IN INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER And SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER 1. I.T.A. No.1955/Ahd/2013 2. I.T.A. No.1956/Ahd/2013 (Assessment Years : - ) Calorx Teachers University Director of Income Tax Nr. Greenwood Lake Resort Vs. (Exemption) Vaishno Devi Circle 2 n d Floor, Vasant Nature SG Highway, Ahmedabad View Bldg. Ahmedabad-380 009 PAN/GIR No. : AAAJC 0739 N (Appellant) (Respondent) Appellant by : Shri S.N. Soparkar, Sr.Counsel Respondent by : Mrs. Vibha Bhalla, CIT-DR Date of Hearing 09/09/2016 Date of Pronouncement 19/09/2016 ORDER PER SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER : Both these appeals filed by Assessee are directed against separate orders of Director of Income Tax (Exemptions) [DIT(E) in short], Ahmedabad dated 17/05/2013 and 15/05/2013. Since issues are inter-connected, these appeals were heard together and are being disposed of by this consolidated order for sake of convenience. 2. First, we take up Assessee s appeal in ITA No.1956/Ahd/2013 for adjudication. 2 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) 2.1. assessee has filed appeal against order dated 15/05/2013 passed by Director of Income Tax (Exemptions), Ahmedabad u/s.12AA(i)(b) of Income Tax Act, 1961 (hereinafter referred to as "the Act") r.w.s. 12A of Act. following grounds of appeal have been raised by assessee:- 1. Ld. DIT (Exemption) erred in law and on facts in refusing to grant registration u/s 12AA of Act to appellant university. Ld. DIT (Exemption) ought to have granted registration in light of fact that all requisite formalities under provisions of Act were complied with by appellant university. It be so held now. 2. Ld. DIT (Exemption) erred in law and on facts in not appreciating fact that private university approved, sanctioned and declared in Schedule by State cabinet under "Gujarat Private Universities Act, 2009" is deemed to be 'Artificial Judicial Person' governed by provisions of this Act that elaborates objects for which such universities shall function. Ld. DIT (Exemption) ought to have granted registration to appellant university whose incorporation, regulation and winding up are all governed by State Act. It be so held now. 3. Ld. DIT (Exemption) erred in law and on facts in holding that no separate registration u/s 12AA of Act to be granted to appellant university as Foundation having been already registered u/s 12AA of Act ignoring submissions that both entities being independent and separate ought to be granted registration u/s 12AA of Act independently. It be so held now. 4. Ld. DIT (Exemption) erred in law and on facts in refusing to grant claim of appellant on baseless observations with respect to genuineness of activities of appellant university ignoring that it is governed by rules and regulations of State legislature. Ltd. DIT(Exemptions) ought not to have refused registration in absence of having brought on record any profit motive in establishing private university by appellant. order of ld. DIT(Exemption) be set aside and registration be granted. 3 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) 5. Ld.DIT(Exemption) erred in law and facts in refusing to grant registration u/s.12AA of Act on untenable and incorrect grounds. It be so held now. 3. facts in brief are that assessee was constituted as University on 24/07/2009 under Gujarat Private Universities Act 2009 ( GPUA for short) whereby assessee was notified as University under Act. assessee moved application in Form No.10A on 13/12/2012 for obtaining registration u/s.12AA of Income Tax Act, 1961 (hereinafter referred to as "the Act"). Similarly applications were also moved to avail exemption u/s.80G(5) of Act. Director of Income Tax (Exemption) [ DIT(E) for brevity] however declined registration u/s.12A/ 12AA of Act and also declined to entertain another application seeking registration u/s.80G(5) of Act. DIT(E) referred to several clauses of Gujarat Private Universities Act and made averments to effect that impugned assessee (University) is totally controlled by sponsoring body, namely Calorx Foundation which is already approved u/s.12A/12AA of Act and, therefore, when sponsoring body is exercising absolute control over assessee, in that event, no separate approval is necessary. DIT(E) next observed that assessee (University) and sponsoring body are in effect no different from each other in view of total control of sponsoring body over assessee. DIT(E) went on to observe that in terms of state enactment for universities, all assets of assessee will vest with sponsoring body in event of its dissolution. University is thus not independent body in real sense. In such situation, it is sponsoring body which