2015 (8) TMI 466 - HC - Income Tax

Entitlement for exemption under Section 10(23C) (vi) - Held that - It is an undisputed fact that the petitioner University has been established under the provisions of the Universities Act, 2009, and accordingly, the same was included in the Schedule of the Universities Act, 23009 by publication in the Gujarat Government Gazette on 11.04.2012. We have perused the provisions of the Universities Act, 2009 as well as the First Statutes of the petitionerUniversity. Several aspects have been pleaded by both the sides with regard to the eligibility of the petitioner University for getting exemption under Section 10 (23C) (vi) of the Act. However, we would like to deal with the present case at this stage only on the ground that the Chief Commissioner of Income Tax had no occasion to deal with the case of the petitioner in absence of sufficient materials i.e. final balancesheet showing income and expenditure account upto 31.03.2014 though the order has been passed on 20.10.2014. Chief Commissioner of IncomeTax, before passing the impugned order dated 20.10.2014, ought to have perused the relevant materials with regard to the income and expenditure of the University and ought not to have decided the case on the reasons assigned in the impugned order having insufficient materials to come to the conclusion that the University is established for earning profit from imparting education to the students. The respondents authorities ought to have perused the powers of the State Government under the Private Universities Act, 2009 while dealing with the case of a University established under the said Act. The respondents authority ought to have considered the powers of the State Government provided under Section 43 of the Universities Act, 2009. Section 43 of the Universities Act, 2009 empowers the State Government to take action against the Universities in certain circumstances. Thus the impugned order requires to be quashed and set aside only on the ground referred hereinabove and accordingly, quashed and set aside. The matter is remanded to the Chief Commissioner of IncomeTax for a fresh consideration with regard to the application dated 21.11.2013 submitted by the petitioner University for grant of certificate under Section 10(23C)(vi) of the Act, after giving an opportunity of hearing to the petitioner - Decided in favour of assessee for statistical purposes.

Summary

Issues:
Challenge to order denying tax exemption under Section 10(23C)(vi) of the Income Tax Act, 1961 for a university established under the Gujarat Private Universities Act, 2009.

Analysis:

1. Background and Petition: The petitioner, a university established under the Gujarat Private Universities Act, 2009, challenged the order denying tax exemption under Section 10(23C)(vi) of the Income Tax Act, 1961. The petitioner submitted Form No.56D under Rule 2CA of the Income Tax Rules for exemption, which was refused by the Chief Commissioner of Income Tax on grounds of not solely being for educational purposes.

2. Contentions of the Petitioner: The petitioner argued that the University's objects align with the Universities Act, 2009, and funds are used for the University's benefit. The petitioner contended that the refusal of exemption was based on extraneous considerations and misinterpretation of relevant sections of the Universities Act, 2009.

3. Legal Arguments: The petitioner relied on a Supreme Court decision stating that making profits does not imply the university was established for profit. The petitioner emphasized that the University's structure and procedures comply with the law, and the observations made in the order were incorrect.

4. Revenue's Position: The Revenue argued that the University's actions, as per its First Statutes, indicated profit-making intentions, especially concerning admissions and control by the Sponsoring Body. The Revenue contended that the Chief Commissioner's decision was justified.

5. Court's Decision: The Court noted insufficiency of materials considered by the Chief Commissioner before the order. It highlighted the need to review income and expenditure details and the State Government's powers under the Universities Act, 2009. The Court quashed the order, remanding the matter for fresh consideration with specific instructions to examine the application thoroughly.

6. Remand and Directions: The Court directed a fresh review by the Chief Commissioner, considering all relevant provisions and legal precedents. The authorities were given a timeline of 8 weeks to complete the review and provide a decision based on sufficient materials. The Court refrained from commenting on certain observations in the original order.

7. Conclusion: The petition was allowed, the rule made absolute, and no costs were imposed. Direct service was permitted, and the authorities were instructed to reevaluate the exemption request in light of the Court's directions and relevant legal provisions.