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Income Tax Appellate Tribunal, VISAKHAPATNAM BENCH, VISAKHAPATNAM
Before: SHRI DUVVURU R L REDDY, HON’BLE & SHRI S. BALAKRISHNAN, HONBLE
PER S. BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of the Ld. CIT (Exemptions), Hyderabad in appeal F.No. CIT(E)/Hyd/218(03)/12A/2018-19, dated 30/09/2019 passed U/s. 12AA(1)(b)(ii) of the Income Tax Act, 1961 for the AY 2019- 20 denying exemption U/s. 12A of the Income Tax Act 1961.
2 ITA No. 671/Viz/2019 2. The assessee has raised ten grounds in its appeal and they are extracted herein below for reference: “1. That in the facts and circumstances of the case, the order UI/s. 12AA of the Act passed by the Ld. CIT (Exemptions), Hyderabad is violative of the principles of natural justice, beyond the statutory powers of the ld. CIT (Exemptions), bad in law and thus, is liable to be set aside. 2. That the Ld. CIT(Exemptions) erred on facts and in law in not appreciating the settled law that the registration has to be granted only on the basis of the objects of the Trust or institution and genuineness of the activities of the Trust or institution and not any other basis. 3. That the Ld. CIT(Exemptions) erred on facts and in law in denying registration U/s. 12AA of the Act on the ground that the appellant had violated the provisions of the law ie the IT Act as the returns of income were not filed and the accounts were not audited, without appreciating that: (a) the amendment to section 12AA(1)(a) and (b) by Finance(2) Act of 2019 is applicable only to applications filed on or after 1st September, 2019 and not in the instant case. (b) The provisions of section 12AA(1)(a) and (b) of the IT Act provide for compliance of requirements of laws other than the IT Act. (c) The Ld. CIT(Exemptions) has not stated the requirements of any law other than the IT Act which are required to be fulfilled by the Appellant for the purposes of achieving its objects. 4. The Ld.CIT(Exemptions) erred on facts and in law in denying the registration U/s. 12AA of the IT Act to the appellant on the ground that the appellant is a profit making entity. 5. The Ld. CIT (Exemptions) failed to appreciate that the application of income is not relevant for the
3 ITA No. 671/Viz/2019 purpose of granting the registration U/s. 12AA of the IT Act. 6. The Ld. CIT (Exemptions) has erred on facts and in the law in denying the registration on the ground that the genuineness of the activities is in doubt without any factual basis and without examining the activities of the appellant. 7. The Ld. CIT (Exemptions) erred on facts and in law in denying the registration U/s. 12AA of the IT Act to the appellant on the ground that the appellant has applied the income outside India without appreciating that the application of income is not relevant at the time of grant of registration U/s. 12AA. 8. The Ld. CIT(Exemptions) has erred in not appreciating the position of law that the registration cannot be denied on the basis of grounds relevant for cancellation of registration. 9. That the order U/s. 12AA passed by the Ld. CIT(Exemptions) is barred by limitation as the same has been served on the appellant after expiry of the period of six months. (a) That in the facts and circumstances of the case, the registration should be considered as deemed to have been granted to the appellant. 10. That in the facts and circumstances of the case, the registration U/s. 12AA should have effect from the date on which the appellant was constituted.” 3. Brief facts of the case are that the assessee is a University which filed its application in form 10A on 30/03/2019 seeking registration U/s. 12A of the Act. The Ld. CIT(E) called for various details and observed that the assessee has not filed its return of income and has neither audited the books of account for the Financial Years 2015-16, 2016-17, 2017-18 and 2018-19. The
4 ITA No. 671/Viz/2019 Ld. CIT(E) also observed that the university due to negligence has not filed its return of income. He further observed that as per the amendment to Income Tax Act effective from 1/9/2019 the assessee has to comply with the law and file the return of income. Ld. CIT (E) also observed that the assessee is a profit making entity based on the Provisional Income & Expenditure Account filed before him. The Ld. CIT (E) also observed that the University has paid to various foreign universities and has violated the provisions of section 11 of the Act. Consequently, the Ld. CIT(E) found it fit to not to grant registration u/s 12A of the Act and rejected the application of the assessee. Aggrieved by the order of the Ld. CIT(E), the assessee is in appeal before us.
The Ld. Counsel for the assessee submitted that this University has been carved out in 2008 out of the earlier JNTU which was found in 1972, and argued that the university is funded by Government. He also submitted that the assessee was earlier exempted from filing the return of income. He also submitted that the assessee existed only for educational purposes and was exempted from tax all along. The amendment to the Finance Act requiring to the file of the return of income
5 ITA No. 671/Viz/2019 along with the audit report was not advised to the Government of Andhra Pradesh and hence the assesee has not filed its return of income. The Ld. Counsel for the assessee also submitted that since the assessee has fulfilled the basic condition for grant of registration U/s. 12A of the Act, the Ld. CIT(E) has erred in denying the registration to the assessee and has caused gross injustice to the assessee. The Ld. Counsel for the assessee relied on the decision of the Tribunal in the case of Jawaharlal Nehru Technological University, Hyderabad vs. CIT(E), Hyderabad in ITA No. 1749/Hyd/2019 wherein the Hon’ble Tribunal has directed the Ld. CIT(E) to grant registration U/s. 12A if the objectives and activities of the assessee are charitable in nature. The Ld. Counsel for the assessee has also produced documents to state that the Finance Officer was not appointed by the Government of Andhra Pradesh and it does not have any Executive Council for more than a year. The Ld. Counsel for the assessee has also furnished documentary evidence in Paper Book-1 from pages 160 to 164 regarding the delay in appointing the Finance Officer for the University. In support of his contentions that even if there is a profit element in the activities carried by the asessee such a
6 ITA No. 671/Viz/2019 violation may not be a ground for refusal for grant of registration U/s. 12A of the Act. He placed reliance on the decision of the Hon’ble Supreme Court in the case of Queen’s Educational Society vs. CIT [2015] 55 Taxmann.com 255 (SC). The Ld. Counsel for the assessee pleaded that similar direction may be granted to the assessee as well.
The Ld. DR on the other hand argued that the assessee has made huge profits as observed by the Ld. CIT(E) in para 4 of his order. Ld. DR also supported the order of the Ld. CIT(E).
Considering the rival contentions and the material available on record, we find that the assessee is a State funded University as in the case of Jawaharlal Nehru Technological University (supra) where the registration was denied to the assessee on similar points and after considering the issue in detail it was granted registration. From the submissions of the Ld. Counsel for the assessee we also observed that the assessee earlier was exempted from tax as the assessee was only engaged in imparting education which is a charitable activity and was also exempt from filing returns of income. The assessee was earlier known as
7 ITA No. 671/Viz/2019 Jawaharlal Nehru Technological University which was subsequently divided into four Universities and the assessee is one of them which was formed in 2008. Section 10(23C)(iiiab) provided that the income of any University or other Educational Institution existing solely for educational purposes and not for purposes of profit, and which is wholly and substantially funded by the Govt., its income is not to be included in the total income. However, sub-section (4C) and sub-clause (e) thereof to section 139 of the Act have been inserted by the Finance Act of 2002, to make the income of such University or other educational institution referred to in sub clause (iiiab) of section 10(23) as assessable to tax only if the total income in respect of such institution, without giving the effect to the provisions of section 10, exceeds the maximum amount which is not chargeable to income tax. Sub-section (4E) to section 139 was inserted by the Finance Act of 2014 requiring every business trust, which is not required to furnish its return of income or loss under any other provisions of this section, to furnish return of such income of the previous year in the prescribed form and verified in the prescribed manner or as may be prescribed and all the provisions
8 ITA No. 671/Viz/2019 of this Act shall so far as may be, apply as if it were a return to be furnished under sub-section-1 of section 139 of the Act. We find that this amendment was w.e.f 1/4/2015. We also find that Rule 2BBB has also been introduced w.e.f 12/12/2014 prescribing the percentage of Government grant for considering a University, Hospital, etc., as substantially funded by the Government for the purposes of clause (23C) of section 10 and it provided that where the Government grants to such University or Hospital exceeds 50% of the total receipts including any voluntary contributions of such University or other Education Institution/Hospital or other institution during the relevant previous year, it shall be considered as substantially funded by the government for such previous year. Till the AY 2014 it was not required to file any return of income and therefore the assessee’s contention that it was not aware of the requirements of filing returns of income appears to be bonafide. Further, the assessee has made an application for registration only w.e.f AY 2019-20. In such circumstances, the requirement of law is that the Ld. CIT(E) has to consider whether the objectives of the assessee were charitable in nature and if the activities have
9 ITA No. 671/Viz/2019 already begun, then whether the assessee is carrying on its activities accordingly. Therefore, we agree with the Ld. Counsel for the assessee that the Ld. CIT(E) has not looked into the objectives of this University while considering its application for registration U/s. 12A of the Act. The Ld. CIT(E) has also not disputed the activities carried on by the assessee. In view of the above findings, we deem it fit and proper to remand the issue to the file of the Ld. CIT(E) with a direction to grant registration U/s. 12A of the Act.
In the result, appeal of the assessee is allowed.
Pronounced in the open Court on the 07th April, 2022.
Sd/- Sd/- (DUVVURU R L REDDY) (S. BALAKRISHNAN) Judicial Member Accountant Member Dated: 07th April, 2022. OKK
10 ITA No. 671/Viz/2019
Copy to: 1. The Assessee: Jawaharlal Nehru Technological University, Pithapuram Road, East Godavari District, Andhra Pradesh – 533003. 2. The Revenue: Commissioner of Income Tax (Exemptions) 2nd Floor, Aayakar Bhawan, Basheer Bagh, Hyderabad. 3. The D.R., ITAT, Visakhapatnam. 4. Pr. CIT 5. Guard file.
By order
Sr. Private Secretary, ITAT, Visakhapatnam.