M/S RAJIV GANDHI PROUDYOGIK VISHWAVIDHALYA,HOSANGABAD vs. DCIT CPC, BENGALURU

आदेश /O R D E R PER KUL BHARAT, J.M. : Both these appeals pertaining to assessment years

2014-15 & 2015-16 are directed against the order of

CIT(A)-2, Bhopal, dated 28.02.2018. Both the appeals were

taken up together since the identical grounds have been

raised in both the years, which are being disposed of by

way of this common and consolidated order.

324/Ind/2018 pertaining to assessment year 2014-15. The

assessee has raised following grounds of appeal :-

3 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Govt. could not be assessed to tax by denying such an exemption through an intimation u/s 143(1).

4 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 3. Briefly stated, the facts of the case are that the

assessee filed its return of income u/s 139 for the

assessment year 2014-15 on 30.03.2016, declaring total

income at Rs. Nil. The return of income was processed at

Centralized Processing Centre of the Revenue at

Bangalore, thereby an intimation u/s 143(1) dated

09.01.2017 was issued intimating the assessee in respect

of rejection of claim of exemption made u/s 10(23C )(iiiad)

of the Income-tax Act, 1961. Aggrieved by this, the

assessee preferred an appeal before the Ld. CIT(A), who

after considering the various judicial pronouncements in

respect of the proposition of granting opportunity to the

assessee sustained the disallowance of exemption as made

by the Processing Unit of the Revenue. The assessee being

further aggrieved is in appeal before this Tribunal.

5 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 4. Grounds No. 1 to 5 are against rejecting the claim of

exemption and making the adjustment u/s 143(1) of the

Act.

Nema, vehemently argued that the action of the authorities

below is contrary to the settled principles of law and the

judgment of the Hon'ble Jurisdictional High Court rendered

in the case of M/s. Bharat Oman Refineries Limited,

Mumbai vs. ITO, Bhopal in I.T.A.No. 16/2001 (M.P.). The

Learned Counsel submitted that the assessee University is

incorporated under the Rajeev Gandhi Proudyogiki

Vishwavidyalaya Adhiniyam, 1998, and the chapter V of

the Adhiniyam deals with finances of the university. He

further contended that section 35 of the Adhiniyam

provides for establishment of the Vishwavidyalaya fund and

the income from all the sources earned by the assessee

university goes into Vishwavidyalaya fund. He further

6 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. contended that as per section 36 of the Adhiniyam provides

the objects to which the Vishwavidyalaya fund may be

applied. He contended that the assessee University filed its

return of income u/s 139 for the assessment year 2014-15

and also 2015-16 declaring total income at Rs. Nil each

after claiming exemption u/s 10 in the returns of income.

He pointed out that in Column No.13, the amount claimed

was exempt u/s 10, by which it can be safely inferred that

the assessee claimed exemption wherever he was entitled

to. The Ld. Counsel for the assessee further submitted that

the income of the assessee university was exempt u/s

10(23C)(iiiab) being income of an Educational Institution

wholly or substantially financed by the State Government.

Therefore, the assessee university being governed by the

Rajiv Gandhi Proudyougiki Vishwavidyalya Adhiniyam,

1998 and eligible for exemption u/s 10(23C)(iiiab). He

submitted that the Ld. CIT(A) failed to appreciate the fact

7 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. that the issue of exemption is a debatable issue, which

could only be decided by way of a detailed scrutiny and

inquiry u/s 143(3) of the Income-tax Act, 1961. This

cannot be made by way of mere processing of return u/s

143(1) of the Act. The Ld. Counsel for the assessee

submitted that the authorities below have wrongly

appreciated that the specific exemption claimed by the

assessee was u/s 10(23C)(iiiad) of the Act. Despite the fact

that in column 13 of the return, the assessee had claimed

exemption u/s 10. It is further submitted by the Ld.

Counsel for the assessee that no separate column is

provided u/s 10(23C)(iiiab) in the return of income. He

submitted that the Act casts a duty on the Assessing

Authorities to find out as to under which clause the

assessee is entitled for exemption if any. He submitted that

admittedly, the processing is made by the computer. At

some occasion due to technical fault, the objection made by

8 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. the assessee are not considered and rejected summarily

there being no system to appreciate the same. Under these

facts, he submitted that the authorities have erred in

treating the processing as valid scrutiny and demand so

created as a recoverable demand. He submitted that this

action of the Revenue is contrary to the judicial

pronouncement, more particularly, in the case of M/s.

Bharat Oman Refineries Limited, Mumbai vs. ITO, Bhopal

in I.T.A.No. 16/2001 (M.P.). The Ld. Counsel for the

assessee also placed reliance on the decision of Hon'ble

Bombay High Court in the case of M/s. Bajaj Auto Finance

Limited vs. CIT, Pune, ITR No. 25/2000. The Ld. Counsel

for the assessee also placed reliance on the judgement of

Hon'ble Delhi High Court in the case of Easter Industries

Limited, vs. Union of India, (2013) 30 Taxmann 318 (Del).

Further reliance was placed on the decision of the Tribunal

in the case of ACIT vs. M/s. Som Distilleries & Breweries

9 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Limited, Bhopal, I.T.A.No. 248/Ind/2012 ( I.T.A.T. Indore ).

The Ld. Counsel for the assessee also placed reliance on

the judgment of the Hon'ble Karnataka High Court in the

case of Director of Income Tax (Exemption vs.

