TaxTMI 
TaxTMI 
2010 (5) TMI 829
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....e Schedule, Notification No. Leg. 3/2009 of Haryana Ordinance No. 3/2009, and Notification No. Leg.36/2006 of Haryana Act No. 32 of 2006, providing for establishment, etc., of private universities in the State of Haryana, for imparting higher education. After hearing the assessee, the learned Commissioner of Income-tax- Rohtak, came to the conclusion that the university is not a competent person for making application for its registration under section 12AA, it is not a charitable institution as it is intended to benefit only a limited number of persons, it is not meant to carry out any charitable purpose as there is no element of any benefit by way of donations to common man, and it will be charging substantial fees from the student. The lack of competence to make application for its registration was stated to be on five grounds, mentioned below:- "(i)Article 45(1) of the notification No. Leg. 36/2006 of Haryana Act No. 32 of 2006 empowers the sponsoring body to dissolve the university. Thus power to dissolve the university is with sponsoring body i.e. O.P. Jindal Jan Kalyan Sansthan. It means applicant is not the university; but the Sansthan. (ii)The university is the activity ....
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.... shall sue, and be sued by the said name. Section 21 provides for authorities of the university, which are - (i)the Governing Body; (ii)the board of management; (iii)The academic council; and (iv)Such other authorities as may be declared by the Statute to be the authorities of the university. 3.2 Section 45 provides that the Sponsoring Body may recommend to the Government to dissolve the university by giving a notice in the manner as may be prescribed to the employees and the students of the university at least one year in advance. The resolution shall take effect only after the last batch of the students of the regular courses have completed their courses and they have been awarded degrees, diplomas or awards, as the case may be so, however, that such resolution of the university shall not have any adverse effect on the validity of degrees, diplomas or awards conferred on the students. It is further provided that on dissolution of the university, the assets and liabilities of the university shall vest in the Sponsoring Body. 3.3 On the basis of these provisions, the case of the learned counsel was that the university shall become a body corporate as soon as it is established....
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....; (8)to establish degrees, diplomas, certificates and other academic distinctions on the basis of examination, or any other method; (9)to ensure that the standard of degrees, diplomas, certificates and other academic distinctions are not lower than those laid down by All India Council for Technical Education, National Council of Teacher Education, University Grants Commission, Medical Council of India, Pharmaceutical Council of India, and other similar agency/agencies established by the Central Development for regulation of education; (10)to open study centers within its jurisdiction; (11)to set up off - campus center and/or the study center within and out of the State, with the prior approval of the 'University Grants Commission and that of the concerned State Governments; (12)to open any offshore campus in foreign countries after obtaining due permission from University Grants Commission, the Government, the Government of India and also that of the Government of the host country; and (13)to pursue any other objective as may be approved by the Government. 3.7 Coming to genuineness of its activities, our attention has been drawn towards pages 207 to 211 of the paper book, be....
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....vely high fees, which cannot be afforded by the public at large. In this connection, the case of the learned counsel is that the Statute does not restrict admission to the university to any class of persons which is open to all as per policy of the Government. In the definition of the expression "charitable purpose", the Legislature has specifically used the word "poor", whenever intended as in the case of "relief of the poor". There is no such qualifying word in respect of education. Thus, this issue has to be examined from a technical angle and not from generally held perceptions in the matter. Therefore, resorting to the dictionary meaning etc. would be of no avail. 4.3 It has also been held that charging of exorbitant fees went against the concept of "charity". The case of the learned counsel is that the amount of fees per se is not relevant and what is to be seen is whether there is any profit motive with which the university is sought to be run. In this connection, our attention was drawn towards section 11 of that Act, under which the minimum endowment fund of Rs. 3,00,00,000 has to be contributed by the Sponsoring Body, which shall be used as security deposit to ensure tha....
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....iversity is not a competent person as referred in section 12AA of the Act. We have considered this matter in the light of submissions made before us. We find that that Act clothes the assessee-university with the character of a body corporate, an artificial juristic person with powers to hold properties, make contracts and sue or be sued. Such a person will fall within the definition of the term "person", in section 2(31)( vii). Further, under Explanation to this provision, an artificial juristic person shall be treated to be a person, whether or not it has been formed or established with the object of deriving income, profits or gains. Therefore, the juristic person created under that Act may or may not be incorporated as a company or a society so as to be a person under the Act. Accordingly, we are of the view that the learned CIT erred in coming to the conclusion that the assessee-university is not a competent person to make an application for its registration. 6.1 The learned CIT gave certain illustrations to show that the assessee is not competent to make the application. It is mentioned that the Sponsoring Body is empowered to dissolve the university under section 45 of that....