requires registration and not Assessee (University). DIT(E) also noted that assessee has not produced its own constitution or trust-deed or Articles of Association (AOA) or 4 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) Memorandum of Association (MOA) or similar legal documentation to demonstrate its own charter. assessee is primarily relied upon State enactment for its existence and operations. GPUA has provided for approving First Statute of University like MOA of University. It was alleged that First Statue has not yet been approved from Government of Gujarat. draft of First Statute submitted to government does not address on point as to what will happen to assets of University upon dissolution. DIT(E) thereafter noted that charitable trust is governed by provisions of Bombay Public Trust Act which does not allow trust to be revoked and no property of trust can be parted away without permission of Charity Commissioner. In present case, contrary has been provided by Act whereby all assets can go to Sponsoring Body. DIT(E) noted with reference to clause 36 of Act that sponsoring body shall establish Endowment Fund for University and in same vain reiterated that all assets of University will vest with sponsoring body. This means Endowment Fund upon dissolution goes back to Settler. DIT (E) also noted on facts that land and building of University is in name of Sponsoring Body, whereas other assets like fixtures and furnitures etc. are in name of University. 4. DIT(E) thereafter summed up in para-10 of its order that registration cannot be granted for following reasons:- 10. In view of discussion in para 9 above, it is clear that registration cannot be granted for following reasons:- i) As stated above, Schedule of Notification of Government of Gujarat notifying University shown that 5 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) assessee appears to have been registered u/s.25 of Companies Act but no such registration from ROC has been given. There is no MOA or AOA and hence objects of University, mode of dissolution and whether activity would be in charitable manner or not cannot be verified. There is nothing to ensure that University would perform its activities in charitable manner. ii) assessee has prepared draft, First Statute report which is not yet approved by Government or Gujarat. Even draft of First Statute is not complete in sense it also does not ensure that University would be run in charitable manner. It does not ensure as to what will happen to assets upon dissolution. iii) As stated above, University is not at all independent body even though it is notified by Government under Gujarat Private Universities Act. Sponsoring Body namely Calorx Foundation is controlling University not only in appointing President of University but also in appointing Governing Body of University as well as Board of Management of University. Almost entire membership of Governing Body as discussed in detail above and also almost entire membership of Board of Management consists of people directly or indirectly appointed by Sponsoring Body and hence University is not independent body but sort of branch or division of Sponsoring Body and hence cannot be stated to be body which is independent and hence registration cannot be given. iv) As discussed above, charitable trust or institution is governed by very strict provisions because it enjoys not only Income-tax exemption but exemptions under various Acts. It is allowed to obtain donations and issue receipts u/s.80G giving tax benefits to donors. It is allowed to receive grants etc. This shows that entire property of charitable trust or institution has public character and hence no amount of asset can be allowed to go back to donor or settler or trustee or controlling bodies. Contrary to this, in present case, Sponsoring body has full and final control on not only dissolving itself but for dissolving University also. As stated above, upon dissolution, assets will vest in Sponsoring body, which is Settler. v) As stated above, u/s.36(1) provides for establishing Endowment Fund by Sponsoring body. language of 6 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) section 36 shows that Sponsoring body is sort of settling particular amount in form of Endowment Fund. However, as per section 42(2), all assets and liabilities of University shall vest in Sponsoring body. This means that settlement of Endowment Fund is not final and same would go back to Settler Sponsoring body upon dissolution. This cannot be permitted in respect of public funds. If University is granted registration u/s.12A/12AA, all its fund become public and do not retain private character. Under no circumstances, they can be allowed to go back to Settler. vi) In absence of constitution of University or Memorandum of Association or Article of Association or trust deed, it is impossible to know how University is running its affairs. It is not possible to know whether activities of University would be of charitable character and hence no registration can be given. 