Income Tax Appellate Tribunal - Chandigarh
M/S I.K. Gujral Punjab Technical ... vs Cit (Exemption), Chandigarh on 23 February, 2018
1
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCHES 'A', CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER&
Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 910/Chd/2017
Assessment Year: 2016-17
I.K.Gujral Punjab Technical University, Vs. The CIT (Exemptions),
Jalandhar Kapurthala Highway, Chandigarh
Kapurthala
PAN No. AAAJP1130G
(Appellant) (Respondent)
Appellant By : Sh. M.R.Sharma
Respondent By : Sh. Gulshan Raj, CIT DR
Date of hearing : 17.01.2018
Date of Pronouncement : 23.02.2018
ORDER
Per Sanjay Garg, Judicial Member:
The appellant, I.K. Gujral Punjab Technical University has preferred the present appeal against the order of the Commissioner of Income Tax (Exemptions), [hereinafter referred to as CIT(E)], Chandigarh dated 31.3.2017 rejecting the application of the applicant University for grant of approval for exemption from taxation u/s 10(23C)(vi) of the Income Tax Act.
2. While rejecting the application of the applicant, the Ld. CIT(E) has observed that the applicant had not filed any return of income and as per the requirement of application u/s 10(23C)(vi), no audited balance sheet of 2 last three years had been filed along with application. He, therefore, held that the application filed was deficient abinitio. He further observed that earlier the Applicant-University had been claiming itself to be covered under the provisions of section10(23C)(iiiab) of the Income-tax Act, 1961 (in short 'the Act') claiming that it was substantially financed by the government and was running the educational institution solely for education purposes and not for the purpose of profit. However, it did not file the returns of income during the period. The Ld. CIT(E), therefore, observed that the applicant was claiming exemption at its own without examination of its claim by the Income Tax authorities. The Ld. CIT(E) further observed that the applicant had been receiving grant from Punjab Government, not on a regular basis but intermittently. The applicant wrongly construed the initial allotment of land by Punjab Government for setting of its campus and its constituent campuses in the State of Punjab as substantially financed by the Government. He, therefore, held that the claim of the applicant right from its inception that it was substantiall y financed by the government was inherently wrong. He further observed that even subsequent to the amendment in the provisions of section10(23C)(iiiab) w.e.f. 1.4.2005, only if the grant is more than 50%, the applicant was to be treated as financed substantially by the Government. Hence, it was otherwise clear that the applicant was not entitled for claiming exemption u/s 10(23C)(iiiab) of the I.T. Act. w.e.f. 1.4.2015, and hence, this was the reason that the applicant was seeking approval u/s 10(23C)(vi) of the Act. The Ld. CIT(E), however, further observed that the matter relating to the past claims of the applicant that it was covered u/s 10(23C)(iiiab) would be examined by the Assessing Officer separately. He, however, made a reference to the assessment made 3 in the case of the assessee in December 2016 for assessment year 2009-10 wherein due to non-filing of the return, the case was taken up/opened u/s 148 of the Act and the entire surplus was treated as taxable income in the absence of any exemption available to the assessee.
The Ld. CIT(E) also raised certain queries while considering the application of the appellant for registration u/s 10(23C)(vi) of the Act to examine whether the applicant measures up to the conditions of existing solely for educational purposes and not for profits. After considering the material on record, the Ld. CIT(E) observed that the appellant/applicant had had been indulging in profit making whereby it had generated huge surpluses in the last few years. Further that surpluses so generated had been parked in FDRs generating huge interest income which was further increasing from year to year. He further observed that the source of the funds in FDR was not only out of the surpluses accumulated but also from the grants in aid received during the past few years from Punjab Government, UGC, SERB etc. that had not been utilized. He in this respect also referred to certain observations made in audit report wherein in the 'notes on accounts' as on 31.03.2015, it has been mentioned that out of total grant received of Rs.2.70 crore, only expenditure of Rs.15.50 lakh had actually been expended and an amount of Rs. 1.06 crore had been booked but not expended. The balance amount had been parked in form of FDRs in the banks. The Ld. CIT(E) further observed that a total of 180 affiliated colleges were being run under the aegis of University. He further observed that apart from that, there were 24 regional centers and the applicant had also been engaged in providing distance education. That the applicant-university had been receiving hefty Charges on account of fees, granting affiliation and counseling on commercial principles which was at 4 par with the private players from the same city doing out similar courses/ activity and who generate large profits and pay taxes on the surpluses. The Ld. CIT(E) in this respect mentioned the example of another private university namely Lovely Professional University, Jalandhar. He, therefore, observed that the applicant, thus, was earning huge profits and that it had not been running solely for the educational purposes. He further observed that the accounts on 31.03.2015 reflected current assets of Rs.1247.38 crores and of Rs.1228.18 crores on 31.3.2016. Most of these assets were in the form of FDRs. The gross receipts included interest of Rs.99.70 crore for financial year 2015-16 on the FDRs invested. Similarly the distance education programmes were run by delegating franchise to private players M/s N1MA and M/s Elfin Eduventures. These private entities, had been appointed as coordinators and facilitators. He observed that for the year ending 31.03.2015 an amount of Rs.17.12 lakhs had been paid to M/s NIMA and Rs. 39.70 lakhs to M/s Elfin Eduventures. He further observed that even the auditors in the audit report, in the 'notes of accounts' ending on 31.03.2015 had also observed that "We had requested to provide us the details of services referred by the C&F but no such information had provided to us. So we cannot vouch the authenticity of payments made to them. As per agreements with them, fixed amount of Rs.4 lac per month was to be paid and variable amount, based on the number of students admitted in PTU courses was to be paid at the end of each semester i.eRs. 300/- per student per semester for new students enrolled and Rs. I50/- per student per semester for old students enrolled. The total payment made to 14 C & F during the year was Rs. 7,83,43,609/-(7.83 crores).
As per agreement of PTU with C&F's
a) C&F are required to appoint minimum staff of 7 personnel at office. PTU has never inspected the appointment of staff by C&Fs,
b) C&F are to adapt Human Resource policy, Attendance Policy, sexual harassment policy, discipline policy and travel 5 policy. No action has been taken by PTU to check whether these policies have been fallowed, We asked the detailed information regarding total number of students, their classesand fee structure via E-mail dated 2.1.2016. 8.2.2016. 9.1.2016, in respect of Distance Education Program, but no action has been taken in this regard due to which the total amount of fee is to be received could not be co- related with this actual amount received. We have apprehend that there is a leakage of revenue in this regard. In spite of pointing out this observation in our previous audit reports as well as a number of reminders given during the current fear, the information was not provided to us. We fail to understand why the required informationis not provided to us. We would suggest that in order to avoid leakage of revenue, accounts must be maintained on Double Entry Scheme of accounting and thus required information be provided. So that this actual income could be ascertained and revenue could be avoided. "
3. The Ld. CIT(E) further observed that in the notes on account for 31.03.2015, the auditors observed that various departments of PTU had received grants to the tune of Rs.2,70,71,997/- from the F.Y 2010-11 to 2014-15. In most of the cases the applicant had not spent the grant received for the purpose for which it had been received but was parked in form of FDRs. He further observed that FDRs had been showing a consistent increase even though there had been no accretion in resources in form of new affiliations and new expenditure towards capital assets.
The Ld. CIT(E), therefore, considering the observations of the auditors and the fact that huge surplus was being generated which was got parked in the form of FDRs instead of being redeployed into education, observed that the claim of the applicant being running solely for the education was not established. He concluded that it was clearly made out that the university was imparting education on purely commercial basis intended for profits. He, therefore, rejected the application of the assessee seeking approval u/s 10(23C)(vi) of I.T. Act.6
4. Being aggrieved by the above rejection of application by the CIT (E), the Applicant University has come up in appeal before us.
