Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2014 (2) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (2) TMI 658 - HC - Income TaxClaim of Exemption u/s 10(23C)(iiiab) of the Act – Purpose of University – Held that:- Whether rejecting the claim of the University seeking exemption/deduction u/s 10(23C) (iiiab) of the Act was justified and Whether the University is existing solely for educational purposes and not for purposes of profit and that the surplus in its accounts in any given year would not constitute profit to deny exemption/benefit under section 10 (23C) (iiiab) of the I.T. Act – Held that:- The intention of legislature is primarily to be gathered from the words used in the statute - Once it is shown that an assessee falls within the letter of law, he must be taxed, however, great the hardship may appear to the judicial mind to be - kThe University earns income from different sources every year - The expressions, "existing solely for educational purposes and not for purposes of profit", is common in all the three sub-clauses - Thus the common element in sub-clauses (iiiab), (iiiad) and (vi) is that the University or education institution must exist "solely for educational purpose and not for the purposes of profit" – Relying upon Additional Commissioner of Income-tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association [1979 (11) TMI 1 - SUPREME Court] – the test that must be applied is not "whether as a matter of fact an activity results in profit" but "whether the activity is carried on with the object of earning profit". According to the revenue the University gets about 1% financial aid/ grants from the Government of the total receipts - even without grants, the surplus amount is more than double the expenditure incurred during 2004-05 till 2009-10. In 2005-06 the surplus amount is almost four times more than the actual expenditure - without actual compliance of a taxing provision, such as Section 10 (23C) (iiiad) of the Act, the provision, such as Section 23 of the 1994 Act, would not entitle any person, such as the University to seek any benefit of the taxing provision. Section 10(23C) (iiiad) of the Act, uses the word/expression 'financed', which is a clear indication of the intendment of the legislature - an exemption under Section 10(23C) (iiiab) cannot be either claimed or granted unless all the ingredients as reflected therein are satisfied/fulfilled. The expression 'not for purposes of profit' will have to be read in the light of the word 'existing' used in sub-clause (iiiab) - the University used the financial aid extended by the Government only for development purpose and not for meeting the other expenditure for which they are entitled to seek grants as provided for under Section 23 of the Act of 1994 - The fees they are receiving from the students routed through colleges affiliated to it and the Examination Authority cannot be treated as financial aid from the Government to the University - the amount is not coming from Government corpus/treasury – thus, the University cannot be treated as an institution wholly or substantially financed by the Government. Whether the appellant is a State or part of the State, within the meaning of Article 289(1) of the Constitution of India so as to seek exemption from taxation under this Article – Held that:- The University is a 'body corporate' having perpetual succession and a common seal with a power to acquire and hold property and to enter into contract in its name as contemplated under Section 3 of the Act of 1994, and in the light of the meaning of the word state in Article 289 of the Constitution, the University is not a 'State' within the meaning of Article 289(1) of the Constitution and it cannot be exempted from taxation as envisaged thereunder - The word "State" employed in the Article cannot be extended so as to include the University – Decided against Assessee.
|