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TMI Blog2018 (8) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee University, which was created by the Special Act of the Legislature solely for the purpose of education. Pr. CCIT directed to grant approval u/s.10(23C)(vi) - Decided in favor of assessee. - ITA No.366/CTK/2015 - - - Dated:- 10-8-2018 - SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER For The Assessee : Shri P.S. Panda/Kamal Agrawalla, ARs For The Revenue : Shri Saad Kidwai, CIT DR ORDER Per N.S.Saini, AM This is an appeal filed by the assessee against the order of the Pr. CIT, Bhubaneswar dated 17th June, 2015. 2. The assessee has raised the following grounds of appeal: 01. The Ld. Pr. CCIT has legally and factually erred in rejecting the application for registration under section 10(23C)(vi) of the Income Tax Act. 02.The Ld. Pr. CCIT has erred legally in assuming that the assessee has not commenced activities. Further, commencement of activities, in any case should not have been a ground of rejection. 03. The Ld. Pr. CCIT has erred legally by looking into the 85% application which is an assessment issues. Further, the applicant has applied the funds as per the income tax provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstitute of Management, Bhubaneswar (XIMB) as detailed below: Date Voucher No. Narration Amount (Dr.) 31.07.20 13 HO-X-FY1314-0708(JR) Fees collection from students in XIMB books of A/c is transferred 1,04,85,000/- 21.08.20 13 HQ-X-FY1314-0803(JR) Fees collection from students in XIMB books of A/c is transferred 1,04,28,000/- 23.11.20 13 HO-X-FY1314-1104(JR) Fees collection from students in XIMB books of A/c is transferred 1,04,25,000/- 31.03.20 14 HO-X-FY1314-0350(JR) Admission related income transferred from XIMB 50,69,467/- 6. The Pr. CCIT observed that from the above, it is evident that the applicant university did not carry out any educational activity of its own during the relevant financial year 2013-14. It merely owned up and projected the income earned by Xavier Institute of Management, Bhubaneswar by showing jour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Institute of Management, Bhubaneswar is patently false, and even the auditor's report endorsing the same as relating to the applicant university is false and misleading, for which the applicant university as well as its auditor are liable for suitable action under the relevant provisions of the Act. 7. On perusal of the audited balance sheet for the year ended 31.03.2014, it is noticed that a sum of ₹ 12 crores was received as endowments fund from its sponsoring body, Xavier Institute of Management, Bhubaneswar has been invested in fixed deposits with various banks, namely, UCO Bank (Rs.10 crores), The Karur Vysya Bank (Rs.1 crore) Kotak Mahindra Bank (Rs.1 crore), which earned the applicant university an interest of ₹ 83,61,6137- during the relevant period. He further observed that assuming, but not accepting that the applicant university was engaged in educational activities of its own during the relevant year, no such interest, however, has been accounted for by the applicant university in its audited income and expenditure account for the relevant year 2013-14, for reasons best known to the applicant and well inferred by the peruser of such accounts. By i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Management, Bhubaneswar, a desperate attempt has been made to float another entity by the name Xavier University for obtaining the certificate of exemption u/s.10(23C)(vi). However, the attempt on the part of the applicant university is preposterous inasmuch as the applicant university is still at a rudimentary set up stage and yet to commence its own academic and educational activities, and the so-called educational activities projected to be its own is an euphemism for the activities already run by Xavier Institute of Management, Bhubaneswar. 10. Therefore, the Pr. CCIT held that in view of the above analysis and discussion and in the light of the ratios of the following case laws, it can be said that the applicant university cannot be said to be existing for educational purpose, much less 'solely' for educational purpose, since no educational activities have commenced hitherto, and as such, it is not entitled to exemption u/s.10(23C)(vi) of the Act. i) CIT vs. Sorabji Nusserwanji Parekh (1992) 107 CTR (Guj) 72: (1993) 201 ITR 939 (Guj). (ii) Aditanar Educational Institution vs. Addl. CIT (1997) 139 CTR (SC) 7: (1997) 224 ITR 310 (SC). iii) CIT vs. Gurukul Gha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and Technology, ( v) School of Banking and Financial Services, ( vi) School of Vocational Education-arid Training; ( vii) School of tribal and Development Studies, ( viii) School of Law, ( ix) School of Vocational Education, and ( x) subject to the approval of the State Government, any other Schools as it may deem fit; ( g) to disseminate knowledge through seminars, conferences, executive education programmes, community development programmes, publications, and training programs ( h) to undertake programmes for the training and development of the faculty members of the University and other institution's in India or abroad; ( i) to create higher levels of intellectual abilities; ( j) to provide consultancy to Industry, Government and Public Organizations; ( k) to ensure that the standards of the degrees, diplomas, charters, certificates and other academic distinctions are not lower than those laid down by University Grants Commission and other Regulatory Bodies, as the case may be; ( I) to do all things necessary or expedient to promote the above objectives; and ( m) to pursue any othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted without affording a reasonable opportunity to show cause to the Sponsoring Body. ( 5) On receipt of the notice referred to in sub-section (1) or on a decision to dissolve under sub-section (2), the State Government shall, in consultation with the All India Council for Technical Education, University Grants Commission and other concerned Regulatory Bodies of Central or State Government make such arrangements for administration of the University from the proposed date of dissolution or winding up of the University until the last batch of students in regular courses of studies of the University complete their courses of studies in such manner as may be prescribed. 