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2018 (8) TMI 713

egistration - The assessee is formed in pursuance to Special Act of the Legislative Assembly of Odisha. - Held that:- It is a settled position that while collecting the amount applied towards objects under third proviso to section 10(23C)(vi), both the revenue application as well as application in capital field are to be taken into consideration. Once the entire amount applied during the year is taken into consideration, it cannot be held by any stretch of imagination that the application for educational purposes during the year under consideration was less than 85% of income. We agree that the assessee has not violated the provisions of third proviso to section 10(23C)(vi) of the Act. - Thus, we find that apart from surmises, conjectures and erroneous inference of fact, no positive reason could be cited by the learned Pr. CCIT to deny the approval under section 10(23C)(vi) of the Act to 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 - 10-8-2018 - SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR G .....

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tence and the academic activities thereof have not commenced. He observed that as per the audited provisional income and expenditure account for the period M/s. Xavier University, Odisha 06.07.2013 to 31.03.2014, a gross income of ₹ 3,73,06,692/- is shown, which comprised of the incomes under the following heads: Heads of Income Amount (Rs. Admission income 50,69,467/- Fees 3,13,00,500/- Other income 9,36,725/- Total 3,73,06,692/- On verification of the general ledger account produced during the course of hearing, it is seen that the fees and admission income shown have been transferred from the account of Xavier Institute 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 .....

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y without actually having carried out any educational and other allied activities. He further observed that the return filed by the applicant university for the assessment year 2014-15 exhibiting the income and expenditure and other statement of affairs of Xavier 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 re .....

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hubaneswar, 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 Ghatkeswar Trust of Hyderaba .....

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ool 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 other objective as may be approved by the State Government. 12. Further, sub-section(2) of Section 41 of the said Special Act reads as under: (2) The amount credited to the General Fund shall be applied to meet the following payments, .....

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on 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 purpose other than education. The assessee University vide its application dated 30.6.2014 in Form No.56D applied for approval under section 10(23C)(vi) of the Act before the prescribed authority namely, Pr. CCIT, Bhubaneswar. The Pr. CCIT, Bhubaneswar vide the impugned order dated 17.6.2015 refused to grant approval to the assessee University. The r .....

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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; (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 1'or the employees of the University; (iv) to .....

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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 interest of ₹ 83,61,613/- during the relevant period. 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 incorporating such interest income, t .....

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nment. (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 exceeding seventy five percentum shall be used for the purposes of development works of the university and the remaining twenty five percentum shall be reinvested in the Endowment fund. 24. Our attention was invested to section 3(2) of the Special Act, which reads asunder: (2) The Sponsoring Body shall,- (a) provide thirty-five acres of land in Industrial Estate Kurki, Vilage-Nijigardh, P.S: Pipli in the district of Puri which shall be the campus of the University; (b) assign a minimum built-up area of Twenty thousand square meters to the University in the form of buildings, and ancillary structures for administrative and academic purposes; which shall not be used for any purpose other than that for which the same is assigned; (c) purchase books and journals at least worth Ten Lakhs rupees or as per the norms of the Regula .....

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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 emoluments; and (viii)to fulfill such other conditions and provide such other information as may be prescribed by the Regulatory Bodies. 25. It was submitted that in pursuance to the above statutory requirement, the Sponsoring Body, the XIMB established Endowment Fund of ₹ 10 crores and Other Asset Fund of ₹ 2 crores, which was invested in Fixed Deposits with banks. As the interest was earned on specific fund, they were credited in the respective fund account. 26. We find that Hon ble Supreme Court in the case of CIT(Exemption), Kochi vs Mata Amrithanandamayi Math, Amritapuri, (2018) 94 taxmann.com 82 (SC) has approved the view of the Hon ble Kerala High Court, wherein, it has been held that where assessee trust received corpus donation on which it earned interest, in view of specific direction of donors that said interest would also form part of corpus, assessee s claim for exemption under section 11(1)(d) in respect o .....

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