Visvesvaraya Technological University Vs CIT (Exemptions) (ITAT Bangalore)
Assessee has moved an application for registration under section 12A on 25.05.1999, but this application was not disposed of by the CIT and it was kept pending and assessee was persuaded by the Revenue to file another application for registration. Vide letter dated 2 1.01.2002, the assessee has also requested the CIT to grant registration under section 12A on the basis of its application filed on 25.05.1999 w.e.f. 01.04.1998 and delay in filing of application for registration of less than 2 months may kindly be condoned. This application of the assessee was also not adjudicated upon by the CIT. Other applications for registration under section 12A was rejected by the CIT on technical grounds despite the fact that at the relevant point of time, assessee was enjoying the recognition under section 80G of the Act. Subsequently, the registration under section 12A was granted to the assessee after making a detailed verification of the records and enquiry. At no point of time, the Revenue has made out a case that assessee was not engaged in educational activities. Assessee is a university established by the Government of Karnataka and Act of State Legislature i.e., VTU Act, 1994, for the purpose of ensuring proper and systematic instructions, teaching, training and research & development of engineering technology and allied sciences in the state of Karnataka and matters connected therewith. Even the Apex Court, while adjudicating the issue of exemption under section 10(23)(c)(IIIAB) of the Act, has categorically observed in para 9 of its judgment that the surplus accumulated over the period has been ploughed back for the educational purposes and the University exists solely for the educational purpose and not for the purpose of profit. The contention of the assessee that as of now 203 engineering colleges located throughout the state of Karnataka are affiliated to the assessee universtiy and more than 4 lakh students are studying in various under graduate and post graduate course are not disputed by the Revenue. The registration was finally granted to the assessee under section 12A w.e.f. 01.04.2016 without recording the reasons for not acceding to the university’s request for grant of registration with retrospective effect from 01.04.1998 though assessee has specifically requested for registration in his application. Till date, the Commissioner has not adjudicated the application for registration under section 12A filed on 25.05.1999. They have chosen to remain silent on this application. During the course of hearing, the Revenue could not answer the query of the Bench as to why this application was not disposed off. The Revenue cannot take the benefit of its own wrong. As per the provisions of section 1 2AA, which was brought on statute by the Finance Act, 1996 w.e.f. 01.04.1997, all applications filed before 1st day of June 1998 shall stand transferred on that day to the Principal Commissioner/Commissioner and the Principal Commissioner/Commissioner may proceed to such application under that sub section from the stage at which they were on that day and as per provisions of sub section 2 of sub section 12AA, every order granting or refusing registration under clause (b) of sub section 1 shall be passed before the expiry of 6 months from the end of the month in which the application was received under section 12A of the Act. As per provisions of section 1 2A (i)(a), application for registration of trust or institution in the prescribed form should be filed within a period of one year from the date of creation of the trust or the establishment or the institution. Undisputedly, the trust was created on 01.04.1998 and application was moved on 25.05.1999. There was delay of 1 month 25 days for which assessee has moved an application requesting therein that the delay may be condoned and registration may be granted from the date of its inception. Though the Revenue was required to dispose off the application for registration under section 12A within a period of 6 months but it was not done. In the light of these facts and the judgments of the Apex Court in the caseof CIT Vs. Society for promotion of Education (supra), the registration is deemed to have been granted from the date of inception of the University as the delay in filing of the application was only 1 month and 25 days for which request for condonation of delay was moved. Therefore, we set aside the order of CIT and direct him to grant registration w.e.f. 01.04.1998. Accordingly, the appeal of the assessee stands allowed.
FULL TEXT OF THE ITAT JUDGMENT
This appeal is preferred by the assessee against the order of the CIT, inter alia, on the following grounds:
1. The impugned order passed by the learned Commissioner of Income-Tax (Exemptions), Bengaluru [hereinafter referred to as the CIT(E)] under section 12A of Income-Tax Act, 1961 (hereinafter referred to as the I-T Act), to the extent it is not retrospective in effect, is arbitrary, erroneous, unreasonable and opposed to the facts and circumstances of the case and the law.
2. The learned CIT(E) has erred in not considering the fact that the Appellant’s case is covered under the Proviso to section 12A(1)(a)(i) of the I-T Act, inasmuch as the Appellant had filed its first application for registration under section 12A of the Act on 25,05.1999 and clause (i) of the Proviso to section 12A(1)(a) stood attracted to its case.
3. The learned CIT(E) has erred in not considering the fact that the amendments to the VTU Act, which were wrongly insisted upon by the department as a precondition for grant of registration, had been enacted by the State Legislature with retrospective effect from 01.04.1998 and, as the earlier applications filed by the Appellant were not considered favourably only for want of such amendments, registration under section 12A ought to be granted from the date from which the amendments are effective, and not prospectively.