14. Section 2(p) defines sponsoring body as under: Sponsoring Body means the Xavier Institute of Management Society registered under the Societies Registration Act, 1860. 15. Thus, it is observed that the assessee University was formed by the Special Act of the Government of Odisha and it was formed solely for the purpose of education. The State Government does not permit the assessee University to apply its funds or income for the benefit of any private person and for this matter for any purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uter networking and other facilities of the Society which shall constitute part of the requirement. d) purchase equipment, computers, furniture, other movable and immovable assets and infrastructure facilities other than buildings, referred to in clause (b), worth twenty Lakhs rupees or as per the norms of Regulatory Bodies, whichever is higher, and give undertaking to procure within the first five years, equipments, computers, furniture, other movable and immovable assets and infrastructure facilities other than buildings referred to in clause (b) worth not less than One Crore rupees or as per norms of the Regulatory Bodies, whichever is higher and the existing equipments, computers, furniture, other movable and immovable assets and infrastructure facilities other than buildings shall constitute part of the requirement; ( e) give an undertaking, - ( i) to appoint at least one Professor, two Associate Professors and adequate number of Assistant Professors and Senior Lecturers on full-time basis along with necessary supporting staff in each School or Department or Discipline of the University prior to the date such School or Department or Discipline is started; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the assessee University. The list of related 60 students is also furnished. 20. We find that said XIMB is a sponsoring body of the assessee University. As the income of the XIMB is also exempt from tax u/s.11 12 of the Act, no financial benefit could have been derived by XIMB by transferring its own income and expenditure to the account of assessee University. 21. Moreover, we find that the assessment of the assessee University for the assessment year 2014-15 was completed u/s.143(3) of the Act vide order of assessment dated 29.7.2016, wherein, the fees and expenditure in question was accepted to be the actual income and expenditure of the assessee University by the department. 22. The next reason given by the Pr. CCIT to refuse to grant approval u/s.10(23C)(vi) was as under: 4. On perusal of the audited balance sheet for the year ended 31.3.2014, it is noticed that a sum of ₹ 12 crores that was received as endowments fund from its sponsoring body, XIMB, had been invested in fixed deposits with various banks, namely UCO Bank (10 crores), The Karur Vysya Bank (R.1 corre) and Kotak Mahindra Bank (Rs.1 crore) which earned the applicant university an inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, it was pointed out that the entire interest income of ₹ 83,61,613/- was duly accounted for in the books of account of the assessee by crediting ₹ 70,22,466/- under the head University Endowment Fund Account and ₹ 13,39,147/- under the head University Other Asset Fund Account . It was clarified that the aforesaid interest income of ₹ 83,61,613/- was earned out of fund of ₹ 12 crores received from Sponsoring Body. Our attention was invited to Section 40 of the Special Act, which reads as under: 40(1) The sponsoring body shall establish an Endowment Fund of ten crores rupees. ( 2) The amount of Endowment Fund shall be invested and kept invested, until the dissolution of the University, in long term securities issued or guaranteed by the State Government. ( 3) The University may transfer any amount from the General fund or the Development Fund to the Endowment Fund. ( 4) Excepting in the dissolution of the university, no money can be transferred from the Endowment Fund under any circumstances for purposes other than that of the University. ( 5) Out of the incomes received from the Endowment Fund, an amount not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... School or Department or Discipline is started; ( ii) to take up co-curricular activities to foster a proper academic and healthy socio-cultural environment, such as seminars, debates, quiz programmes and extra curricular activities like games, sports, and such other activities for the benefit of the students as per the norms laid down by the Regulatory Bodies; ( iii) to establish welfare programmes for the employees of the University; ( iv) to fulfil such other conditions and provide such other informations as may be prescribed by the Regulatory Bodies, from time to time; ( v) that the programmes of study leading to a degree or a post-graduate degree or diploma offered by the University shall conform to the relevant regulations or norms of the UGC and the concerned Regulatory Body, as amended from time to time; ( vi) that the admission procedure and fixation of fees shall be in accordance with the norms or guidelines, if any, prescribed by the Regulatory Bodies; ( vii) that the teaching staff of the University shall have at least the minimum qualifications prescribed by the UGC or other concerned Regulatory Bodies, and be paid appropriate e ..... 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