Dhamaprakasha Rajakarya Praskta B.M. Sreenivasaiah

Educational Trust,(2015) 59 Taxman 33 ( Karnataka ). The

Ld. Counsel for the assessee also placed reliance on the

decision of Tribunal in the case of Ganapathy Educational

Trust vs. ACIT (Exemption ), (2013 37 Taxman 285 (

Chennai Trib). The Ld. Counsel for the assessee submitted

that had the Ld. CIT(A) considered this binding precedent,

he would not have sustained the addition/adjustments

made through intimation as issued by the CPC Bangalore.

On the contrary the Ld. Departmental Representative

supported the orders, mor e particularly, the impugned

order of the Ld. CIT(A). He submitted that there is no

illegality in the impugned order. He, thus, prayed that the

10 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. addition made may be sustained. He, in support of this contention has taken us through relevant provisions of law. 6. We have considered the rival contentions, perused the

material on record and the case laws as cited above. The

short question that arises for consideration is whether

declining the claim of exemption made in the return of

income, while processing such return of income u/s 143(1)

would ipso facto authorized and entitled the Revenue to

treat the disallowance so made as a recoverable demand

without making any further inquiry as provided under the Act, for the purpose of scrutiny assessment.

made relentless efforts to defend the action of the

authorities below. He submitted that the assessee is not

entitled for exemption under any of the provisions of the

Act. He further contended that the assessee was required

to demonstrate under which provisions of law, he is

11 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. entitled for exemption. Even if it is assumed for the sake of

arguments that the assessee is entitled for exemption u/s

10(23C)(iiiab), the assessee was required to demonstrate

the same by enclosing the supporting evidence. He

contended that the requirement of law is that the Society

should be financed by the Government. The Ld.

Departmental Representative reiterated the submissions

made before us. However, for the sake of clarity, we are

reproducing below the written submission, which is also on

record :-

“Sub:-Written submission in the case of Rajiv Gandhi Prodougiki Visvawidyalaya, Bhopal, ITA No. 324& 325/Ind/2018, A.Y. 2014-15 & A.Y. 2015-16-Reg.

In the case of Visvevarya Technilogical University Hon'ble Apex Court has beautifully summed up the decisions of various benches of Supreme Court on the issue of allowability of exemption under section10(23C)(iiiab), 10(23C)(iiiad) and 10(23C)(vi) of Income Tax Act 1961. In

12 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. this case, the appellant had claimed exemption under section 10(23C)(iiiab) which was, infact disallowed by the A.O. The view of A.O. was confirmed by CIT(A), ITAT and HC. While dealing with the issue of allowability of exemption under relevant section, Hon'ble Apex Court has beautifully analysed and adjudicated one of the twin conditions, which is found common in all the three sub sections, 10(23C)(iiiab),(iiiad)and vi. The question dealt with by the Hon'ble court was whether the university or education institution was existing solely for educational purpose and not for the purposes of profit. This issue has been found discussed elaborately in the case Queen's Educational Society by Hon'ble Apex Court. As many as five principles have been laid down at para 11 of said decision:

" 11. Thus, the law common to section 10(23c)(iii ad) and (vi) may be summed up as follows:

13 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 2. The predominant object test must be applied- the purpose of education should not be submerged by a profit making motive.

The said principle is as under :-

14 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal.

In the decision of Queen's Society, above principle is reiterated at para 19 in the following words.

15 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. the educational institution exists solely for educational purposes and for purposes of profit."

In view of above discussion, the societies, Educational institutions, have necessarily to pass through following six (6) tests.

16 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 5. In overall view, the object is the 'profit' or 'education' to the people.

Facts of the Case:-

5.1 The assessee University was established in the year 1998, by Madhya Pradesh Vidhan Sabha Act 13 of 1998 (The Rajeev Gandhi Proudyogiki Vishwavidyalaya Adhiniyam, 1998). As per the Chapter-II of the Rajeev Gandhi Proudyogiki

17 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Vishwavidyalaya Adhiniyam, 1998, the Vishwavidyalaya shall be a body corporate. Further, the Vishwavidyalaya shall have perpetual succession and a common seal and shall sue and be sued by its name. The Vishwavidyalaya shall be competent to acquire and hold property and enter into contract in its own name. Thus, the Vishwavidyalaya was established as a separate independent legal entity. It is found that the assessee had not been filing its return of income till AY 2013-14 despite the fact that it was required to file its return of income as per the provisions of the Income Tax Act, 1961. The assessee for the first time filed its return of income for AY 2014-15 and AY 2015-16, both belatedly on 30.03.2016 and 31.03.2016 respectively. The assessee claimed exemption of its income u/s 10 of the Act in row number 15 of part B-TI of the return of income, more specifically u/s 10(23C)(iiiad) of the Act, although it was not eligible for such exemption. The returns were processed u/s 143(1) of the Act by the Centralised Processing Centre (CPC), Bangalore and the claim of exemption u/s 10 was disallowed as such incorrect claim was apparent from information contained in the return of income. Accordingly, intimations cum demand notices were

18 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. issued u/s 143(1) of the Act on 09/01/2017 for AY 2014-15 and on 29/03/2017 for AY 2015-16 to the assessee. It is also found that the assessee filed rectification application on 05/04/2017 for AY 2014- 15 before the CPC, which was rejected. Subsequently, the assessee filed appeal against these intimations before ld. CIT(A)-2, Bhopal and requested for stay of demand before the Assessing Officer after depositing 10% of the outstanding demand. The application for stay of outstanding demand was positively and reasonably considered by the Assessing Officer and after payment of 10% of the outstanding demand only, the assessee was granted stay of balance 90% of the outstanding demand by passing a speaking order till disposal of the first appeal before the ld. CIT(A) despite the instructions of the Board for payment of 20% of outstanding demand. 5.2 Subsequently, the CIT (A) has passed a detailed

speaking order u/s 250(6) of the Act on 28.02.2018

for AY 2014-15 and AY 2015-16 and upheld the

intimations issued to the assessee disallowing the

exemption u/s 10 of the Act relying upon the specific

facts of the case and the judicial decisions in this

19 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. regard. Since, the demand was confirmed by the ld.