5. We have heard the rival submissions and have also gone through the records. Shri M.R. Sharma, Ld. Counsel for the assessee has submitted that mere generation of surpluses out of receipts, cannot form the basis for rejection of application u/s 10(23C)(vi) of the Act when the surpluses is to be spent for the object of the applicant University i.e. for educational activities only. That the accumulation of surpluses from year to year cannot be said to be an activity of profit making. He, in this respect has relied upon the CBDT Circular No. 14/2015 dated 17.8.2015. The Ld. counsel has further submitted that the tuition fee charged by the University is fixed by the Punjab Government and if there is any surplus generated out of the fee collected, fixation of which is in the hands of the government, that cannot be said to be profit making activity of the applicant-appellant. That the university has been created by the Act of Legislature of the State of Punjab for the advancement of technical education and development thereof in the State of Punjab and that it has not been doing any other activity except the aforesaid education activity. He has further submitted that the observation of the Ld. CIT(E) that the applicant had not filed audited balance sheet of the three years was wrong. That there was no evidence of spending any amount out of the receipts on any other activity. That the surplus funds have been parked in the FDRs but that does not mean that the Applicant University has been engaged in any profit making activity. That all the officers of the University including the Vice Chancellor are nominated / appointed by the State Government. He, in this respect, has relied upon the Punjab Technical University Act, 1996. He has further relied upon the notification No.13/127/09-ITE2/767 dated 7 1.3.2011 of the Punjab Government to show that the tuition fee chargeable for various courses run by the University has been fixed by the Punjab Government. He has further relied upon the Notification dated 11.4.2017 of the Punjab Government to state that the applicant University has been appointed as the authority competent to conduct Online Centralized Counselling for admission to various degree level Engineering and Architecture course. He has further submitted that the university has been getting substantial income out of entrance test fee etc. collected from the students who are aspirant to seek admission in various technical colleges in the State of Punjab. He has further submitted that if the interest earned by the university on the surplus placed in the FDRs is excluded/not taken into consideration, the University has applied the funds to the extent as required under the provisions of section 10(23C)(vi) of the Act. He in this respect has further relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of 'Pinegrove International Charitable Trust Vs. Union of India' [2010] 327 ITR 73(P&H) and further on the decision of the Hon'ble Supreme Court in the case of 'Queen Educational Society Vs. CIT' [2015] 372 ITR 699 (SC).
6. On the other hand, Ld. DR has submitted that a look at the income and surplus generated by the Applicant-University would itself show that the applicant is not engaged in any charitable activity. The funds have been accumulated from year to year and are placed in the FDRs instead of utilizing the same for achieving the educational objects of the applicant. The applicant has been following the mercantile system of accounting and that the interest earned on the FDRs during the year was also the income of the assessee for that year. The Ld. DR has also invited our attention to the assessment order passed in the case of the assessee for assessment year 8 2009-10 u/s 147 read with section 144 of the Income-tax Act and has submitted that the applicant's claim of being eligible and entitled to claim exemption u/s 10(23C)(iiiab) was not found correct and total addition of Rs. 86.36 crores was made into the income of the assessee. He has further given example of another private University namely Lovely University, Jalandhar and has stated that the said University has not sought any exemption under the Act and has been paying due taxes on its income and that the case of the assessee was not different from that University. While inviting our attention to para 8 of the impugned order of the CIT (E) and Punjab Government Notification No.13/127/09-ITE2/767 dated 1.3.2011, he has submitted that the fee structure of the applicant is not different from the private colleges and the private universities like Lovely University and that the applicant was not providing any subsidized education and neither such a case was put forth by the applicant. He, therefore, has subtitled that the Ld. CIT(E) has rightly rejected the application of the assessee.
7. We have considered the rival contentions and have also gone through the record. Before further deliberation on the matter, it will be appropriate to reproduced here the relevant provisions of section 10(23C)(vi) of the Act.
"Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included-- .......
(23C) any income received by any person on behalf of--
........
(vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or 9 ......
Provided that the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause
(v) or sub-clause (vi) or sub-clause (via) shall make an application in the prescribed form67 and manner to the prescribed authority68 for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via):
Provided further that the prescribed authority, before approving any fund or trust or institution or any university or other educational institution or any hospital or other medical institution, under sub-clause (iv) or sub-clause (v) or sub- clause (vi) or sub-clause (via), may call for such documents (including audited annual accounts) or information from the fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, as it thinks necessary in order to satisfy itself about the genuineness of the activities of such fund or trust or institution or any university or other educational institution or any hospital or other medical institution, as the case may be, and the prescribed authority may also make such inquiries as it deems necessary in this behalf:
Provided also that the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via)--
(a) applies its income, or accumulates it for application, wholly and exclusively to the objects for which it is established and in a case where more than fifteen per cent of its income is accumulated on or after the 1st day of April, 2002, the period of the accumulation of the amount exceeding fifteen per cent of its income shall in no case exceed five years; and .....
Provided also that any amount of donation received by the fund or institution in terms of clause (d) of sub-section (2) of section 80G in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the 10 Prime Minister's National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax:
........
Provided also that where the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub- clause (v) or sub-clause (vi) or sub-clause (via) does not apply its income during the year of receipt and accumulates it, any payment or credit out of such accumulation to any trust or institution registered under section 12AA or to any fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via) shall not be treated as application of income to the objects for which such fund or trust or institution or university or educational institution or hospital or other medical institution, as the case may be, is established :
......"
8. As per the above reproduced provisions, any income received by an y person on behalf of any University or other educational institution existing solely for educational purposes and not for the purposes of profit and which may be approved by the prescribed authority is not to be included while computing the total income for the purpose of taxation. It has been further prescribed that such institution or university shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of exemption or continuation thereof. The prescribed authority before approval of any such fund or trust or institution or University may call for such documents or information from the institution or university in order to satisf y itself about the genuineness of the activities of such institution or university and is authorized to make any such enquiry, as it deems necessary in this behalf.11
9. A perusal of the impugned order of the CIT(E) as well as profit and loss account of the applicant University reveals that it has been generating huge surplus running into hundreds of crores from year to year, parking the same in FDRs and merely accumulating thousands of crores and earning huge income therefrom as per details extracted from its financial statements submitted before us, as under:
Financial Income Surplus of FDRs-as at Interest
Year receipts income/profits the end of earned on
earned (In over the year (in FDRs (in
Crores) expenditure crores) crores)
(in crores)
2010-11 445.94 172.38 561.33 73.00
2011-12 439.70 181.07 724.89 61.00
2012-13 467.59 200.75 927.46 84.00
2013-14 387.83 188.76 1086.86 93.63
2014-15 307.17 158 1178.59 105
2015-16 235.96 144 1042.94 99.35
10. As revealed from the above details the surplus for the assessment
year 2009-10 was 82.19 Crores and was 200.75 crores for assessment year 2013-14. The surpluses so generated has been parked in FDRs which has shown an increasing trend e.g. as on 31.3.2011 surplus parked in FDRs was Rs. 561.33 crores which has increased to 1042.95 crores as on 31.3.2016.
As is evident from the above details the generation of the profits of the applicant in no terms are less than any commercial institution. The Ld. CIT(A) has given an example of one institution namely lovely university which is also operating in the same area/city, which is involved in the 12 educational activity for the purpose of profit and is offering its income for taxation as per the provisions of law. The Ld. counsel for the applicant/appellant could not establish how the activity of the applicant- university has been different from that of Lovely University to say that the applicant university has been running solely for educational purposes and not for profit. The Appellant-University is not only making huge profits from its activities but also is not utilizing the same for promoting and making available affordable education, rather, University is involved in earning income from surplus generated by further investing the same in FDRs and earning huge interest income which fact also shows that the University is not running solely for educational purposes but for making profits.
11. Another glaring fact that is evident from the data submitted before us is that the applicant is spending on an average only 60% of its receipt / income on its stated charitable activities of imparting education, either by way of incurring running / operating expenses or by way of investing in fixed assets. This is evident from the detail submitted by the Ld. Counsel for the assessee before us which is as under:
YEAR WISE DETAILS OF SURPLUS UTILIZATION FINANCIAL 2013-14 2012-13 2011-12 2010-11 2009-10 ASSESSMENT YEAR 2014-15 2013-14 2012-13 2011-12 2010-11 INCOME AS PER INCOME/EXP.ACCOUNT DURING YEAR 3,87,83,36,272.81 4,67,59,12,069.07 4,39,70,65,926.22 4,45,94,38,209.42 3,32,60,07,475.85 .. A EXPENDITURE AS PER INCOME/EXP ACCOUNT 1,99,07,30,523.00 LESS: DEPRECIATION 5,08,68,336.00 2,66,84,10,763.12 2,58,63,40,499.89 2,73,56,21,506.32 1,84,59,70,858.65 IN ABOVE 4,52,12,902.00 4,57,31,618.00 4,60,37,969.00 ADD:CAPITAL INVESTMEN T DURING 1,93,98,62,187.00 2,62,,31,97,861.12 2,54,06,08,881.89 2,68,95,83,537.32 1,84,59,70,858.65 YEAR 70,98,98,166.07 6,67,23,095.00 2,84,30,786.75 7,71,88,116.00 3,02,96,080.00 TOTAL OUTLAY INCLD.
CAPITAL INVESTMENT 2,64,97,60,353.07 2,68,99,20,956.12 2,56,90,39,668.64 2,76,67,71,653.32 1,87,62,66,938.65
DURING YEAR
..B
13
NET SURPLUS 1,22,85,75,919.74 1,98,59,91,112.95 1,82,80,26,257.58 1,69,26,66,556.10 1,44,97,40,537.20
(DEFICIT) (A+B)
%AGE UTILIZATION OF 68.32 57.53 58.43 62.04 56.41
TOTAL OUTLAY
AGAINST INCOME
As per the provisions of section 10(23C)(vi) of the Act, the institution is supposed to apply the entire receipts / income for its stated object which is education in the case of applicant before us, The only leverage given is that the concerned institute, if could not spend the entire receipts/ income during the year, is allowed to accumulate upto the maximum of 15% of the receipts / income which is mandatorily required to be expended or applied within next five years from the date of its accumulation. However, a perusal of the financial data for the last so many years in the case of the applicant reveals that the applicant never stood to the requirements of complying the provisions of Section 10(23C)(vi) of the Act. The excess generated by the applicant is being parked in FDRs as has already been pointed out above. Further it is revealed from the balance sheet of the applicant that a major portion of the funds available with it was applied in current assets more specifically in the form of cash and FDRs and very little funds were utilized for investing in fixed assets for the purpose of carrying on the activity of the applicant. This is evident from the following figures of sources and application of funds in various years as extracted from the audited balance sheet of the applicant filed before us as under :
Financial Year Sources of Application of funds (in Crores) Funds (in crores) (in fixed assets) (in FDRs & Cash) 2010-11 687.71 38.79 813.74 2011-12 884.38 52.45 800.49 2012-13 1098.34 55.13 1016.47 2013-14 1286.39 123.02 1161.43 2014-15 1532.90 164.26 1247.83 2015-16 1487.82 147.15 1228.18 14
12. A perusal of the above data reveals that as on 31.3.2015, total funds available to the assessee were 1532 cores out of which deployed in fixed assets were only Rs. 164 cores and Rs. 1247 crores were lying in current assets, out of which only Rs. 26 lacs were on account of debtors while 1178 cores in term deposits with banks and 68 cores in saving bank account. Further, as on 31.3.2017, the total funds available to the applicant were 1486 cores, out of which Rs.1156 crores were lying in current assets; out of said current assets, Rs.43 crores in sundry debtors, Rs.916 crores in term deposits and Rs.196 crores were lying in saving account. The interest income from FDRs from accumulated surplus as on 31.3. 2015 was Rs.99.07 crores, as on 31.03.2016 was Rs. 96.69 crores and as on 31.03.2017 was at Rs.75.66 Crores.
All the above facts cast a huge shadow of doubt on the genuineness of the activities of the applicant. It may be pointed out that the genuineness of the activity is a general term and not defined under the Act. The genuineness of a particular activity carried out by an institution is to be seen vis-à-vis its act, conduct and the intention towards achieving the objects for which it has been formed and also to find out from the facts and circumstances available as on the date, as to whether the activity of such an applicant can be said to be genuine. If, it was the education purpose, the object for which the applicant claims to be solely existing, the funds which have been collected and accumulated by the applicant university over the years would have been expended for educational purposes. Hence it cannot be said that the university is doing the sole activity of imparting education and not existing for the purposes of profit. Parking funds in FDRs continuously for the last so many years only shows that the applicant has neither any intention nor any vision or plan to spend the huge funds so 15 generated and accumulated, for achieving the stated objects of imparting education. The fact of collection and accumulation of huge funds running into thousands of crores which are lying unused and are increasing day by day and year by year shows that the applicant has failed to act for the achievement of the object for which it was established.
13. The genuineness of the activity of the applicant is also put to a question by note of auditor's in their report in which they have raised serious doubts about the financial activity of the university and pointed out that the university has delegated franchise in respect of distance education to private players M/s NIMA and M/s Elfin Eduventures. For the year ending on 31.3.2015, an amount of Rs. 17.12 lacs has been paid to M/s NIMA and Rs. 39.70 lacs to M/s Elfin Eduventures. The auditors in their report, as reproduced in earlier paras of this order, have pointed out that the university has failed to provide the details of services offered by the aforesaid agencies despite repeated requests. The auditors have pointed out that the total payment made to the C&F during the year was Rs. 8.83 cores. As per the agreement, the C&F was required to appoint minimum staff of seven persons at office. However, the applicant never inspected the appointment of staff by C&F. No action has been taken by the university to check whether the required policies in respect of human resources, attendance, sexual harassment, discipline and travel have been followed or not. The auditors also asked for detailed information regarding total number of students, their classes and fee structure in respect of distance education, but no reply has been given by the University. It has been pointed out that despite of the observations made in the previous audit report as well as numbers of reminders given during the current year, the information was not provided. The auditors suspecting leakage of Revenue 16 have suggested that in order to avoid leakage of Revenue, account must be maintained in double entry scheme of accounting and required information be provided. In nutshell, the applicant university failed to provide information even to the auditors regarding the fee and expenditure in relation to the distance education course. Even the Auditors have reported that various departments of the applicant university had received grants as per the notes on accounts for 31.3.2015 and that in most of the cases, the university had not spent the grant received for the purposes for which it was received.
The genuineness of the activities of the applicant otherwise is also in doubt as the functioning of the applicant is marred by controversies. We cannot close our eyes to the frequent news items in this respect including the registration of an FIR against the Ex. Vice Chancellor of the University on corruption charges. Though mere registration of an FIR against the Vice Chancellor or the news items we come across, may not be enough to drive to the conclusion about the genuineness or otherwise of the activities of the assessee, however, at this stage, these factors coupled with other facts as discussed above cannot be totally ignored.
14. We are further perturbed to note that the youth of the state who wish to professionally qualif y themselves are charged hefty fee for applying for admission to the professional courses instead of giving them a helping hand from the huge surpluses generated and accumulated Rather, it appears that the applicant university has used the noble cause of selecting the meritorious and suitable students for admission to technical courses as a source of earning profits out of the fee for entrance examination, generating huge surplus and further what is more disturbing is that it has 17 not been used for the educational activity rather it is parked and blocked in the shape of FDRs in banks without any vision or plan of expending the same for education purposes . Rather than to act as an instrument in facilitation and providing technical education and knowledge to the aspiring students and thereby contributing for the progress of the country, we are afraid to say that the university has acted otherwise by blocking the funds in the banks.
So far as the argument of the Ld. Counsel that the fee is fixed by the Punjab Government and his reliance upon the notification dated 1.3.2011 is concerned, we find that the fee for the various technical courses has been fixed by the government in the state of Punjab but the said notification is regarding tuition fee only. The said notification is issued so that the private institutions may not charge exorbitant tuition fee hence a limitation has been put on them. However, it has been specifically provided in the said notification that fee and charges other than the tuition fee should be determined by the Punjab Technical University, Jalandhar (Applicant University) and further that university should ensure that this fee and charges are not exorbitant and do not fulfil profit motives of any of the college in state. It has been further provided that if any of the colleges affiliated to Punjab Technical University, Jalandhar wish to charge fee less than fee prescribed by the government, they can do so provided such a reduced fee should be charged uniformly without any discrimination. Hence, there is no embargo on the University or the affiliated college to charge less than prescribed fee by the Punjab Government. The other fee and charges have to be fixed by the University itself. Under the circumstances, the plea of the appellant university that it has charged the fee in line with the private colleges because the fee is fixed by the Punjab 18 Government, does not hold water. The notification has been issued by the government to control the fee structure of the private colleges but that does not mean that the university is also supposed to charge the fee at par with private colleges. Admittedly, some private colleges may be doing educational activities with profit motive, charging the fee in same lines and thereby generating surplus in thousands of crores of rupees and then to say that profit element is not involved in the activity of the assessee, in our view, is not an acceptable plea.
15. Now coming to the case laws relied upon by the Ld. Counsel for the applicant. The Ld. Counsel has relied upon the decision of the Hon'ble Punjab & Haryana High Court in the case of 'Pinegrove International Charitable Trust Vs. Union of India' (supra) and also of Hon'ble Supreme Court in 'Queen Educational Society Vs. CIT' (supra). In the aforesaid case laws, it has been held that to decide the entitlement of any institution for exemption u/s 10(23C)(vi) of the Act, the test of pre-dominant object of its activities has to be applied by posing question whether the institution exists solely for educational and not to earn profit, and further that merely because some profits have resulted from activity of imparting education, would in itself, not result in change of character of that institution. The Hon'ble Punjab & Haryana High Court while relying upon the decision of the Hon'ble Supreme Court in the case of 'American Hotel and Lodging Association Education Institution Vs. CBDT' (2008) 301 ITR 86 (SC) and the decision of the constitutional Bench of the Supreme Court rendered in the case of 'ACIT Vs. Surat Art Silk Cloth Manufacturers Association' (1980) 121 ITR 1, has observed that the test to be applied is whether the pre-dominant object of the activity is to earn profit or not. Similarly, the 19 Hon'ble Supreme Court in the case of 'Queen Educational Society Vs. CIT' (supra) in para 11 of the order has laid down the following parameters.
"11. Thus, the law common to section 10(23C)(iiiad) and (vi) may be summed up as follows :
(1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit.
(2) The predominant object test must be applied--the purpose of education should not be submerged by a profit-making motive.
(3) A distinction must be drawn between the making of a surplus and an institution being carried on "for profit". No inference arises that merely because imparting education results in making a profit, it becomes an activity for profit.
(4) If after meeting expenditure, a surplus arises incidentally from the activity carried on by the educational institution, it will not be cease to be one existing solely for educational purposes.
(5) The ultimate test is whether on an overall view of the matter in the concerned assessment year the object is to make profit as opposed to educating persons."
16. As discussed above, in our view, the Applicant-University has failed the test as per the above parameters laid down by the Hon'ble Supreme Court. As discussed above, it seems that the predominant object of the applicant university is to earn profit, accumulate it and invest the same for further earning of interest income. In our view, the applicant university has failed to carry out the activity as per its objects. The over all facts and circumstances of the case do not suggest that the applicant-University is not indulged in profit motive. It can not be said in this case that the surplus generation is incidental to the main education activity of the appellant. Rather the main motive of the entire activity is the generation 20 and accumulation of surplus and further earning interest income thereupon. Even the applicant has failed to utilize or spend the grants issued by Govt. and other organization for the purposes for which those have been granted, but the same were also parked in the banks to earn interest income.
17. So far as the arguments that the application of the income is to be seen at a later stage and not at the time of granting of approval is concerned, in our view, that argument will have force in case of newl y established institution which has not commenced its activity or are in the course of commencement of activity. However, the applicant university has been established since 1997, hence, the activities carried out by it since its incorporation can well be examined by CIT(E) to determine whether it is genuinely involved in carrying out its objects. The overall facts and circumstances, the accumulation of income running into thousands of crores, even non spending of the grants received by the University for the purpose of which the same was received and further deposit of the same in banks for earning of profits in the shape of interest income and no explanation coming forward from the Applicant-University for accumulation of such huge deposits without any visible plan or vision to expend the same for achieving the sole purpose of education, denotes that the university is engaged in the profit making activity. It is not the case where while performing its educational activities, some profits have been earned or some surplus are generated or accumulated which is incidental to the main activity of the assessee, rather it is a case where the main motive appears to be to earn profit for which the educational activit y is carried out.
The argument that as per the statutory provisions, the university is not entitled to expend the money on any other activity and that since it is a 21 government organization, hence, surplus cannot be utilized by the trust members for their personal use or that the surplus ultimately have to be spent on educational activity only, in our view, at this stage is of no help to the applicant university. While granting approval under the relevant provisions of section 10(23C)(vi) of the Act, the Commissioner has to see the activities of the assessee as on date vis-a-vis the accounts and other relevant information. As on date, the applicant university is engaged in the profit making and has accumulated surplus running into thousands of crores of rupees. Though, imparting technical education, is the need of the hour for which the applicant university has been established, but instead of performing its activity in real sense, it has got involved itself in huge profit making. Under the circumstances, it cannot be said that the applicant university is doing activities in the course of fulfillment of its objects. We, therefore, do not find any infirmity in the order of CIT (E) in denying the approval to the assessee-applicant.
The appeal of the Applicant - University is hereby dismissed. Order pronounced in the Open Court on 23.02.2018.
Sd/- Sd/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated : 23.02.2018 Rkk Copy to: 1. The Appellant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR