Revoke tax exemption on educational institutions: HC
Tax exemption was accorded to institutions which carry out genuine charitable activities.
CHENNAI: The Madras high court has ordered notice to Income Tax department on a petition seeking to revoke tax exemption and other benefits granted under Income Tax Act to private educational institutions registered as charitable organisations. The First Bench of Chief Justice Sanjay Kishan Kaul and Justice R. Mahadevan, before which a PIL filed by Jawaharlal Shanmugam of Tiruvanmiyur came up for hearing on Monday, directed the Director General of Income Tax (Investigation) to file a reply.
The petitioner said tax exemption was accorded to institutions which carry out genuine charitable activities. A majority of educational institutions offering medical and engineering education course were registered as charitable organisations and managed by charitable trusts. These institutions claim exemption and other benefits under the Act. He said this was a gross misuse of the law.
According to him, the objective of private educational institutions was to make huge profits and many of them were registered as charitable organisations. He referred to observations made by the Supreme Court recently while dealing with the issue of black money. The court had said that private educational institutions in the country were a big source of black money generation. He alleged that Sri Ramachandra Educational Health Trust violated objective of charitable trust.
In a few incidents, authorities seized a large amount of cash during raids. He alleged many charitable trusts which run professional educational institutions (engineering and medicine) do not reveal all income earned properly to regulators such as AICTE, MCI, UGC, NAAC etc and to investigating authorities. In such a situation, the question arises whether the department should cancel or revoke the Essentiality Certificate/ No Objection Certificate.
As his representations to Income Tax Department, Department of Health and Family Welfare, Tamil Nadu, had not ended the menace, he filed the PIL seeking direction to the authorities to cancel the tax benefits to private educational institutions, take over or close them. Issuing notice to the Central and State Governments, the First Bench directed the authorities to file reply in four weeks and adjourned the matter for further hearing to August 22.