TMI Blog2010 (5) TMI 829X X X X Extracts X X X X X X X X Extracts X X X X ..... ery university established by an Act of the State Legislature under section 6 shall be a body corporate by the name as specified in the Act and shall have perpetual succession and a common seal. It shall have the power to acquire and hold property and to make contract, and shall sue and be sued in its name. We find that that Act clothes the assessee-university with the character of a body corporate, an artificial juristic person with powers to hold properties, make contracts and sue or be sued. Therefore, the juristic person created under that Act may or may not be incorporated as a company or a society so as to be a person under the Act. Accordingly, we are of the view that the learned CIT erred in coming to the conclusion that the assessee-university is not a competent person to make an application for its registration. Sponsoring Body and the assessee university are two different persons during the life-time of the latter. Assuming for a moment that they are the same person, then it follows automatically that the activities of the university are entitled to exemption under section 11, as the Sponsoring Body has already been registered by the Director of Income-tax (Exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee will be entitled to the registration from this date or the 1st day of April of the year in which the application for registration was moved. In view of the aforesaid discussion, we are of the view that the learned CIT erred in refusing to register the assessee university. University approval u/s 80G - HELD THAT:- The provision contained in section 80G 5(iii) makes it clear that the approval can be granted only if the institution is formed wholly for charitable purposes and none of its object is of religious nature. Section 80G(5B) grants some concession in this matter that approval can be granted if not more than 5 per cent of the total income of a year is applied towards religious purposes. We find that there is no ceiling on religious expenditure in the objects of the Sponsoring Body. Considering the facts of this case, it is true that none of the objects of the assessee-university pertain to religious activities. However, on its dissolution, all its assets shall vest in the Sponsoring Body. Section 80G(5)(ii) contains the word do not contain any provision for the transfer or application at any time (emphasis supplied) of the whole or any part of the income or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mending Haryana Private Universities Act, 2006, by adding the name of O.P. Jindal Global University in the Schedule, Notification No. Leg. 3/2009 of Haryana Ordinance No. 3/2009, and Notification No. Leg.36/2006 of Haryana Act No. 32 of 2006, providing for establishment, etc., of private universities in the State of Haryana, for imparting higher education. After hearing the assessee, the learned Commissioner of Income-tax- Rohtak, came to the conclusion that the university is not a competent person for making application for its registration under section 12AA, it is not a charitable institution as it is intended to benefit only a limited number of persons, it is not meant to carry out any charitable purpose as there is no element of any benefit by way of donations to common man, and it will be charging substantial fees from the student. The lack of competence to make application for its registration was stated to be on five grounds, mentioned below:- (i)Article 45(1) of the notification No. Leg. 36/2006 of Haryana Act No. 32 of 2006 empowers the sponsoring body to dissolve the university. Thus power to dissolve the university is with sponsoring body i.e. O.P. Jindal Jan Kalya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpetual existence and a common seal. It shall have the power to acquire and hold property both movable and immovable and to make contract, and shall sue, and be sued by the said name. Section 21 provides for authorities of the university, which are - (i)the Governing Body; (ii)the board of management; (iii)The academic council; and (iv)Such other authorities as may be declared by the Statute to be the authorities of the university . 3.2 Section 45 provides that the Sponsoring Body may recommend to the Government to dissolve the university by giving a notice in the manner as may be prescribed to the employees and the students of the university at least one year in advance. The resolution shall take effect only after the last batch of the students of the regular courses have completed their courses and they have been awarded degrees, diplomas or awards, as the case may be so, however, that such resolution of the university shall not have any adverse effect on the validity of degrees, diplomas or awards conferred on the students. It is further provided that on dissolution of the university, the assets and liabilities of the university shall vest in the Sponsorin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sharing knowledge and its application; (6)to establish a campus in the State of Haryana and to have study centers at different places within its jurisdiction; (7)to establish examination centers; (8)to establish degrees, diplomas, certificates and other academic distinctions on the basis of examination, or any other method; (9)to ensure that the standard of degrees, diplomas, certificates and other academic distinctions are not lower than those laid down by All India Council for Technical Education, National Council of Teacher Education, University Grants Commission, Medical Council of India, Pharmaceutical Council of India, and other similar agency/agencies established by the Central Development for regulation of education; (10)to open study centers within its jurisdiction; (11)to set up off - campus center and/or the study center within and out of the State, with the prior approval of the University Grants Commission and that of the concerned State Governments; (12)to open any offshore campus in foreign countries after obtaining due permission from University Grants Commission, the Government, the Government of India and also that of the Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, this expression has to be understood as defined in the Act. 4.2 The third finding is that the university does not cater to the interests of public at large, as it is meant to benefit only rich persons because of the charging of prohibitively high fees, which cannot be afforded by the public at large. In this connection, the case of the learned counsel is that the Statute does not restrict admission to the university to any class of persons which is open to all as per policy of the Government. In the definition of the expression charitable purpose , the Legislature has specifically used the word poor , whenever intended as in the case of relief of the poor . There is no such qualifying word in respect of education. Thus, this issue has to be examined from a technical angle and not from generally held perceptions in the matter. Therefore, resorting to the dictionary meaning etc. would be of no avail. 