPMENT OF THE SOCIETY WHICH IS IN FACT A PART OF EDUCATION. THE FACTS OF THIS CASE ARE ENTIRELY DIFFERENT. THEREFORE, THIS JUDGMENT WILL NOT BE HELPFUL TO THE ASSESSEE. IN RESPECT OF THE DECISION OF HONBLE BIHAR HIGH COURT IN THE CASE OF BIHAR STATE TEXT BOOK PUBLISHING CORPORATION VS. COMMISSIONER OF INCOME TAX, 241 CTR PATNA 403 WHEREIN THE HONBLE HIGH COURT HAS DECIDED THE ISSUE THAT ASSESSEE, A PUBLIC SECTOR UNDERTAKING OF STATE GOVT . ENGAGED IN BUSINESS OF PRINTING AND SALE OF TEXT BOOKS AT LOW RATES TO THE STUDENT OF DEPRIVED SECTIONS OF SOCIETY AGAINST RECEIPT OF SUBSIDY FROM THE STATE GOVT. WAS EXEMPT U/S 10(23C)(IIIAB) AND SUBSIDY RECEIVED BY ASSESSEE ON THE SALE OF TEXT BOOKS IS NOT TAXABLE. THE FACTS OF THIS CASE IS ENTIRELY DIFFERENT. THEREFORE, THIS WILL NOT BE HELPFUL TO THE ASSESSEE. - 50 - ITA NOS.65 TO 70(PNJ)/2012 (ASST. YEAR 2004 - 05 TO 2009 - 10) 7.4. 18 IN VIEW OF THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE ASSESSEE DOES NOT FULFIL ALL THE STIPULATED CONDITIONS TO BE ELIGIBLE F OR CLAIM OF DEDUCTION U/S 10(23C)(IIIAB) OF THE ACT. THE ASSESSEE IS ALSO NOT ENTITLED TO BE ELIGIBLE U/S 10(23C)(IIIAD) OF THE ACT SINCE THE AGGREGATE ANNUAL RECEIPT OF THE UNIVERSITY EXCEEDS RS. 1 CRORE. THE ASSESSEE HAS ALSO NOT CLAIMED THAT IT HAS AP PROVAL OF PRESCRIBED AUTHORITY TO CLAIM DEDUCTION U/S 10(23C)(VI) OF THE ACT. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT INCOME OF THE ASSESSEE IS CHARGEABLE TO TAX IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX ACT FOR ALL THE SIX ASSESSMENT YEAR S FROM A.Y. 2004 - 05 TO 2009 - 10. THUS, GROUND NOS. 9 TO 17 STANDS DISMISSED. 8. IN THE RESULT, ALL THE APPEAL S FILED BY THE ASSESSEE ARE DISMISSED. 9. ORDER PRONOUNCED IN THE OPEN COURT ON 21 /06/2013. SD/ - (P.K. BANSAL) ACCOUNTANT MEMBER SD/ - (D.T.GARASIA) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 21 /06/2013 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT CONCERNED (4) CIT (A) (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER, SR. PRIVATE SECRETARY, ITAT, PANAJI, GOA