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....ch ensures availability of minimum requisite fund for running of the university. Taking all these factors into account, we are of the view that the Sponsoring Body and the assessee university are two different persons during the life-time of the latter. Assuming for a moment that they are the same person, then it follows automatically that the activities of the university are entitled to exemption under section 11, as the Sponsoring Body has already been registered by the Director of Income-tax (Exemption) vide order dated 25-4-2005, a copy of which has been placed before us. Therefore, the objection of the learned CIT is merely technical, in nature. However, we are of the view that in view of section 7 of that Act, the assessee is a separate juristic person, separate and apart from the Sponsoring Body. By virtue of this provision, it is a competent person under section 12AA, to apply for its registration. 7. The second question is - whether, the assessee university is a charitable institution as understood under the Act? The case of the learned CIT is that it is not a charitable institution as it is charging high fee and it is not meant for the benefit of people at large. The def....
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....of indigenous yarn, which was carried on by the assessee, was not activity for profit. The predominant object of this activity was promotion of commerce and trade in art silk yarn, raw silk, cotton yarn, art silk cloth, silk cloth and cotton cloth, which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out the charitable purpose. It is significant to note that the assessee was a company recognized by the Central Government under section 25 of the Companies Act, 1956, and under its memorandum of association, the profit arising from any activity carried on by the assessee was liable to be applied solely and exclusively for the promotion of trade and commerce in various commodities which we have mentioned above and no part of such profit could be distributed amongst the members in any form or under any guise. The profit of the assessee could be utilized only for the purpose of feeding this charitable purpose and the dominant and real object of the activity of the assessee being the advancement of the charitable purpose, the mere fact that the activity yielded profit did not alter the charitable ch....
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....e amount received qua these projects was spent on the project and surplus, if any, is used for advancement of the objectives which the petitioner Foundation is established." 7.2 The objects of the assessee-university are mentioned in that Act, in section 3, all of which are educational in nature, primarily aimed awarding diplomas and degrees to the students. The funds of the university are to be applied in accordance with section 13 of that Act, which are either in the nature of disbursement of expenses or granting fellowship, freeship, schoolship etc., to students belonging to weaker sections of the society. The only benefit granted to the Sponsoring Body is that in case of dissolution the assets and liabilities of the assessee university shall vest in it. However, as seen earlier, the Sponsoring Body itself is a charitable institution, registered under section 12AA of the Income-tax Act. Therefore, the net assets going to the Sponsoring Body amount to application of assets or accumulated income for charitable purpose. It may be mentioned here that the learned counsel fairly conceded before us that the Sponsoring Body is not purely an education institution as it has other charita....
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....ody, Om Prakash Jindal Gramin Jankalyan Sansthan, which was filed. This became necessary because as per provisions of that Act, the assets and liabilities were to vest in the Sponsoring Body in the event of the dissolution of the assessee-university. It was found that the governing body has 32 objects, which cover a vast field including education, relief of poor, religion, medical aid etc. Object No. 27 reads as under :- "27. To construct, alter, maintain, improve, develop, manage and control Dharmashalas, Ashrams, Auditoriums and temples and provide all kind of required facilities and worship materials to devotees." 9.1 The case of the learned counsel is that the assessee-university has a perpetual existence and, therefore, vesting of its properties in the Sponsoring Body is only of academic interest, being a distant and future eventuality. 10. We have considered the facts of the case and submissions made before us. The relevant provision of section 80G(5) and section 80G(5B) read as under :- "(ii)the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer or applicati....
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....me to the conclusion that even if one of the objects is wholly or substantially wholly of a religious character, the institution or fund falls outside the scope of section 80G(5). For the sake of ready reference, the relevant portion of the judgment is reproduced below :- "The High Court did not accept the assessee's argument that the establishment or maintenance of prayer halls was not a religious object. The High Court also did not accept the assessee's argument that the object of clause 2(h) of the trust deed should not be considered to be a religious object, because the trustees were not empowered to set up places of worship and prayer halls of a particular community or religion; it took the view that even if a trust was set up for the advancement of all the religions in the world, it would be a trust of a religious nature. The High Court rejected the assessee's argument that the trust was not set-up wholly or substantially for a religious purpose; one of the purposes, it said, was "to establish, maintain and grant aid to public places of worship and prayer halls", which was an entirely religious purpose. Section 80G applies to donations to any institution or fund established....