4.3 It has also been held that charging of exorbitant fees went against the concept of charity . The case of the learned counsel is that the amount of fees per se is not relevant and what is to be seen is whether there is any profit motive with which the university is so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sued in its name. The case of the learned CIT is that it has not been registered as a company under section 25 of the Companies Act, 1956. It is also not registered as a charitable trust or a charitable society, therefore, it has been inferred that the university is not a competent person as referred in section 12AA of the Act. We have considered this matter in the light of submissions made before us. We find that that Act clothes the assessee-university with the character of a body corporate, an artificial juristic person with powers to hold properties, make contracts and sue or be sued. Such a person will fall within the definition of the term person , in section 2(31)( vii). Further, under Explanation to this provision, an artificial juristic person shall be treated to be a person, whether or not it has been formed or established with the object of deriving income, profits or gains. Therefore, the juristic person created under that Act may or may not be incorporated as a company or a society so as to be a person under the Act. Accordingly, we are of the view that the learned CIT erred in coming to the conclusion that the assessee-university is not a competent person to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... functioning of the university and obligation in regard thereto is cast on the Sponsoring Body. However, it cannot be said that the assessee-university is not a person in its own right. Establishment of endowment fund is an obligation on the sponsoring body which ensures availability of minimum requisite fund for running of the university. Taking all these factors into account, we are of the view that the Sponsoring Body and the assessee university are two different persons during the life-time of the latter. Assuming for a moment that they are the same person, then it follows automatically that the activities of the university are entitled to exemption under section 11, as the Sponsoring Body has already been registered by the Director of Income-tax (Exemption) vide order dated 25-4-2005, a copy of which has been placed before us. Therefore, the objection of the learned CIT is merely technical, in nature. However, we are of the view that in view of section 7 of that Act, the assessee is a separate juristic person, separate and apart from the Sponsoring Body. By virtue of this provision, it is a competent person under section 12AA, to apply for its registration. 7. The second qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere the question was decided in favour of the assessee and against the revenue by making following observations :- If we apply this test in the present case, it is clear that the activity of obtaining licences for import of foreign yarn and quotas for purchase of indigenous yarn, which was carried on by the assessee, was not activity for profit. The predominant object of this activity was promotion of commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth, which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out the charitable purpose. It is significant to note that the assessee was a company recognized by the Central Government under section 25 of the Companies Act, 1956, and under its memorandum of association, the profit arising from any activity carried on by the assessee was liable to be applied solely and exclusively for the promotion of trade and commerce in various commodities which we have mentioned above and no part of such profit could be distributed amongst the members in any form or under any guise. The profit of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is nowhere disputed that the receipts are utilized by the petitioner Foundation for advancement of its objectives. The memorandum of association specifically stipulates that these are not to be disturbed to the members as dividends or profits. It is clear that most of the amount received qua these projects was spent on the project and surplus, if any, is used for advancement of the objectives which the petitioner Foundation is established. 7.2 The objects of the assessee-university are mentioned in that Act, in section 3, all of which are educational in nature, primarily aimed awarding diplomas and degrees to the students. The funds of the university are to be applied in accordance with section 13 of that Act, which are either in the nature of disbursement of expenses or granting fellowship, freeship, schoolship etc., to students belonging to weaker sections of the society. The only benefit granted to the Sponsoring Body is that in case of dissolution the assets and liabilities of the assessee university shall vest in it. However, as seen earlier, the Sponsoring Body itself is a charitable institution, registered under section 12AA of the Income-tax Act. Therefore, the net as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before us, arguments of the rival parties are the same as in case of the registration under section 12AA, which have already been considered by us. We have not accepted the case of learned D.R. We also obtained from the assessee a copy of memorandum of association of the Sponsoring Body, Om Prakash Jindal Gramin Jankalyan Sansthan, which was filed. This became necessary because as per provisions of that Act, the assets and liabilities were to vest in the Sponsoring Body in the event of the dissolution of the assessee-university. It was found that the governing body has 32 objects, which cover a vast field including education, relief of poor, religion, medical aid etc. Object No. 27 reads as under :- 27. To construct, alter, maintain, improve, develop, manage and control Dharmashalas, Ashrams, Auditoriums and temples and provide all kind of required facilities and worship materials to devotees. 9.1 The case of the learned counsel is that the assessee-university has a perpetual existence and, therefore, vesting of its properties in the Sponsoring Body is only of academic interest, being a distant and future eventuality. 10. We have considered the facts of the case and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding correctness or otherwise of the approval granted to the Sponsoring Body. We are concerned with the assessee-university. The Hon ble Supreme Court examined this matter in the case of Upper Ganges Sugar Mills Ltd. v. CIT [1997] 227 ITR 5781 . After examining the provision contained in the Statute, the court came to the conclusion that even if one of the objects is wholly or substantially wholly of a religious character, the institution or fund falls outside the scope of section 80G(5). For the sake of ready reference, the relevant portion of the judgment is reproduced below :- The High Court did not accept the assessee s argument that the establishment or maintenance of prayer halls was not a religious object. The High Court also did not accept the assessee s argument that the object of clause 2(h) of the trust deed should not be considered to be a religious object, because the trustees were not empowered to set up places of worship and prayer halls of a particular community or religion; it took the view that even if a trust was set up for the advancement of all the religions in the world, it would be a trust of a religious nature. The High Court rejected the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the donation by the assessee to it fall outside the scope of section 80G. 10.4 Coming to the facts of this case, it is true that none of the objects of the assessee-university pertain to religious activities. However, on its dissolution, all its assets shall vest in the Sponsoring Body. Section 80G(5)(ii) contains the word do not contain any provision for the transfer or application at any time (emphasis supplied) of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose . We have supplied emphasis to the words at any time for the reason that transfer of its assets and liabilities on dissolution will fall within the ambit of the words at any time . The rules governing the assessee university contain a provision for transfer of its asset to the governing body, whose objects include a manifestly religious object. In view thereof, and in view of the aforesaid decision rendered by Hon ble Supreme Court, we are of the view that the assessee university is not entitled to approval under section 80G. 11. In result, ITA No. 3981/Delhi/2009 is allowed and ITA No. 3980/Delhi/2009 is dismissed. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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