CIT(A), the whole outstanding demand was

payable/recoverable from the assessee as per the

provisions of the I.T. Act and Instructions of the

Board. Thus, a letter dated 06.03.2018 was served

to the assessee for depositing of the outstanding

demand. However, instead of paying the confirmed

demand, the assessee has again filed stay

application u/s 220(6) of the Act on 09.03.2018 and

12.03.2018 before the Assessing Officer. All these

applications for stay have been duly considered and

rejected by passing speaking order dated

12.03.2018 by the Assessing Officer. It is pertinent to

mention here that the section 220(6) of the Act is not

applicable in case of any demand confirmed in

appeal. There is neither any provision in the Income

Tax Act nor any Instruction of Board for stay of

demand confirmed in appeal. It is also to mention

that the assessee has been generating huge profits

over the years and accumulated huge funds of

20 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. almost one thousand crores and there is no liquidity

crunch at all with the assessee for payment of

outstanding demand. The assessee is neither eligible

for exemption u/s 11/12 nor under section 10 of the

Act and the income of the assessee is duly taxable as

per the provisions of the Income Tax Act. The

assessee also filed Writ petition before the Hon’ble

MP High Court for Stay of the outstanding demand,

which was rejected vide its order dated

14/03/2018. The Writ Petition was not admitted and

the Hon’ble Court has given following observations:

“It is observed that the petitioner has a

remedy of filing an appeal before the Income

Tax Appellate Tribunal and in such

circumstances, the question of entertaining the

present petition does not arise.”

5.3 However, while disposing off the petition, the Hon’ble

High Court has given interim relief of 6 weeks to the

assessee with liberty to assail the impugned order before

21 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. the appellate forum and directed the Department not to

take any coercive action against the petitioner.

Scope of Section 143(1) of Income Tax Act, 1961 6. According to the express provisions of section

143(1)(a)(ii) of the Act read with Explanation (a) to the

section 143(1) of the Act, while processing u/s 143(1)

of the Act, the total income or loss shall be computed

after making the adjustment on account of incorrect

claim, if such claim is apparent from any information

in the return. The assessee in the return of income

had claimed exemption u/s 10 of the Act in row

number 15 of part B-TI of the return of income, which

constitutes section 10(23C)(iiiad). The assessee

before the Assessing Officer and the CIT(A) had

admitted that the exemption was claimed u/s

10(23C)(iiiad) of the Act in the return of income. Now,

for allowability of any claim of exemption u/s

10(23C)(iiiad) of the Act, the gross receipts have to be

less than Rs. one crores. However, from the amount

of income shown in the return itself it is clear that the

22 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. receipts/income was much more than the prescribed

limit. Thus the claim of exemption u/s 10(23C)(iiiad)

was an incorrect claim, which was apparent from the

information regarding the amount of income in the

return itself. As such the return was correctly

processed as per the provisions of section 143(1) of

the Act. The ld. CIT(A) has also elaborately discussed

this issue in his order and discussed relevant judicial

pronouncements in this regard. The assessee now

has claimed that it had claimed the exemption u/s

10(23C)(iiiab) of the Act, but it is factually incorrect. If

such claim was to be made, it was to be made in the

row number 16 not in 15 of the part B-TI of the return

of income. The assessee itself admitted before the

AO and the CIT(A) that it had claimed exemption u/s

10(23C)(iiiad) of the Act. Without any prejudice to the

above, even for claiming any exemption u/s

10(23C)(iiiab) of the Act, any University has to be

substantially financed by the Government meaning

thereby it shall receive substantial grants from the

23 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Govt. However, from the row number 5 of Part B-TI of

return and Schedule VC of the return, it is clear that

the assessee had not received any voluntary

contribution/grant/donation during the years

involved. In fact, the assessee had itself admitted

before the AO and CIT that it had not received any

donation since inception. Thus even if it was claim

u/s 10(23C)(iiiab) in the return, then also such claim

of exemption was an incorrect claim, which was

apparent from the information regarding the amount

of grant/donation/voluntary contribution received

during the year in the return itself (Row No. 5 and

Schedule VC). As such the return was correctly

processed as per the provisions of section 143(1) of

the Act.

Accumulation of Huge Funds 7.1 It is seen from the latest accounts furnished by

the assessee that as on 31.03.2017, it had liquid

assets of approx. 900 crores which has been

accumulated from the profits over the years and kept

24 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. in Bank in form of Cash Balance and FDRs. From the