4. The learned CIT(E) has erred in failing to appreciate that grant of registration from a prospective date would lead to miscarriage of justice and cause loss to the public at large, by resulting in an absurd situation where the income of the Appellant, which is a public institution, would be exempt from tax in the years to come, but taxable in earlier years, even though there has been no change in the charitable nature of its objectives or activities since its
5. The learned CIT(E), having been satisfied, on the basis of the documents submitted to him, that the Appellant deserves to be treated for purposes of income-tax as a charitable trust, has erred in not granting registration to the Appellant University with retrospective effect from 01.04.1998, without bringing anything on record to show that the Appellant’s objectives or activities were any different in earlier years.
2. Though various grounds are raised but they all relate to denial of registration with retrospective with effect from 01.04.1998. The checkered history of this case is that the assessee is a university established on 01.04.1998 under an Act of State Legislature i.e., Visveswaraya Technological University Act, 1994 for the purpose of ensuring proper and systematic instruction, teaching, training and research and development of engineering, technology and allied sciences in the State of Karnataka and matter connected therewith. Being a not for profit institution engaging in promoting engineering and technological education which is a charitable purpose within the meaning of section 2(15) of IT Act, 1961 (hereinafter called as an “Act”), the university has been existing solely for the purpose of education according to the assessee. Surpluses, if and when generated from such activities, are re-invested in one of the modes specified in section 11(5) of the Act and continue to remain so invested till date, for furtherance of the objects of the University. The University is headed by the Chancellor (Governor of the State of Karnataka) and is managed by the Officers of the University consisting of the Pro-Chancellor (Minister in charge of higher education in the Government of Karnataka), the Vice-Chancellor, the Registrar (Academic), the Registrar (Evaluation) etc. The funds of the University consist of a General Fund, the Development Fund and such other funds as may be prescribed from time to time by the statutes of the Government of Karnataka which makes non lapsable lump sum grants to the University each year to cover the net expenditure incurred, the expenditure incurred on the pay and allowances of its staff, contingencies, supplies and services, and such non-recurring and additional items of expenditure as the Government may deem necessary for the proper functioning and development of the University. The annual accounts are audited by authorities appointed by the Government of Karnataka and the accounts and the audit report are laid before both the Houses of the State Legislature. Thus the function of the University including the quantum of fees charged to the students is wholly controlled by the Government of Karnataka. As of now, 203 engineering colleges located throughout the State are affiliated to the University and more than four lakh students are studying therein in various under-graduate and post-graduate courses, including inter alia, Bachelor of Engineering, Bachelor of Technology, Bachlor of Architecture, Master of Engineering, Master of Technology, etc.
3. The University had filed an application on 08.10.1998 seeking registration on the ground that university is exempted from income tax under section 10(23C)(iiiab). The learned CIT vide letter dated 18.07.2002 not only accepted the University’s claim of being exempt under section 10(23C)(iiiab) and granted recognition under section 80G for a period of 5 years from 01.04.1998 to 31.03.2003 but also renewed recognition twice for a period of 3 years from22 06.2004 to 31.03.2007 and subsequently for a period from 01.04.2007 to 31.03.2010 vide order dated 30.03.2007. However, when the University filed an application on 28.04.2010 requesting for renewal of the recognition under section 80G beyond 01.04.2010, the learned CIT vide its order dated 18.03.2011 rejected the application and withdrew the recognition by holding that University was neither eligible for exemption under section 10(23C)(iiiab) nor for registration under section 12A of the Act. Being aggrieved, assessee preferred an appeal before the Panaji Bench of the Tribunal and Tribunal vide its order dated 26.08.2011 restored the recognition under section 80G to the University. The Tribunal held that in terms of amendment made to section 80G(5)(vi) by the Finance Act, 2009 w.e.f. 01.10.2009, Registration already held by an assessee shall have automatic renewal unless specifically withdrawn by the CIT and the CIT cannot take advantage of the wrong committed by the assessee in making an application for renewal when it was not required to do so. The order of the Tribunal was later on approved by the jurisdictional High Court vide its judgment dated 11.01.2013. The Hon’ble High Court had however given liberty to the department to initiate proceedings and provide an opportunity of being heard to the assessee and then pass appropriate order in accordance with law for withdrawal of recognition under section 80G of the Act. The CIT thereafter issued a show cause notice for withdrawal of recognition under section 80G with immediate effect on the ground that University did not have Registration under section 12A and the Hon’ble High Court has already held in its judgment dated 23.12.2013 that University was not eligible for exemption under section 10(23C)(iiiab) of the Act.
