The Commissioner of Income-tax, Belgaum v. KLE University
[Citation -2014-LL-1015-87]

Citation 2014-LL-1015-87
Appellant Name The Commissioner of Income-tax, Belgaum
Respondent Name KLE University
Court HIGH COURT OF KARNATAKA CIRCUIT BENCH AT DHARWAD
Relevant Act Income-tax
Date of Order 15/10/2014
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags cancellation of registration • exemption under section 11 • charitable activity
Bot Summary: As per the UGC notification dated 13.09.2006, the said KLE 3 Academy of Higher Education and Research Centre was changed as KLE University. Subsequently, the Commissioner of Income Tax initiated proceedings under Section 12-AA(3) of the IT Act, as against the KLE University on the ground that KLE Society is collecting donation for admission of students for medical course in KLE University and such donation was presumed to be the capitation fee which is prohibited under the Karnataka Educational Institutions Act, 1984 and that KLE University was not carrying on the charitable activity and therefore, held that KLE University is not entitled for exemption under Section 11 of the Income Tax Act. The Commissioner of Income Tax issued a show-cause notice dated 18.08.2010 to the KLE University to show-cause as to why registration granted under Section 12-A of IT Act shall not be withdrawn. Thereafter, the Revenue, by Order dated 14.12.2011, passed an Order, holding that the activities of the KLE University are not genuine and not remained as charitable purpose within the meaning of Section 2(15) of the 4 Income Tax Act and also not being carried on the activities in accordance with the objects and cancelled the registration granted to the KLE Society under Section 12-A of IT Act, from the assessment year 2008-09. Learned counsel appearing for the appellant/Revenue submits that the information collected about the donations paid to KLE Society by some of the students, who took admission in KLE University in the year 2008-09 is nothing but donation received for admission of the students to KLE University which is contrary to the Karnataka Educational Institutions Act, 1984, and the activities of the University are not genuine and it is not being carried on in accordance with the objects and therefore, the Revenue is justified in cancelling the registration granted to KLE University under Section 12-A of the Income Tax Act from assessment year 2008-09, but the Appellate Tribunal erred in rejecting the 5 grounds urged by the revenue. Learned counsel appearing for the respondent/KLE University submits that the Revenue has no authority to hold that the donation paid to KLE Society, is capitation fee for admission of the students to KLE University. Our answer to the above point is in the affirmative for the following reasons: i. that the donations received by the KLE society cannot be construed as capitation fee for the admission of students by the KLE university; ii.


1 IN HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS 15th DAY OF OCTOBER 2014 PRESENT HON'BLE DR. JUSTICE K. BHAKTHAVATSALA AND HON'BLE MR. JUSTICE PRADEEP D.WAINGANKAR INCOME TAX APPEAL NOS.5016/2012 C/W 5017/2012 BETWEEN Commissioner of Income Tax, Opp. Civil Hospital, Dr. Ambedkar Road, Belgaum. Appellant (Common in both Appeals) (By Sri Y V Raviraj, Adv., for appellant) AND KLE University, JNMC Campus, Nehru Nagar, Belgaum. Respondent (Common in both Appeals) (By Sri S Parthasarathi, Sri H R Kambiyavar & Sri Gangadhar, J M, Advs., for respondent) 2 These Income Tax Appeals are filed under Section 260A of Income Tax Act, 1961, against order dated 16.3.2012 made in ITA No.9 and 10/PNJ/2012 on file of Income Tax Appellate Tribunal. These Appeals coming on for hearing, same having been heard and reserved for pronouncement of Judgment this day, Dr. Bhakthavatsala, J., delivered following: JUDGMENT These two appeals have been filed by Revenue under Section 260-A of Income Tax Act, 1961, challenging common Order dated 16.03.2012 made in IT Appeal No.9 and 10/PNJ/2012 (for Assessment Years 2008-09 and 2009-10) on file of Income Tax Appellate Tribunal, at Panaji. 2. For purpose of convenience and better understanding, respondent-assessee is hereinafter referred to as KLE University . 3. It is case of respondent-assessee that on 09.11.2004, KLE Academy of Higher Education and Research Centre, at Belgaum was registered as Society under Karnataka Societies Registration Act, 1960, with various objects. As per UGC notification dated 13.09.2006, said KLE 3 Academy of Higher Education and Research Centre was changed as KLE University . As per order dated 22.11.2007, Commissioner of Income Tax, Belgaum, registered it under Section 12-A of Income Tax Act (in short IT Act). Subsequently, Commissioner of Income Tax initiated proceedings under Section 12-AA(3) of IT Act, as against KLE University on ground that KLE Society is collecting donation for admission of students for medical course in KLE University and such donation was presumed to be capitation fee which is prohibited under Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984 and that KLE University was not carrying on charitable activity and therefore, held that KLE University is not entitled for exemption under Section 11 of Income Tax Act. Commissioner of Income Tax issued show-cause notice dated 18.08.2010 to KLE University to show-cause as to why registration granted under Section 12-A of IT Act shall not be withdrawn. In pursuance of show-cause notice, KLE University filed its statement of objections. Thereafter, Revenue, by Order dated 14.12.2011, passed Order, holding that activities of KLE University are not genuine and not remained as charitable purpose within meaning of Section 2(15) of 4 Income Tax Act and also not being carried on activities in accordance with objects and cancelled registration granted to KLE Society under Section 12-A of IT Act, from assessment year 2008-09. assessee challenged same before Appellate Tribunal. Tribunal after hearing arguments of assessee and revenue, passed impugned common order allowing appeals and setting aside Order of Revenue dated 14.12.2011 passed under Section 12- AA(3) of IT Act. This is impugned in appeals. 4. Learned counsel appearing for appellant/Revenue submits that information collected about donations paid to KLE Society by some of students, who took admission in KLE University in year 2008-09 is nothing but donation received for admission of students to KLE University which is contrary to Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984, and activities of University are not genuine and it is not being carried on in accordance with objects and therefore, Revenue is justified in cancelling registration granted to KLE University under Section 12-A of Income Tax Act from assessment year 2008-09, but Appellate Tribunal erred in rejecting 5 grounds urged by revenue. He submits that impugned Order of Appellate Tribunal may be set aside and order of Commissioner of Income Tax may be restored. He has cited following decisions: i. (2013) 355 ITR 280 (P & H) COMMISSIONER OF INCOME TAX Vs. SURYA EDUCATIONAL & CHARITABLE TRUST; ii. (2013) 84 CCH 287 PHHC (COMMISSIONER OF INCOME TAX Vs. SAVIOR CHARITABLE TRUST); iii. (2009) 315 ITR 428 (UTTARAKHAND) (COMMISSIONER OF INCOME TAX Vs. NATIONAL INSTITUTE OF AERONAUTICAL ENGINEERING EDUCATIONAL SOCIETY); iv. (2014) 98 DTR (ALL) 183 (COMMISSIONER OF INCOME TAX Vs. LUCKNOW DEVELOPMENT AUTHORITY); v. (1992) 3 SCC 666 (MOHINI JAIN Vs. STATE OF KARNATAKA AND OTHERS. CHARITABLE TRUST); vi. (2011)7 SCC 179 (INDIAN MEDICAL ASSOCIATION Vs. UNION OF INDIA & OTHERS); 6 vii. (2005) 6 SCC 537 (P.A. INAMDAR AND OTHERS Vs. STATE OF MAHARASTRA AND OTHERS); viii. (2003) 6 SCC 697 (ISLAMIC ACADEMY OF EDUCATION & ANR. Vs. STATE OF KARNATAKA AND OTHERS); ix. ITA Nos.5007-12/13 (KAR) (M/S. VISVESVARAYA TECHNOLOGICAL UNIVERSITY Vs. ASST. COMM. INCOME TAX) (DATED 20.12.2013); x. (2008) 20 SOT 353 (HYD) (VODITHAL EDUCATION SOCIETY Vs. ASSISTANT DIRECTOR OF IT); xi. (2010) 324 ITR 44 (MAD) (P.S. GOVINDASAMY NAIDU AND SONS Vs. ASSISTANT COMMISSIONER OF INCOME TAX); xii. (1975) 101 ITR 234 (SC) (SOLE TRUSTEE, LOKA SHIKSHANA TRUST Vs. COMMISSIONER OF INCOME TAX); xiii. (1971) 82 ITR 540 (SC) (COMMISSIONER OF INCOME TAX Vs. DURGA PRASAD MORE); xiv. (1995) 214 ITR 801 (SC) (SUMATI DAYAL Vs. COMMISSIONER OF INCOME TAX). 7 5. Learned counsel appearing for respondent/KLE University submits that Revenue has no authority to hold that donation paid to KLE Society, is capitation fee for admission of students to KLE University. It is also contended that KLE Society and KLE University are two different entities and merely because Chairman and few members of KLE Society are Chairman and members of KLE University cannot be said that KLE Society has received capitation fee in form of donation for admission of some of students to KLE University. It is also contended that KLE University is carrying on its objects without any deviation and there is neither profit motive nor division of income of KLE University. Therefore, he submits that there is no merit in appeals and he relied upon following decisions: i. (2006) 285 ITR 327 (KARN) (SANJEEVAMMA HANUMANTHE GOWDA CHARITABLE TRUST Vs. DIRECTOR OF INCOME-TAX (EXEMPTIONS); ii. (1997) 224 ITR 310 (SC)(ADITANAR EDUCATIONAL INSTITUTION ETC. Vs. 8 ADDITIONAL COMMISSIONER OF INCOME TAX); iii. (2001) 247 ITR 658 (SC) (OXFORD UNIVERSITY PRESS, ETC. Vs. COMMISSIONER OF INCOME TAX); iv. (1997) 225 ITR 1010 (SC) (THIAGARAJAR CHARITIES Vs. ADDITIONAL COMMISSIONER OF INCOME TAX AND ANOTHER); v. (2008) 301 ITR 86 (SC) (AMERICAN HOTEL & LODGING ASSOCIATION EDUCATIONAL INSTITUTE Vs. CENTRAL BOARD OF DIRECT TAXES & ORS.); vi. (2011) 330 ITR 480 (SC) (DIRECTOR OF INCOME TAX Vs. GARDEN CITY EDUCATIONAL TRUST); and vii. ITA NO.182/2011 (THE DIRECTOR OF INCOME TAX Vs. M/S. VENKATESHA EDUCATION SOCIETY) (DB). 6. substantial question of law that arises for our consideration is as under: Whether Tribunal is justified in holding that activities of KLE University are genuine 9 and withdrawal of registration by CIT was erroneous? 7. Our answer to above point is in affirmative for following reasons: i. that donations received by KLE society cannot be construed as capitation fee for admission of students by KLE university; ii. that revenue appears to have not properly appreciated legal point that though Chairman and few members of Society are Chairman and members of KLE University , they are separate legal entities; iii. that there is no violation of any of conditions stipulated under IT Act, warranting for cancellation of registration of society; iv. that Tribunal on proper appreciation of grounds urged by Society and Revenue has rightly restored registration. 10 In view of above, there is no merit in contentions urged by learned counsel for Revenue and decisions cited by him are of no avail. 8. For reasons stated above, we pass following : ORDER Appeals fail and they are hereby rejected. Sd/- JUDGE Sd/- JUDGE Bjs Commissioner of Income-tax, Belgaum v. KLE University
Report Error