accounts submitted. A copy of unaudited final

balance sheet of University as on 31.03.2017 along

with relevant schedule of FDRs is attached herewith

as Annexure-A. This in itself shows that there are

huge funds available with the assessee and by no

stretch of imagination, it can be said that liquid funds

are not available. It is also not out of place to

mention here that the assessee has been earning

huge profits and keeping the same in Cash or in

FDRs and earning huge interest income. The same

are not being ploughed back for the purposes of

education. On the basis of accounts/financial

statements submitted by the assessee from FY 2011-

12 to FY 2016-17, the gross income and expenses of

the assessee and consequent profits have been

examined. The following table prepared on the basis

of the same, in itself represents the year wise

generation of huge profits in Rs. Lacs by the

assessee in a regular and systematic manner: -

25 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Net Surplus even after Revenue Profits Gross Revenue Capital Total Capital Expenditure F. Y. Income Expenses Expenses Expenses (E = A-B) (F=A-D) Profit Profit % % (A) (B) (C ) (D=B+C) Amount Amount 72.15 28.89 2011-12 12804.11 3566.27 5538.91 9105.18 9237.84 3698.93 69.41 16.33 2012-13 12550.12 3838.48 6662.05 10500.53 8711.64 2049.59 76.60 44.28 2013-14 16796.96 3931.18 5427.46 9358.64 12865.78 7438.32 73.60 66.22 2014-15 15887.16 4194.5 1171.97 5366.47 11692.66 10520.69 75.18 73.57 2015-16 16306.23 4046.41 263.84 4310.25 12259.82 11995.98 66.90 37.38 2016-17 15030.97 4974.93 4437.38 9412.31 10056.04 5618.66

7.2 It may be seen from the above chart itself that there

is huge generation of profits over the years. The profits are

being consistently generated and invested in FDRs to earn

more interest income. As discussed above, the assessee

had almost 900 crores of accumulated funds which are

lying in FDRs and Banks as on 31.03.2017 and the same

have not been utilised either for any charitable purposes or

for education purpose. In fact the funds have not been

ploughed back for the purpose of creating assets for the

purpose of education.

26 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. The university is not owned and run by the state

government:

Proudyogiki Vishwavidyalaya Adhiniyam, 1998, the

Vishwavidyalaya shall be a body corporate. Further,

the Vishwavidyalaya shall have perpetual

succession and a common seal and shall sue and be

sued by its name. The Vishwavidyalaya shall be

competent to acquire and hold property and enter

into contract in its own name. Thus, the

Vishwavidyalaya was established as a separate

independent legal entity having its own independent

existence. Hon’ble Supreme Court in several

judgments including in the case of

Visvesvaraya Technological University v. Assistant

Commissioner of Income-tax reported in [2016] 384

ITR 37 (SC) has categorically held that such a

University cannot be termed as State. On the

contrary, if the assessee succeeds in appeal, the

27 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. demand paid will be returned with interest which is

almost parallel to the interest earned on FDRs. Thus,

there is no logic in this ground and there is no reason

of not paying the demand confirmed by the CIT(A). It

is also important to mention here that the assessee

argued before the ld. CIT(A) that it will apply before

the Board (CBDT) for retrospective registration u/s

12AA of the I.T. Act. It is worthwhile to mention that

the demand cannot be stayed in anticipation that the

assessee will get retrospective benefit in future.

Claim of appellant not admissible under any sub clause of section 10(23C) of Income Tax Act, 1961:

9.1 In view of the above claims made by the assessee, the eligibility of the exemption u/s 10(23C) of the Act of the assessee has also been examined. Considering the facts and circumstances of the case, the assessee is not found eligible for any exemption u/s 10 of the Act. As discussed in preceding Paras, the assessee in the return of income had claimed exemption u/s 10 of the Act in row number 15 of part B-TI of the return of income. The assessee before

28 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. the Assessing Officer and the CIT(A) had admitted that the exemption was claimed u/s 10(23C)(iiiad) of the Act in the return of income. However, the assessee is not eligible for exemption u/s 10(23C)(iiiad) of the Act as the gross receipts of the assessee are exceeding prescribed limit of Rs. One Crore. In fact, the receipts are much more than the limit prescribed and by no stretch of imagination, it can be covered u/s 10(23C)(iiiad) of the Act. 9.2 The appellant is not eligible for exemption u/s 10(23C)(vi) of the Act as the assessee is not approved u/s 10(23C)(vi) of the Act which is a prerequisite for claiming exemption u/s 10(23C)(vi) of the I. T. Act. As regards the claim of exemption u/s 10(23C)(iiiab) at this stage, which was neither claimed in the return of income nor before the ld. CIT(A), at the outset such claim has not been allowable by the AO in view of the judgment of Hon’ble Apex Court in case of Goetze India Ltd (Supra). Without any prejudice to the above, even on merits the claim of the assessee for exemption u/s 10(23C)(iiiab) of the Act is not allowable as it doesn’t satisfy the preconditions for claiming exemption under that section. It is to not that for applicability of exemption u/s 10(23C)(iiiab) of the Act, the specific conditions mentioned therein has to be fulfilled. The section 10(23C)(iiiab) of the Act is reproduced as under:-

29 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included—

(23C) any income received by any person on behalf of—

(iiiab) any university or other educational institution existing solely for educational purposes and not for purposes of profit, and which is wholly or substantially financed by the Government

9.3 In view of the above provisions, it is absolutely necessary that for claiming exemption under this section, the institution shall exist solely for educational purposes and not for the purposes of profit and it shall be wholly or substantially financed by the Government. 9.4 In the instant case, the assessee is neither wholly nor substantially financed by the Govt. nor is existing solely for the propose of education. Rather it has been established that the appellant institution is being run for the purpose of profit. Moreover, the appellant has not received any grant from the Government. The assessee itself in its submissions before the AO and the CIT has accepted that it has not received any donation/grant since inception.

30 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 9.5 It is also pertinent to mention here that the word ‘substantially’ was not defined earlier in the Income-tax Act or Rules. However, Explanation to section 10(23C)(iiiab) has been inserted w.e.f. 01.04.2015 i.e. AY 2015-16 and also accordingly the Rules 2BBB of the Income-tax Rules, 1962 have been inserted w.e.f. 12.12.2014 to clarify the position and percentage of Government Grants for considering any university as substantially financed by the Government for the purposes of section 10(23C) of the Act. The same rules are reproduced as under- Percentage of Government grant for considering university, hospital etc. as substantially financed by the Government for the purposes of clause (23C) of section 10. 2BBB. For the purposes of sub-clauses (iiiab) and (iiiac) of clause (23C) of section 10, any university or other educational institution, hospital or other institution referred therein, shall be considered as being substantially financed by the Government for any previous year, if the Government grant to such university or other educational institution, hospital or other institution exceeds fifty per cent of the total receipts including any voluntary contributions, of such university or other

31 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. educational institution, hospital or other institution, as the case may be, during the relevant previous year. 9.6 In view of the above, it is evident that exemption under this particular section [10(23c)(iiiab)] is only available if the government grant is more than 50% of the total receipts of that previous year. In the instant case, admittedly no grants have been received by the assessee during the previous years. Thus, it is abundantly clear that the applicant is not entitled for claiming exemption u/s 10(23C)(iiiab) of the I.T. Act. w.e.f. 1.4.2015 i.e. AY 2015-16. It is also pertinent to mention here that even when the Explanation to this section and Rule 2BBB was not there before AY 2015-16, the Hon’ble jurisdictional ITAT, Indore Bench has examined this issue, in almost identical case, in the case of M.P. Rajya Open School, Bhopal v. Deputy Commissioner of Income-tax-1(2), Bhopal with regard to its eligibility u/s 10(23C)(iiiab) of the Act. The ld. ITAT vide its order dated 08.11.2012 reported in [2013] 141 ITD 721 (Indore-Trib.) has elaborately discussed the issue and after considering the submissions/arguments of the assessee concluded that the assessee is not eligible for exemption u/s 10(23C)(iiiab) of the Act. It was found by the ld ITAT that the assessee was not substantially financed by the Government and also it was held that the profit motive of the assessee is

32 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. clearly established. The relevant portions of the order of the Hon’ble Tribunal in this regard is reproduced herein under:- “The figures mentioned in the expenses borne by the Govt. are also not actual and are notional, meaning thereby, these were not actually received by the assessee. Huge surplus has been generated by the assessee, therefore, it can be said that the profit motive of the assessee is clearly established. During hearing, the ld. Counsel for the assessee contended that the word "substantially" will be made even if the grants are 10%. We are not agreeing with this proposition because the word is "wholly or substantially", meaning thereby, either it can be 100% or near to 100% but in any case may not be less than 75% because it has been used with the word wholly and not singularly. Admittedly, there is no clear cut formula regarding percentage in the Act but some figure may be adopted under the facts and circumstances available on record.” 9.7 It is also pertinent to mention here that the Hon’ble Supreme Court in the case of Visvesvaraya Technological University v. Assistant Commissioner of Income-tax reported in [2016] 384 ITR 37 (SC) has categorically held that to consider any university or institution as wholly or substantially financed by Government as

33 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. contemplated under section 10(23C)(iiiab) of the Act, funds received from Government must be direct grants/contributions from governmental source and not fees collected from students under Statute. The Hon’ble Court has observed that the plain reading of the section implies that the phrase 'wholly and substantially financed by the Government' should only include grant received from the Government to meet the direct expenses of the University such as expenses incurred towards salary, infrastructure and for the purpose of other development activities of the University. The same order of the Hon’ble Court has further confirmed this decision in the order in review reported in [2016] 389 ITR 10 (SC). 9.8 In addition to the above facts and position of law, it is also evident from the accounts produced by the assessee itself and the table given in preceding para, that huge surplus is being generated by the assessee over the years which is being accumulated as reserves and not expended/applied by the assessee institution for its objects. The same table is reproduced below, which clearly show that the University exists for profit only. The profits generated have been invested in FDRs to earn interest income instead of applying the same for charitable purposes.

34 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Even despite of consistent generation of profits compared to the related expenses, there is no effort seen to reduce the fees from the students. Thus, the assessee is also existing for the purposes of profit and hence it is not eligible for exemption 10(23C)(iiiab) of the Act.

Net Surplus even Revenue Profits Gross Revenue Capital Total after Capital F. Y. Income Expenses Expenses Expenses (E = A-B) Expenditure (F=A-D) Profit Profit % % (A) (B) (C ) (D=B+C) Amount Amount 72.15 28.89 2011-12 12804.11 3566.27 5538.91 9105.18 9237.84 3698.93 69.41 16.33 2012-13 12550.12 3838.48 6662.05 10500.53 8711.64 2049.59 12865.78 76.60 44.28 2013-14 16796.96 3931.18 5427.46 9358.64 7438.32 11692.66 73.60 10520.69 66.22 2014-15 15887.16 4194.5 1171.97 5366.47 12259.82 75.18 11995.98 73.57 2015-16 16306.23 4046.41 263.84 4310.25 10056.04 66.90 37.38 2016-17 15030.97 4974.93 4437.38 9412.31 5618.66

9.9 It has been further held by the Hon’ble Supreme Court in the case of Queens Education Society reported in [2015] 372 ITR 699 (SC) that the surplus generated is to be ploughed back for educational purposes only, which is not satisfied in the case of assessee. In fact, the assessee is generating huge surpluses over the years and at the same time it is accumulating the profits

35 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. and not expending/applying the same for its objects. Thus, the assessee is not ploughing back the surplus generated for educational purposes. Hence, it is clear that it is existing for profit. In almost identical facts and circumstances, the Hon’ble Tribunal, Chandigarh Bench in I.K. Gujral Punjab Technical University Vs. CIT(E), Chandigarh vide its recent order dated 23/02/2018 in ITA No. 910/Chd/2017 has held that any University established by the Government is to be treated as existing for profit not for education if it has accumulated huge surpluses and earning interest income on the same instead of expending the same for the educational purposes. In the above referred case also, the assessee was a Technical University established by State Government. The assessee was not filing return of income and no audited balance sheet was filed. That Applicant- University had also been claiming itself to be covered under the provisions of section10(23C)(iiiab) of the Income-tax Act, 1961. The facts of the instant case are squarely applicable as the assessee has accumulated huge surpluses of almost one thousand crores of rupees over the years and earning interest income on the same through investment in FDRs. Even though the assessee has applied for exemption u/s 12AA, but the fact remains that it is carrying out activities with profit motive and exist for profit. It does not exist for charitable purposes.