4. Since the assessee is engaged in the activity of imparting education since its establishment, it moved two applications, one on 08.10.1998 seeking recognition under section 80G of the Act and other on 25.05.1999 seeking registration under section 12A with effect from 01.04.1998. However, while granting recognition under section 80G on 18.07.2002, the CIT did not take any action on application filed for registration under section 1 2A of the Act. Though the assessee had written a letter to CIT vide letter dated 21.02.2002 for grant of registration under section 12A and recognition for exemption under section 80G but no action was taken by the CIT. Later on the assessee has moved a new application for registration under section 12A on 26.05.2012 but this application was rejected by the CIT vide its order dated 26.12.2012 on sole ground that the University had failed to incorporate certain clauses in the VTU Act. The appeal filed against the said order of the CIT was also dismissed for the same reason. The AO has also reopened the assessment under section 147 of the Act for the assessment years 2008-09 and 2009-10, 2004-05 to 2007-08 and 2010-11 to 2013-14. During the reassessment proceedings, the assessee has again filed the third application for registration under section 12A on 5.11.2014 along with the resolution passed by the Execute Council of the University approving certain amendments to the VTU Act, as desired by the CIT. However, the CIT insisted on production of the amendments enacted by the state legislature. According to the assessee, this constrained him to withdraw the application on 27.05.20 15 with a liberty to file a fresh application. The amendment came to be eventually enacted by the state legislature on 13.08.2015 and shortly thereafter on 25.08.2015 the assessee filed its 4th application for registration under section 12A of the Act. After the amendments approved by the University’s Executive Council, enactment was made by both Houses of the State Legislature with retrospective effect from 01.04.1998 and having received the Hon’ble Governor’s assent on 13.08.20 15, the Government of Karnataka notified the same as the VTU (Amendment)Act, 2015 (the Amendment Act), vide its notification dated 18.08.2015. Again the assessee made another application for registration under section 12AA and this application was duly accompanied by certified copies of the VTU Act, the Amendment Act and other documents such as (i) list of officers of the University; (ii) a note on the University’s activities; (iii) certificate of non-infringement of section 13(1 )(c); (iv) returns of income and financial statements for AYs 2012-13 to 2014-15; (v) reasons for delay in filing the application; (vi) details of investments; and (vii) details of centres of the University. Through this application, assessee sought registration with retrospective effect from 01.04.1998. After making detailed verification, the CIT granted the registration vide its order dated 08.12.2015 w. e. f. 01.04.2016 without recording the reasons for not acceding the University’s request for grant of registration with retrospective effect from 01.04.1998. Before the CIT(A), assessee has placed all the relevant evidences with regard to the objects of the University and its activities and the CIT was satisfied with the statement of accounts and the activities conducted by the assessee but it has granted the registration from prospective date i.e., from 01.04.2016 and not from retrospective date i.e., from 01.04.1998 without recording reasons. Against this order, the assessee preferred the present appeal.
5. The learned counsel for the assessee has invited our attention to the first application moved for registration on 25.05.1999 w.e.f. 01.04.1998. Copy of this application is placed at page 128 of the compilation but this application was not acted upon by the CIT. Thereafter, the assessee wrote a letter to CIT on 21.02.2002 requesting him to grant registration under section 12A of the Act and recognition under section 80G(5)(vi) of the Act. This letter was also not considered by the CIT. The learned Counsel for the assesse further contended that though the assesse has approached the CIT for disposal of his earlier application for registration under section 1 2A w.e.f. 01.04.1998, but the assessee was advised by the CIT to move a fresh application. Consequently, the assesse has moved an application for registration under section 12A on 26.05.20 12 which was rejected by the CIT on the ground that certain provisions were not incorporated in the VTU Act. Later on when the requisite amendment was done in the VTU Act w.e.f. 01.04.1998 and fresh application was filed along with required documents, the Registration under section 12A ought to have been granted with retrospective effect i.e., the date of inception of University. The learned Counsel for the assesse further contended that assessee is a University and is governed by the statutory provisions of the VTU Act. Since the Revenue has not specifically made out a case that University is engaged in other than the charitable activities i.e., imparting education, the Registration under section 12A should not have been denied from the retrospective effect. It was further contended that assessee case is covered with the proviso to section 12A(1)(a)(i) of the IT Act in as much as the application for Registration under section 12A have been filed as for back as 25.09.1999. In support of his contention, he placed reliance upon the order of the Tribunal in the case of Darshan Goswamy Vs. ITO (2003) 127 Taxmann.com 54 wherein it was held that the proviso attached to section 12A empowers the CIT to admit the application for the Registration of trust or institution after the expiry of period specified in section 12A(1)(a) if there are sufficient reasons. The learned counsel for the assesse further contended that if the CIT does not decide the application for Registration within a period of 6 months, the registration deemed to have been granted to the assesses and in support of his contention, he placed reliance upon the order of the Tribunal, Special Bench, in the case of Bhagwat Swaroop Swamy, Shri Devendra Baba Memorial vs. CIT 11 ITD 175 in which it was held that proviso to clause (1)(a) of section 12A empowers the CIT to admit the application even after the period specified in section 12A(1)(a) if there are sufficient reasons. The learned counsel for the assessee further contended in the light of these facts the registration should be granted w.e.f. 01.04.1998 since the inception of University. The learned counsel for the assessee has also placed the reliance upon the following judgments in support of his contentions:
