TMI Blog2018 (2) TMI 1371X X X X Extracts X X X X X X X X Extracts X X X X ..... ng imparted in a controlled manner, financially or administratively, then those objects would not change. If some actions at the end of the assessee are being taken against the provisions of Income Tax Act and then section 13 etc. are already there to keep a check of misuse of powers. Next reasons assigned by the ld.DIT that university has shown unsecured loan of ₹ 3.15 crores from Bhandari Charitable Trust is not a relevant factor to determine genuineness of objects. All financial affairs if misused can be considered at the time of assessment proceedings with the help of section 13 In the present case, even if the assessee has taken funds from “BCT” it will not be affect its objects, if it has extended some undue benefits to “BCT” then safeguards are already there under section 13 of the Income tax Act. Registration cannot be rejected at the threshold only under an anticipation that something could be controlled either by the “BCT” or some undue benefit would be given to “BCT”. These are concerns which can always be looked into at the time of assessment proceedings. If a charitable institution enjoying benefit under section 12A is being dissolved then either those a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Govt. of Gujarat simply declared institution, Indus University as a private university. He also observed that GPUA does not ensure that institution is non-profit organization. Hence, he called for further details, and thereafter examined various provisions of GPUA. The ld.DIT has assigned four reasons for not granting assessee registration under section 12AA of the Act. We deem it appropriate to take note of these four reasons, which read as under: i) With respect to the control it is seen from clause 2 of Chapter 3; namely Officers of Indus University and read with Chapter 4 Authorities of Indus University that Board of Governance as well as Board of Management is entirely controlled by Sponsoring Body namely Bhandari Charitable Trust. Board of Governance consists of Chairman who is Patron (President), Alternate Chairman who is Associate Patron and the Vice Chairman, Executive President who is also a Provost, Executive Vice President who is Additional Provost, 4 persons to be nominated by the Sponsor, 2 Deans to be nominated by Executive President with prior approval of Patron etc. and Board of Management similarly consists of Chairman who is Patron, Co-Chairma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... soring Body was running the college since 2006 and all these assets by now must be highly depreciated assets. iii) It is very pertinent to note that on winding up of University i.e. on dissolution of the University, assets of the University will go back to the Sponsoring Body i.e. Bhandari Charitable Trust. In fact section 41(1) of the Gujarat Private Universities Act says thai Sponsoring Body can dissolve itself and section 42(1) of the Gujarat private Universities Act says that Sponsoring Body can dissolve the University, hence the University is totally dependent upon the wishes of the Sponsoring Body and whenever the Sponsoring Body wants, the University can be dissolved. Further, sub-section 2 of section 42 of the Cujarat Private Universities Act says that on dissolution of the University, all the assets and liabilities of the University shall vest in the Sponsoring Body in the manner as may be prescribed. This means all the assets which are purchased/acquired by the University through its income which would be exempt u/s 10(23C)(vi) will go back to the Sponsoring Body and this is against the spirit of Charitable Trust whereupon dissolution, no assets are allowed to go ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l s order in ITA No.1246/Ahd/2014. The Tribunal vide its order dated 10.6.2015 allowed appeal of the assessee and directed the DIT(E) to grant registration to the assessee-university. According to Shri Divetia, conditions enumerated by the ld.DIT(E) in the present case were identical in that case. 5. On the other hand, the ld.CIT-DR contended that in the case of Rai University its sponsoring body was enjoying registration under section 12AA of the Act, whereas in the case of the assessee BCT was not having registration under section 12AA. This sponsoring body could dissolve the university and nowhere it was provided that what will happen to the assets of assessee on dissolution of the University as well as trust. Thus, the ld.DIT has rightly rejected grant of registration to the assessee. 6. We have duly considered rival contentions and gone through the record carefully. Section 2(15) and 12AA have direct bearing on the controversy. Therefore, we deem it appropriate to take note of relevant part of the provisions, which reads as under: Section 2(15) charitable purpose includes relief of the poor, education, [yoga,] medical relief, [preservation of environm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xx xx xx xx 7. A perusal of section 2(15) of the Income Tax Act would indicate that it provides meaning of expression charitable purpose and in that stride, the activity performed by an assessee for falling in the ambit of charitable purpose have been dividend in two category. The first category is relief to poor, education, yoga, medical relief . which are per se for charitable purpose and second category is advancement of any other object of general public utility. In the case of second category proviso to this section is attracted. This proviso contemplates that if an assessee is doing advancement of any other objects of general public utility, then it is to be seen whether such objects of general public utility are being carried out in the nature of trade, commerce or business. If it is being carried out in this manner, then proviso to section 2(15) would be applicable on such institutions. It is pertinent to observe that the assessee is a University and does not engage in advancement of any general public utility. Thus, in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iz. Bhandari Charitable trust. However, in section 13 of GPUA it has been provided that officers of university viz. President, Provost, Rgistrar, Chief Finance and Accounts Officers and such other officer as may be declared by the statute to be the officers of the assessee-university. President shall be appointed by the sponsoring body in consultation with State Government for a period of three years by following such procedures and on such terms and conditions as may be prescribed by the statute. The president shall preside at the meeting of the governing body. Thus, in the Act a mechanism has been provided that there will be search committee and it will be searching eminent personalities and professionals to be appointed by the Board of management. At every stage there would be a consultation with the State Government. Apart from the above, it is pertinent to observe that how this aspect is relevant to test genuineness of objects of the university. Objects of the university are to impart education. Whether such education is being imparted in a controlled manner, financially or administratively, then those objects would not change. If some actions at the end of the assessee are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the provisions of law governing its constitution or incorporation, it shall give at least six months prior notice to the State Government. ( 2) The State Government shall, on receipt of such notice make such arrangements as may be necessary, for the administration of the University from the date of dissolution of the sponsoring body till the completion of syllabus by the last batch of students admitted to the University and may also cause the functioning of the University to continue by appointing an administrator in place of the sponsoring body, who shall be entrusted with the powers, duties and functions of the Sponsoring Body as prescribed under this Act, 42. (1) The Sponsoring Body who intends to dissolve the University shall give a notice to that effect in the prescribed manner to the State Government. The State Government, after due consideration, may dissolve the University in the manner as may be prescribed; Provided that the dissolution of the University shall have effect only after the last batches of students of the regular courses have completed their courses and they have been awarded degrees, diplomas or, as the case may be, awards. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Private Universities Act, 2009, the University cannot run commercially. The Id. DR could not controvert the contention of the Id. Counsel for the assessee that under the identical facts other Universities have been granted registration u/s 12AA by the Revenue. Under these facts, we are of the view that the Id. DIT(E) was not justified in declining the registration to the assessee u/s.!2AA of the Income-tax Act, 1961. Moreover, the assessee has placed reliance on various judicial pronouncements. The Id. DIT(E) has not adverted on the submission of the assessee that the case of the assessee is also covered by the judgment of Hon'ble High Court of Punjab and Haryana in the case of CIT vs. O.P. Jindal Global University (supra), wherein the Hon'ble High Court has held as under:- 13. In ITA No.701 0/2010 titled CIT v. Surya Educational Charitbale Trust [2011] 203 Taxrnan 53/15 taxrnann.com 123 (Pun] Har.) it has been held by this court that at the stage of registration under Section 12AA of the Act, the extent and nature of activities are not required to be examined. That question is required to be examined in assessment proceedings. The Court observed as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X
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