36 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 10. In view of above detailed discussion, there

remains no iota of doubt that the appellant

institution has never been eligible to claim

exemption u/s 10(23C)(iiiab), 10(23C)(iiiad) and

10(23C)(vi) of Income Tax Act, 1961. The claim has

been rightly rejected under the valid scope of section

143(1) of Income Tax Act, 1961. The same has been

found to be apparent on the basis of details of

Income, sources of income and claim of exemption

filed under various specified columns. It is not out of

place to mention that the system automatically

negates the claim of appellant on the basis of

mechanical, systematical and factual basis.

Therefore, pray this Hon’ble Bench to dismiss the

appeals of the institution both for the A.Y. 2014-15

& A.Y. 2015-16. ”

contentions. The Section 143 of the Act opens with the

word “Assessment”. As per Section 143(1), where return

37 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. has been made u/s 139 or in response to a notice under sub section (1) of Section 143, such return shall be processed in the following manner, namely,:-

“(a) the total income or loss shall be computed after making the following adjustments, namely:—

(i) any arithmetical error in the return; an incorrect claim, if such incorrect claim is (ii) apparent from any information in the return; disallowance of loss claimed, if return of the (iii)

previous year for which set off of loss is claimed was furnished beyond the due date specified under sub-section (1) of section 139. (iv) disallowance of expenditure indicated in the audit report but not taken into account in computing the total income in the return;

38 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. (v) disallowance of deduction claimed under

sections 10AA, 80IA,, 80-IAB, 80IB, 80-IC, 80-ID

or section 80IE, if the return is furnished beyond

the due date specified under sub-section (1) of section 139; ,or (vi) addition of income appearing in Form 26AS or

Form 16A or Form 16 which has not been

included in computing the total income in the

return;

Provided that no such adjustments shall be

made unless an intimation is given to the

assessee of such adjustments either in writing

or in electronic mode :

Provided further that the response received from

the assessee, if any, shall be considere4d before

making any adjustment, and in a case where no

response is received within thirty days of the

39 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. issue of such intimation, such adjustments shall

be made .

(b) the tax ( and interest), if any, shall be computed

on the basis of the total income computed under

clause (a);

(c) the sum payable by, or the amount of refund

due to, the assessee shall be determined after

adjustment of the tax (and interest , if any,

computed under clause (b) by any tax deducted

at source, any tax collected at source, any

advance tax paid, any relief allowable under an

agreement under section 90 or section 90A, or

any relief allowable under section 91, any

rebate allowable under Part A of Chapter VIII

any tax paid on self-assessment and any

amount paid otherwise by way of tax (or

interest)

40 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. (d) an intimation shall be prepared or generated

and sent to the assessee specifying the sum

determined to be payable by, or the amount of

refund due to, the assessee under clause (c);

and

(e) the amount of refund due to the assessee in

pursuance of the determination under clause (c)

shall be granted to the assessee:

Provided that an intimation shall also be sent to

the assessee in a case where the loss declared

in the return by the assessee is adjusted but no

tax or interest is payable by, or no refund is due

to, him:

Provided further that no intimation under this

sub-section shall be sent after the expiry of one

41 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. year from the end of the financial year in which

the return is made.

Explanation.—For the purposes of this sub-

section,—

(a) "an incorrect claim apparent from any

information in the return" shall mean a claim, on

the basis of an entry, in the return,—

(i) of an item, which is inconsistent with another

entry of the same or some other item in such

return;

(ii) in respect of which the information required

to be furnished under this Act to substantiate

such entry has not been so furnished; or

(iii) in respect of a deduction, where such

deduction exceeds specified statutory limit

42 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. which may have been expressed as monetary

amount or percentage or ratio or fraction;

(b) the acknowledgement of the return shall be

deemed to be the intimation in a case where no

sum is payable by, or refundable to, the

assessee under clause (c), and where no

adjustment has been made under clause (a).

(1A) For the purposes of processing of returns

under sub-section (1), the Board may make a

scheme16 for centralised processing of returns

with a view to expeditiously determining the tax

payable by, or the refund due to, the assessee

as required under the said sub-section.

(1B) Save as otherwise expressly provided, for

the purpose of giving effect to the scheme made

under sub-section (1A), the Central Government

43 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. may, by notification in the Official Gazette,

direct that any of the provisions of this Act

relating to processing of returns shall not apply

or shall apply with such exceptions,

modifications and adaptations as may be

specified in that notification; so, however, that

no direction shall be issued after the 31st day of

March,

(1C) Every notification issued under sub-section

(1B), along with the scheme made under sub-

section (1A), shall, as soon as may be after the

notification is issued, be laid before each House

of Parliament.]

(1D) Notwithstanding anything contained in sub-

section (1), the processing of a return shall not

be necessary, where a notice has been issued to

the assessee under sub-section (2) :

44 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. Provided that the provisions of this sub-section

shall not apply to any return furnished for the

assessment year commencing on or after the 1st

day of April, 2017]”

has been furnished u/s 139, or in response to a notice

under sub-section (1) of section 142, the AO or the

prescribed income-tax authority as the case may be, if,

considers it necessary to expedient to ensure that the

assessee has not understated the income or has not

computed excessive loss or has not under-paid the tax in

any manner, shall serve on the assessee a notice requiring

him, on a date to be specified therein, either to attend the

office of the AO or to produce, or cause to be produced

before the AO any evidence on which the assessee may rely

45 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. in support of the return. Provided that no notice under

this sub-section shall be served on the assessee after the

expiry of six months from the end of the financial year in

which the return is filed, as the Section 143(3) states that

[on the day specified in the notice issued under] sub-

section (2), or as soon afterwards as may be, after hearing

such evidence as the assessee may produce and such other

evidence as the AO may require on specified points, and

after taking into account all relevant material which he has

gathered, the income or loss of the assessee, and determine

the sum payable by him or refund of any amount due to him on the basis of such assessment. 10. Keeping in view the above provisions, it is to be

determined whether under the facts of the present case,

whether there was no need to proceed u/s 143(2) and

143(3) of the Act and processing made u/s 143(1) would be

sufficient to fasten the tax liability on the assessee,

46 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. whether the assessee has specifically objected to the adjustment as made by the Revenue. 11. The reliance is placed by the Ld. Counsel for the

assessee on the judgment of the Hon'ble Madhya Pradesh

High Court rendered M/s. Bharat Oman Refineries Limited,

Mumbai vs. ITO, Bhopal in I.T.A.No. 16/2001 (M.P.),

wherein the Hon'ble Court after considering the facts held

that in the light of the nature of the deposit made and the

source from which the interest is received in the present

case if the law laid own in the case of CIT vs. Karnal

Cooperative Sugar Mills Limited, (2000) 243 ITR 2 ( S.C.), is

applicable, then the interest earned may not fall in the

category of income from other sources, but may come in

the category of income earned from business. That being

the legal position it is to be held that in the matter of

assessment of income in question a debatable question

arises and therefore taxing of income in the facts and

47 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. circumstances of the present case holding it to be covered

as prima facie adjustment under section 143(1)(a) is not

correct. Accordingly, the Hon'ble Court answered the

reference in favour of the assessee and held that the

question as to whether the income in the facts and

circumstances of the present case could be taxed under the

provisions of Section 143(1)(a) of the Act holding it to be

prima facie adjustable, is not correct. The question is a

debatable one and it requires consideration in accordance with the provisions of section 143. 12. Another judgement, the Ld. Counsel for the assessee

has placed reliance is of the Hon'ble Bombay High Court,

I.T.R.No. 25 of 2000, in the case of Bajaj Auto Finance

Limited vs. CIT, Pune, wherein the Hon'ble High Court has held as under :-

“10. The issue that arises for our consideration

is whether an adjustment by intimation u/s

48 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. 143(1)(a) of the Act can be made where the

issue which arises for consideration is a

debatable issue. In the present facts, the

computation of total income submitted along

with return indicates that claim for bad debt s

has been made by relying upon the decision of

Gujarat High Court in the case of Vithaldas H.

Dhanjibhai Bardanwala (supra).

the note made by the applicant in its

computation of return, indicating that the basis

of claim for bad debts is the decision in

Gujarat High Court in Vithaldas H.Dhanjibhai

Bardanwala (surpa). In the above case, even a

provision debited to the profit and loss account

was allowed as bad debts, where

corresponding credit entries are posted in the

49 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. bad debts reserve account. It held that is was

not necessary to post credit entries in the

ledger account of the concerned parties. It was

on the basis of the aforesaid decision of the

Gujarat High Court that the claim in respect of

the provision for bad debts was made by the

applicant assessee. Once, reliance is placed

upon a decision of a Court and / or Tribunal to

make a claim, then even if the Assessing

Officer has a different view and does not

accept the view, yet the claim itself becomes

debatable. This is so laid down in Instruction

No.1814 dated 4th April, 1989 issued by the

CBDT in respect of the scope of prima facie

disallowance under Section 143(1)(a) of the

Act. In fact, paragraph no.9 thereof provides

that where a claim for deduction has been

50 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. made on the basis of a decision of a High

Court / Tribunal, then, even if there is contrary

view expressed by another High Court and /

or Tribunal or an appellate Authority, the issue

itself becomes debatable. In such cases, no

adjustment under Section 143 (1) (a) of the Act

is permissible. Thus, disallowance of a claim

can be made only after hearing the assessee

who has made the claim.

(supra) had while dealing with the word

"prima facie inadmissible" in clause (iii) of

Section 143 (1) (a) of the Act has held that the

word "prima facie" means on the face of it the

claim is not admissible. It means the claim

does not require any further inquiry before

disallowing the claim. The Court observed that

51 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. where a claim has been made which requires

further inquiry, it cannot be disallowed

without hearing the parties and / or giving the

party an opportunity to submit proof in support

of its claim: In the absence of Section 143(1)(a)

of the Act the above manner i.e. debatable

issues cannot be adjusted by way of being

read in intimation under Section 143 (1) (a) of

the Act, would lead to arbitrary and

unreasonable intimations being issued leading

to chaos.

the decision of Gujarat High Court was

referred to in the computation of income. Thus,

the Assessing Officer could not have

disallowed the claim on a prima facie view

that the same is inadmissible. In fact, there

52 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. can be no dispute that even according to the

Assessing Officer, the issue was debatable.

This is evident from the fact when the

applicant assessee had filed an application

under section 154 of the Act for deletion of the

adjustment made of provision of bad debts by

intimation under Section 143(1)(a) of the Act, it

was disallowed on the ground that it is a

debatable issue. This itself would indicate that

whether the claim of a provision for bad debts

is deductible under Section 36(1) (vii) of the Act

or not is debatable. Further, the above claim

for deductions as made by the applicant was

by following the decision of the Gujarat High

Court in Vithaldas H.Dhanjibhai Bardanwala

(Supra). Thus, a debatable issue. Therefore,

the same could not have been disallowed by

53 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. way of an intimation under section 143(1)(a) of

the Act.

36(1)(vii) of the Act was amended by the

Finance act, 2001 by insertion of Explanation to Section 36(1)(vii) of the Act w.e.f. Ist April,

1989. We are also conscious of the fact that

while disposing of a Reference under Section

256(1) of the Act, the question proposed for our

opinion shall be answered taking into account

the subsequent amendment to the law with

retrospective effect, as they are clarificatory in

nature.

the insertion done by Explanation to Section

36(1)(vii) of the Act (w.e.f. 1989) would arise

for consideration while answering the

54 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. proposed question in respect of Assessment

Year 1993-94. The above amendment by

addition of Explanation to Section 36(1) (vii) of

the Act was a subject matter of consideration

by the Supreme Court in Vijaya Bank (supra).

In the above decision, the Court while applying

the amended law, held that mere debit of a

provision to the profit and loss account will not

by itself be sufficient to constitute bad debts

(write off). This must be accompanied by

simultaneously also reducing the loans and

advances from the asset side of the Balance

Sheet. This would ensure that the amount

shown as loans and advances (debtors) is net

of the provisions made for bad debts.

making of provision for bad debts will not by

55 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. itself (on application of amended law) entitle

the party to deduction, yet it would be a

matter where the assessee should be given an

opportunity to establish its claim. This by

producing its evidence of the manner in which

it treated the provision of bad debts written off

in accounts as well as in its Balance Sheet.

Therefore, the disallowance cannot be made

by intimation under section 143(1)(a) of the

Act, as it requires that a party be given an

opportunity to establish its claim before

disallowing it. It would have been a completely

different matter if the Apex Court had ruled

that in no case can provision for bad debts be

allowed as a bad debt under section 36(1) (vii)

of the Act. The allowance of the claim of

provision for bad debt is entirely dependent

56 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. upon how it is reflected in the Balance Sheet

and its accounts. Therefore, for the above

purpose it is necessary that the party to be

given an opportunity to establish its claim.

Therefore, in the present facts, adjustment by

way of disallowing deduction by intimation

under section 143(1)(a) of the Act is not

proper.” 13. The Revenue has not rebutted the fact that the

assessee had made claim u/s 10 as well as under section

10 in column no.13 in the return of income and also made

the claim u/s 10(23C)(iiiad) as per column 15 of the return.

It is the contention of the assessee that no column is

provided separately for claiming exemption u/s

10(23C)(iiiab). Therefore, the Assessing Authority ought to,

have accepted the claim as made in column no. 13 of the

return. After considering the totality of the facts, we are of

57 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. the view that the issue of claim of exemption by the

assessee whether it falls under the category u/s

10(23C)(iiiab) or under section 10(23C)(iiiad) is debatable.

As per Section 10(23C)(iiiab), exemption is available if any

university or other educational institution existing solely

for educational purposes and not for the purpose of profit

and which is wholly or substantially financed by the

Government. It is not in dispute that the assessee

University is established by the Government of Madhya

Pradesh. Nothing is on record suggesting that the assessee

is not existing for educational purposes. The issue whether

contention of the assessee that it is solely existing for

educational purpose and the Government has financed it

requires verification by conducting detailed enquiry and

this can be done by mere stating adjustments u/s 143(1) of

the Act, which, thus, can be done only by way of scrutiny

assessment. We, therefore, respectfully following the

58 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. decision of Hon'ble Jurisdictional High Court in the case of

M/s. Bharat Oman Refineries Limited, Mumbai vs. ITO,

Bhopal in I.T.A.No. 16/2001 (M.P.), hold that the issue

being debatable, authorities below ought to have made the

detailed scrutiny as provided u/s 143(3) of the Act.

Accordingly, the ground nos. 1 to 5 of the assessee’s appeal

are allowed. However, it is made clear that the Revenue

would be at liberty to make scrutiny assessment as per law.

the assessee, Ground No. 6 becomes of academic nature,

which needs no adjudication.

324/Ind/2018 is allowed.

I.T.A.No. 325/Ind/2018 – A. Y. 2015-16:

identical as taken in I.T.A.No.324/Ind/2018. Since facts

59 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal. are common, the decision taken in appeal for assessment year 2014-15, in view of observations made in foregoing paragraphs nos. 8 to 13 will be, mutatis mutandis, binding on this appeal also. 17. In the result, the appeal in I.T.A.No. 325/Ind/2018 is allowed. 18. Consequently, both the appeals of the assessee in I.T.A.Nos. 324 & 325/Ind/2018 for assessment years 2014-15 and 2015-16 respectively are allowed. The order pronounced in the open court on 29.05.2018.

Sd/- Sd/- (मनीष बोरड) (कुल भारत) लेखा सद�य �या�यक सद�य (KUL BHARAT) (MANISH BORAD) ACCOUNTANT MEMBER JUDICIAL MEMBER Indore; �दनांक Dated : 29/05/2018 CPU*/SPS

60 M/s.Rajiv Gandhi Proudyogiki Vishwavidyalaya,Bhopal.

Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file. By order

Private Secretary/DDO, Indore