5. DIT(E) accordingly concluded that he is not satisfied about objects of University and genuineness of its activities to be of charitable nature in consonance with provisions of section 12A/12AA of Act and accordingly refused to grant registration sought u/s.12A/12AA of Act. 6. Aggrieved by order of DIT(E), assessee is in appeal before Tribunal. 7. ld. Counsel Mr. S.N. Soparkar, senior advocate appearing for assessee, at outset, adverted our attention towards Gujarat Government Gazette bearing notification and Schedule thereto wherein assessee, namely Calorx Teachers University , Ahmedabad figures at third row of Schedule. As per aforesaid schedule, State Government has granted requisite permission or approval to set up private University in terms of provisions of GPUA with effect 7 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) from 24/07/2009. Ld. Senior Counsel submitted that as per third column of Schedule, Registration Number has been mentioned which is misunderstood by DIT(E) to be registration number of assessee. Ld. Counsel submitted that aforesaid registration number relates to sponsoring body, namely Calorx Foundation which is registered company u/s.25 of Companies Act, 1956. Counsel vehemently exhorted that DIT(E) has misunderstood facts and arrived at finding of fact that assessee appears to have been registered u/s.25 of Companies Act which is obviously not true. Ld. Counsel strenuously urged that that assessee (University) is independent legal entity created and established by State Action and has its own independent legal identity and existence. He asserted that requisite formalities under provisions of State Act has been duly complied with by assessee while setting up university. He emphasized that assessee is private university approved, sanctioned and declared in Schedule by State cabinet under Gujarat Private Universities Act, 2009 [GPUA] and is deemed to be Artificial Juridical Person governed by provisions of Income Tax Act and objects of University are governed by GPUA. He thus claimed that DIT(E) has misdirected himself in law in drawing adverse inference against assessee and in refusing to entertain application for registration to assessee-company whose incorporation, regulation and winding up are all governed by State Act. Ld. Senior Counsel further contended that assessee (University) is entitled in law for independent registration u/s.12AA of Act regardless of registration already available to sponsoring body as sponsoring body and assessee are different bodies and are separate legal entities. There is nothing on record to entertain any doubt on alleged profit motive 8 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) in establishing private university by assessee. He therefore pleaded that refusal order of DIT(E) is required to be set aside and DIT(E) be directed to grant registration in terms of application placed before him. He relied on decision in case of CIT vs. O.P. Jindal Global University reported at (2013) 38 taxmann.com 366 (P&H) and co- ordinate bench of ITAT Delhi Bench G in case of Soham For Kids Education Society Centre vs. DIT (Exemptions) [copy placed in file] to support his case for registration. Ld. Senior Counsel thereafter invited our attention to appeal No. ITA No.1955/Ahd/20133 wherein similar application u/s.80G(5) of Act placed before DIT(E) was also consequently denied albeit wrongly on similar grounds. He thus also sought reversal of order u/s.80G(5) dated 15/05/2013 on similar footings. 8. Ld. CIT-DR Ms.Vibha Bhalla, on other hand, relied upon order of DIT(E) and submitted that DIT(E) has given elaborate reasonings while coming to conclusion adverse to assessee. Hence, it was urged that no interference is called for. 9. We have heard rival submissions, perused material available on record and gone through orders of authorities below as well as decisions relied upon by Ld. Counsel for assessee. Assessee in its appeals has assailed action of DIT(E) in refusing to entertain application of assessee seeking registration under S. 12A/12AA and exemption under S. 80G of Act. 9.1 As submitted to us, assessee namely Calorx Teachers University is established under GPUA which was enacted to provide 9 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) for establishment and incorporation of private universities in State of Gujarat with emphasis to provide