Principal Commissioner Of Income Tax vs Jawaharlal Nehru Technological University

Heard Mr. B. Narasimha Sarma, learned senior Standing Counsel for Income Tax Department, for the appellant.

This appeal has been preferred by the revenue against the order dated 27.04.2021 passed by the Income Tax Appellate Tribunal, Hyderabad

‘A’ Bench, Hyderabad in I.T.A.No.1769/Hyd/2019 for the Assessment Year 2019-20.

Appellant has proposed the following questions as substantial questions of law, viz.,

“1. In the facts and in the circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in directing the

Commissioner of Income Tax (Exemptions) to grant registration under Section 12A of the Income Tax Act, 1961, if the objectives and

activities of the Respondent-assessee are the same as for the assessment year 2020-21?

In the facts and in the circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in not appreciating that as per

Section 12A of the Income Tax Act, 1961 the Commissioner of Income Tax (Exemptions) has to satisfy himself about the genuineness of the

activities and that the Commissioner of Income Tax (Exemptions) gave a clear finding that the activities of the trust are not in accordance

with the provisions of the Income Tax Act, 1961?

In the facts and in the circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in not appreciating the fact

that the trust applied funds outside India and hence is not eligible for registration under Section 12A of the Income Tax Act, 1961?

In the facts and in the circumstances of the case, whether the Hon’ble Tribunal (ITAT) is correct in law in directing the Commissioner

of Income Tax (Exemptions) to grant registration under Section 12A of the Income Tax Act, 1961 to the respondent-assessee though there is

a clear finding by the Commissioner of Income Tax (Exemptions) that the respondent-assessee failed to get accounts audited within the

specified date and hence violated the provisions of Section 12A of the Income Tax Act, 1961?â€​

We find that respondent / assessee had filed an application before the Commissioner of Income Tax (Exemptions), Hyderabad seeking registration

under Section 12A of the Income Tax Act, 1961 (briefly, ‘the Act’ hereinafter) on 30.03.2019 for the Assessment Year 2019-20. Be it stated

that the respondent is an educational institution (Technological University) situated at Hyderabad.

Commissioner of Income Tax (Exemptions) passed order dated 30. 09.2019 under Section 12AA(1)(b)(ii) of the Act rejecting the application of the

respondent / assessee, primarily on two grounds. Firstly, it was noticed that respondent / assessee had not filed return of income, thus violating

provisions of the Act. Therefore, respondent / assessee was not eligible for registration under Section 12A which is a beneficial provision. Secondly,

Commissioner observed that respondent / assessee had earned income outside India. Referring to Section 11 of the Act, Commissioner held that

respondent / assessee had not obtained permission from the Central Board of Direct Taxes while earning income abroad. Thus, it had violated

provisions of the Act. On this ground also, its prayer for registration under Section 12A was declined.

Respondent / assessee thereafter preferred appeal before the Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad (Tribunal).

The appeal was allowed by the Tribunal vide the order dated 27.04.2021 in the following manner :

“9. Having regard to the rival contentions and the material on record, we find that the assessee is an institution which is carrying on

educational activities and therefore, the activity is undisputedly a charitable act. The assessee was earlier known as Jawaharlal Nehru

Technological University which has subsequently been 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 of other Educational Institution existing solely for educational

purposes and not for purposes of profit, and which is wholly and substantially funded by the Government, 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 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 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 govt. grant for considering a

university, hospital, etc., as substantially funded by the govt. for the purposes of clause (23C) of section 10 and it provides that where the

govt. grants to such university or hospital exceeds 50% of the total receipts including any voluntary contributions of such university or

other educational institution / hospital or other institution during the relevant previous year, it shall be considered as substantially funded

by the govt. for such previous year. Thus, it can be seen that though the assessee university was formed in 2008, till the A.Y. 2014, it was not

required to file any return of income and therefore, the assessee’s contention that it was not aware of the requirement of filing returns

of income appears to be bona fide. Further, the assessee has made an application for registration only w.e.f. A.Y. 2019-20 onwards. In such

circumstances, the requirement of law is that the CIT(E) has to consider whether the objectives of the assessee were charitable in nature and

if the activities have already begun, then whether the assessee is carrying on its activities in accordance with such objectives. Therefore, we

agree with the learned Counsel for the assessee that the CIT (E) has not looked into the objectives of this University while considering its

application for registration u/s 12A of the Act. Further, from the very next A.Y. i.e. 2020-21 onwards, the assessee has been granted

registration u/s 12A of the Act. Thus, it is evident that the CIT (E) while granting the registration, was satisfied about the charitable nature

of assessee’s activities. In view of the same, we deem it fit and proper to remand the issue to the file of the CIT(E) with a direction to

grant registration u/s 12A if the objectives and activities of the assessee are the same as were considered by the CIT(E) while granting

registration u/s 12A of the Act for the A.Y. 2020-21 onwards.â€​

From the above, we find that Tribunal had taken note of the fact that for the next Assessment Year 2020-21 respondent / assessee has been

granted registration by the Commissioner of Income Tax (Exemptions) under Section 12A of the Act which would imply that the Commissioner was

satisfied about the charitable nature of assessee’s activities. In view of above, Tribunal thought it fit and proper to remand the matter back to the

file of the Commissioner of Income Tax (Exemptions) with the direction to grant registration under Section 12A of the Act if the objectives and

activities of the respondent / assessee are found to be the same by the Commissioner of Income Tax (Exemptions) while granting registration under

Section 12A for the Assessment Year 2020-21.

Thus, Tribunal has only asked the Commissioner to examine the claim of the respondent / assessee for the assessment year under consideration

keeping in mind the factors which prevailed upon the Commissioner in acceding to such claim of the respondent / assessee for the succeeding

assessment year on the principle of parity. Such a direction cannot be said to be illegal.

In the light of the above, we are of the view that no substantial question of law arises from the order passed by the Tribunal as extracted above.

Consequently, we decline to entertain this appeal which is accordingly dismissed. No costs.

As a sequel, miscellaneous applications pending if any in this appeal, shall stand closed.