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TMI Blog2020 (9) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 crores, which also was not ploughed back for any activity for which the University was set up; fulfilled its object; or fees of the students reduced. Also, profits generated were far more than the permissible limits (6 to 15%) as laid down by in Islamic Academy of Education Vs. State of Karnataka [2003 (8) TMI 469 - SUPREME COURT] . It is under these circumstances; the Court held that the mandate of the law of securing contributions from the Government source and not fees collected under the statute to be Income not generated from the sources of finance of the Government. We agree with the submission made by Sri Pathy that the impugned action is not only misconceived but wholly unsustainable and untenable in law. - Civil Writ Jurisdiction Case No.20296 of 2010 - - - Dated:- 4-9-2020 - HONOURABLE THE CHIEF JUSTICE SANJAY KAROL And HONOURABLE MR. JUSTICE S. KUMAR For the Petitioners : Mr. D. V. Pathy , Advocate For the Respondents : Mrs. Archana Sinha , Advocate JUDGMENT ( Per : HONOURABLE THE CHIEF JUSTICE ) The sole issue arising consideration in the present proceedings is as to whether the petitioner is entitled to exemption in terms of Sections 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e termed as Sarva Shiksha Abhiyan , sufficient enough to reassess the scheme. This undisputedly is under a programme undertaken pursuant to and under a policy decision of the Government and not any private individual. To begin with, Ms Archana Sinha, learned counsel for the Revenue, with vehemence, argued that petitioner had got an alternative remedy of filing an appeal under the provisions of the Act and as such, must take recourse to such remedy. Not finding favour with such submission, we called upon the learned counsel for the parties to argue the matter on merits. For at such a belated stage, we are not inclined, more so when the order of assessment stands passed during the pendency of the instant proceeding, to relegate the parties for exhausting alternative remedy, particularly as would unfurl from our discussions hereinafter, the impugned action is totally in violation of the statutory provisions and judicial pronouncements. On merits, opposing the petition, Ms Archana Sinha lays much emphasis on the most recent decision on the issue rendered by Hon'ble Apex Court in (2016) 12 SCC 258 titled as Visvesvaraya Technological University Vs. Assistant Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stands reproduced (supra): The ingredients, sine qua non for making such a clause of exemption applicable are (a) the person must be a University/other educational institution; (b) existing solely for educational purpose, and (c) not for the purposes of profit; and (d) must be wholly or substantially financed by the Government. The Hon'ble Apex Court in Visvesvaraya case (supra) while taking note of its earlier decisions rendered in Queen's Educational Society (supra) has already observed that if a surplus of Revenue accrued is applied for educational purposes, then the educational institution can be said to functioning solely for educational purpose and not for the purposes of profit. Also, the earlier principle enunciated in Queen's Educational Society stands reiterated in the following terms : 6. The relevant principles of law which will govern the first issue i.e. whether an educational institution or a university, as may be, exists only for educational purpose and not for profit are no longer res integra, having been dealt with by a long line of decisions of this Court which have been elaborately noticed and extracted in a recent pronouncement i.e. Q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase [CIT v. Surat Art Silk Cloth Manufacturers' Assn.(1980) 2 SCC 31], Aditanar case [Aditanar Educational Institution v. CIT [(1997) 3 SCC 346] and American Hotel Lodging case [American Hotel Lodging Assn. Educational Institute v. CBDT [(2008) 10 SCC 509]. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. 9. In the present case, we find that during a short period of a decade i.e. from the year 1999 to 2010 the appellant University had generated a surplus of about ₹ 500 crores. There is no doubt that the huge surplus has been collected/accumulated by realizing fees under different heads in consonance with the powers vested in the University under Section 23 of the VTU Act. The difference between the fees collected and the actual expenditure incurred for the purposes for which fees were collected is significant. In fact the expenditure incurred represents only a minuscule part of the fees collected. No remission, rebate or concession in the amount of fees charged under the different heads for the next Academic Year(s) had been granted to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating proceedings for assessment of Income untenable in law. In fact, the Court answered the following four questions in favour of the petitioner: (i) Whether the Tribunal was correct in law in holding that the amount of ₹ 8,23,15,167/- being the amount of subsidy receivable on sale of text books though not received either by the end of the final year or till date, could be brought to tax as Income under the scheme of the Act? (ii) Whether the Tribunal was in error in applying the ratio of the judgment of the Hon'ble Supreme Court in Sahni Steel Case (supra) which is distinguishable on facts? (iii) Whether the Tribunal was in error in holding that the subsidy receivable from the State Government of Bihar on sale of text books was taxable on mercantile system of accounting without any appropriate consideration of the fact that such subsidy not having been received was not real Income and, therefore, not liable to tax? (iv) Whether the Tribunal erred in considering the fact that even otherwise sale of text book was an educational activity exempt from tax? And while doing so it took note of an earlier decision rendered by Hon'ble Apex Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; secondly, the High Court ought to have considered the source of funding, the shareholding pattern and aspects, such as return on investment; thirdly, it has not considered the letters issued by the CBDT which are referred to in the judgment of the Rajasthan High Court granting benefit of exemption to various boards/societies in the country under Section 10(22) of the Act; fourthly, it has failed to consider the judgments mentioned hereinabove; and lastly, it has failed to consider the letter of the Central Government dated 9.7.1973, to the effect that all State-controlled educational committee(s)/board(s) have been constituted to implement the educational policy of the State(s); consequently, they should be treated as educational institution. (emphasis supplied) Coming to the decision on which Ms Archana Shahi vehemently relies upon, we notice that in Visvesvaraya case (supra) on facts the Court found the petitioner therein, not to be fulfilling the essential ingredients mandatorily required entitling applicability of the exemption clause. In fact, the Court reiterated its earlier view in Queen's Education Society case (supra). It found the University established by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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