for qualitative and industry relevant higher education and to regulate their functions and for matters connected therewith or incidental thereto as detailed therein. assessee thus is private university which came into existence by act of State assembly under aegis of "Gujarat Private Universities Act, 2009". assessee herein claims to be 'Artificial Juridical Person' regulated by provisions of Income Tax Act, 1961. sponsoring body of impugned university as stipulated in impugned State Act is M/s. Calorx Foundation . assessee applied for registration u/s.12A as per procedure laid down under S. 12AA of Act for university set up under State Act. Simultaneously, Assessee also moved separate application for exemption u/s.80G of Act. 9.2 reading of order appealed against shows that refusal to entertain applications of assessee by DIT(E) is founded primarily on two grounds; 9.3 Firstly, DIT(E) noticed that that sponsoring body is already registered u/s.12AA of Act and therefore separate registration is not required in facts of case. DIT(E) justified his action on premise that entire management and control of University is in effect vested with sponsoring body. governing body of private University is also manned by people on behest of sponsoring body. DIT(E) further noted that assets and liabilities of assessee (University) will vest with sponsoring body in event of dissolution of university. Thus, assessee (University) is de facto controlled and run by sponsoring body which already enjoys 10 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) registration under section 12AA of Act. He claimed that sponsoring body and assessee are, in effect, no different and thus separate approval is not justified. DIT(E) also noted that assessee has not furnished any trust-deed or MOA or AOA or any legal document binding it with various obligations. In rebuttal, main plank of argument on behalf of assessee is that it is governed by provisions of Statute i.e. Gujarat Private Universities Act, 2009 and thus no separate charter is required. 9.4 Secondly, DIT(E) also observed that assessee appears to be registered u/s.25 of Companies Act, 1956 and in absence of any legal documents to bring out spirit behind setting up of university, it is not possible to ascertain whether assessee university is set up to pursue charitable objectives or is set up with profit motives. DIT(E) noted that there is nothing on record to ensure that University will perform its objects in charitable manner. He made reference to Bombay Public Trust to make out case that primary onus lies on assessee that Assessee will advance charitable causes for benefit of general public. DIT(E) contended that provisions of Gujarat Private University Act, 2009, can apply to institution which may be running university either on private profit basis or on charitable basis. Charitable trust or Institution is governed by very strict provisions because it enjoys not only income-tax exemption but exemption under various Acts. It is allowed to receive grant and donations etc. Thus entire property of charitable trust or institution acquires public character and hence no amount of assets can be allowed to go back to donor or settler or trustee or controlling bodies. DIT(E) declined to grant registration on ground that it is not 11 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) discernible from record as to whether activities of University is or charitable character or not. 9.5 On perusal of various observations of DIT(E), we note that DIT(E) has failed to take note of scheme for creation of private universities in perspective while holding that sponsoring body and assessee (University) are one and same. On careful perusal of Gujarat Private Universities Act, 2009 placed before us, we find that State Legislature itself contemplates for establishment of private University by sponsoring body. sponsoring body is also entitled under aforesaid state enactment to appoint various persons to administer and manage universities as approved by it. Therefore, objection of Revenue that assessee and sponsoring body are not independent runs counter to very scheme of establishment of private universities and is thus damp squib. We also take note of another error committed by DIT(E) in holding that Assessee university is registered under S. 25 of Companies Act 1956 and as sequel thereto in holding that registration certificate was not produced. We find ourselves in agreement with demonstration made on behalf of assessee that it is sponsoring body which is registered under section 25 of Act, 1956 and not assessee per se. assessee is not company registered under Companies Act but body which was borne by state action. Thus, in totality of circumstances, we are of view that mere dependence of Assessee on sponsoring body for carrying out its objects in sync with State enactment will not deprive it of benefit of registration and exemption as per application moved before revenue in this regard. 12 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) 9.6 Having noted aforesaid, we now advert to second objection of Revenue that assessee has not brought any material on record to establish that activity of applicant-assessee would be carried out with solemn objects of charitable nature and university would not be run in commercial spirit as business or profit venture. In this regard, we do not find anything in Gujarat Private Universities Act, 2009 which compels University to run in charitable manner alone. State enactment merely provides manner in which constituent Universities would function to carry out objects as specified in Act on their approval and sanction. Therefore, there is nothing in state enactment which implies that university enacted under its aegis would be bound to run in charitable manner. mere sanction and approval of university under GPUA would not ipso facto tantamount to carrying out of educational activities with charitable objectives. No such provision has been brought to our notice either. We also do not find reference to any other legal document which binds assessee to run university in charitable manner. Thus, it can not be denied that university would be at liberty to exploit permission to set up university on commercial considerations. provisions of section 12AA of Act stipulate that objects of assessee should be of charitable nature to avail registration u/s.12A of Act. Therefore, in our view it is incumbent upon assessee to at least prima-facie establish that assessee (University) has been formed with aims and objects which are charitable in nature. We are alive to fact that assessee is educational institution which concerns larger public engagement. Consequently, it would be in fitness of things to grant one more opportunity to assessee to place relevant material on record of 13 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) revenue to demonstrate bonafides of charitable objects it seeks to propound. 9.7 In light of aforesaid discussion, we deem it appropriate to remit matter back to file of DIT(E) on limited ground to ascertain charitable intent and purposes in carrying out its objects. Needless to say, it shall be open to assessee to establish this fact with relevant material and documentary evidences before competent authority. For this purpose, assessee shall be granted reasonable opportunity of being heard. On being satisfied of compliance, DIT(E) shall grant registration u/s.12AA of Act as sought in accordance with law. Similarly, application for exemption u/s.80G shall also be dealt with in same manner in terms of aforesaid directions. 10. Thus, Appeal of assessee in ITA No.1956/Ahd/2013 is allowed for statistical purposes. 11. In ITA No.1955/Ahd/2013, assessee has agitated denial of exemption sought under S. 80G of Act. revenue has refused exemption in wake of refusal of registration under 12AA to assessee university. In wake of our observations in ITA no. 1956/AHD/ 2013 seeking grant of registration under S. 12A/ S. 12AA of Act, we restore this appeal also back to file of DIT(E) with direction to revenue to review matter afresh in accordance with law after giving proper opportunity of being heard to assessee. 12. Thus, appeal of assessee in ITA No.1955/Ahd/2013 is also allowed for statistical purposes. 14 ITA Nos.1955 & 1956/Ahd/2013 Calorx Teachers University vs. DIT(E) 13. In result, both appeals of assessee are allowed for statistical purposes. This Order pronounced in Open Court on 19 /09/2016 Sd/- Sd/- ( R.P. TOLANI ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 19/ 09 /2016 . . , T.C. NAIR, Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. Concerned CIT 4. CIT(A)-concerned/DI (Exemptions), Ahd. DR, ITAT, Ahmedabad 5. 6.Guard file. BY ORDER, //True Copy// (Dy./Asstt.Registrar) ITAT, Ahmedabad 1. Date of dictation .. 9.9.16 (dictation-pad 30- pages attached at end of this appeal-file) 2. Date on which typed draft is placed before Dictating Member 12.9.16 3. Other Member 4. Date on which approved draft comes to Sr.P.S./P.S .. 5. Date on which fair order is placed before Dictating Member for pronouncement 6. Date on which fair order comes back to Sr.P.S./P.S .19.9.16 7. Date on which file goes to Bench Clerk 19.9.16 8. Date on which file goes to Head Clerk ... 9. date on which file goes to Assistant Registrar for signature on order .. 10. Date of Despatch of Order Calorx Teachers University v. Director of Income Tax (Exemption)