|
II. Direct Taxes Case Laws:
1. Visvesvaraya
Technological University Vs. ACIT, Civil Appeal Nos. 4361-4366 of
2016, Date of Order: 22.04.2016, Supreme Court of India
Issue:
Whether fees collected from students are to be considered as
Government funding for deciding whether University is wholly or
substantially financed by Government even if collection of fees is
empowered by statute?
Held_No
Brief Facts:
The assessee, Visvesvaraya Technological University had been
constituted under Visveswaraiah Technological University Act, 1994 to
discharge functions earlier performed by the Department of Technical
Education, Government of Karnatka. For the Assessment Years 2004-05 to
2009-10, returns were filed in response to the notice u/s 148 declaring
NIL income after claiming deduction u/s 10(23)(iiiab). The AO disallowed
such exemption and the same decision was upheld by all the Authorities
and the High Court. Aggrieved by which, assessee appealed before the
Supreme Court.
Held:
It was held that if collection of fees is to be understood to be
amounting to funding by the Government merely because collection of such
fees is empowered by the Statue, all such receipts by way of fees may
become eligible to claim exemption u/s 10(23)(iiiab). It will be more
appropriate to hold that the funds received from the Government u/s
10(23)(iiiab) must be direct grants/ contributions from the Government
Sources including the value of Land made available by the Government and
not the fees collected under the statue. In the present case, the total
funding by the Government would be around 4%-5% of its total receipts
and therefore, it is concluded that the assessee does not satisfy the
second requirement (i.e. wholly or substantially owned by the
Government) of the Section 10(23)(iiab). Hence, the assessee is not
entitled to any exemption under the quoted section.
The appeal of the assessee is dismissed.
(Please click here for judgment)
2. DIT(E) Vs. M/s Lala Lajpatrai Memorial Trust, I.T.A. No. 2307 of 2013, Date of Judgment: 13.04.16, Bombay High Court
Issue:
Whether if the predominant purpose is charitable and the earning
of profit from an incidental activity like letting of property for
educational activities does not affect the charitable status?
Held Yes
Brief Facts:
The assessee trust founded under a Trust Deed claimed that the object
for the establishment trust being "advancement of education" fell
within charitable purpose as defined u/s 2(15) of the Act. The CIT
granted registration u/s 12A(a) of the Act. The assessee owned plot of
land having a building consisting of an auditorium on the ground floor
and class rooms from 2nd to 7th floors. This building was let out to one
Lala Lajpatrai Institute which conducts Junior College, Senior college,
Law College etc and the 6th and 7th floors are let out to run a
Management Institute which was in consonance with the objects of the
trust which intended to promote colleges and schools.
The
income which was received by the assessee from letting out the premises
to Lala Lajpatrai Institute was claimed as exempted from taxation from
1976 till the AY 2009-10 in question. Invoking proviso to Section 2
(15), a show cause notice was issued to the assessee as to why
registration u/s 12A shall not be withdrawn in exercise of the powers
u/s 12AA(3) of the Act, as the assessee had received service charge of
Rs.12 lacs for renting out the premises for running the institution of
Management and earned an income of Rs.15,02,182/- for letting out of the
auditorium. The assessee responded that letting out of the property of
the trust did not amount to any trade, business or commercial activity
and thus there was no case for withdrawing of the exemption granted to
the assessee as there was a very nominal rent from Institute. It was,
thus, contended that the proviso to section 2(15) of the Act is not
attracted in the assessee's case relying on CBDT Circular No.11/2008
dated 19th December 2008.The DIT(E). However, registration of the
assessee cancelled u/s 12A of the Act observing that the educational
institutes were being conducted by a different entity.
Held:
Hon’ble High Court upheld the order of the tribunal that the
revenue’s contention that the tribunal has overlooked the provisions of
section 11(4A) is unfounded. The service charges received in respect of
6th and 7th floor were clearly on account of educational purpose.
Letting out was incidental and not the principle activity of the
assessee trust. Thus, Section 11(4A) which require separate account to
be maintained would not be attracted in view of our conclusion that the
said amounts as received by the assessee for the assessment year have
been received from educational activity which is the dominant activity
of the assessee trust. An interpretation as urged on behalf of the
revenue would render nugatory the very spirit, rationale and the object
of the exemption provisions making the same unworkable.
Thus, the appeal of revenue was dismissed.
(Please click here for judgment)
|
New User? 
Subscribe Now