To avail the benefit of exemption under section 10(23c) of the Income- Tax Act, Court held that the University must be ‘directly or substantially financed by the Government’
Civil Appeal Nos. 4361- 4366 of 2016
Bench: Justice Ranjan Gogoi; Justice Prafulla C. Pant
Case Brief: Here, in the present case, the judgement and order passed by the High Court is in challenge and the Appellant- University which has been constituted under the provisions of Visvesvraiah Technological University Act, 1994, has brought this appeal before this bench. In the facts of the case, The University for the assessment years 2004- 2005 to 2009- 2010 filed returns declaring ‘Nil Income’ and claiming exemption under section 10(23C)(iiiab) of the Income- Tax Act, 1961. The said claim of exemption has been negativated by the Assessing Officer, Commissioner, Tribunal and also a similar decision for the rejection of the said exemption is taken by the High Court also. The said decision of the High Court rejecting the University’s claim to exemption under Section 10(23C)(iiiab) of the Act, is in challenge before this bench. Bench, sought to decided the question to this effect and whether the University is entitled to get exemption from payment of tax under the said provision. Now, this bench decided that there are two conditions for the entitlement of the said exemption under the said provision. And firstly, the educational institution or the university must be solely for the purpose of the education and without any profit motive. And also secondly, the University should be wholly or substantially financed by the government. And to get benefits of such exemption, both of such conditions should be satisfied. Now, the bench further decided to analyse the facts on this two grounds and fount that the University has generated a surplus of about Rs. 500 crores during a short period of a decade i.e. from the year 1999- 2010. It was also observed that the said surplus is collected or accumulated by realizing fees under the different heads in consonance with the powers vested in the University under the Act of 1994. Bench also inferred that the funds received from the Government by the University contemplated under Section 10(23c)(iiiab) of the Act of 1961 should be direct grants/ contributions from the Governmental sources and not fees collected under the Statute. Also, there is a settled law that the expression “wholly or substantially financed by the Government” as shown in the said Section 10(23c) cannot be confined to annual grants only, but also to include the value of the land made available to the University by Government. Here, the high Court has already opined that if the land allotted to the University will be taken, then also the university’s total receipt’s only 4 to 5 per cent will be covered. As such this Bench found that University is neither directly nor even substantially financed by the Government so as to be entitled to exemption from payment of tax under the Act of 1961. As such, the appeal filed by the Appellant- University is dismissed by this bench.
Read the Judgment: Visvesvaraya Tech.University Vs Assistant Commissioner of Income Tax