VTU asked to cough up Rs 220 crore as income tax

Varsity says its not a commercial venture; claims it faces a deficit

The cash-rich Visvesvaraya Technological University (VTU) has been asked to cough up income tax  (I-T) to the tune of Rs 220 crore for the last six financial years.

The reserves and surpluses of the varsity are about Rs 466.30 crore. This is the first among the State universities which has been asked to pay income tax.

As per the amendment to the Income Tax Act, even autonomous institutions and government undertakings have to pay income tax. The Karnataka Examination Authority, which conducts common entrance tests to professional courses has been paying I-T of about Rs eight to Rs nine lakh per annum from 2007. Thirty per cent of the total interest earned from the deposit or reserve money comes under tax net as it is considered income.

The I-T department has directed VTU to pay Rs 30 crore for 2004-05, Rs 32 crore for 2005-06, Rs 40 crore 2006-07, Rs 42 crore for 2007-08, Rs 36 crore for 2008-09 and Rs 39 crore for 2009-10. The university received the first notice in 2010 and the latest to be slapped was in November last year. As the varsity is no mood to pay the tax, it may also end up paying penalty plus interest on the tax amount to be paid, according to official sources.

Rationale questioned

With VTU questioning the very rationale behind considering a university as a profit making body and also for re-opening the assessment for 2009-10, the IT department, in a letter dated November 18 last to the registrar, has stated that the annual receipts are Rs 120,61,76,395, which is more than the amount of annual receipts prescribed under ‘clause (iii) (ad)’, i.e., Rs one crore. Hence, the university cannot claim exemption. In addition, the University has not been approved by the prescribed authority - the Chief Commissioner of I-T, Panaji.

But the university officials have been arguing with the department that it exists solely for educational purposes and not for profit. It is not wholly or substantially financed by the government.

The varsity has received an annual grant of Rs 10 lakh and fees of Rs 6,91,18,000, which is not substantial. It is also receiving certain amount from CET, being the fees paid by the students. This is only an arrangement to collect fees from the students and instead of directly receiving the fees, the university is receiving it through CET. It just forms 5.73 per cent of the gross receipts, the officials said.

When the varsity has so much funds in reserve, why is it receiving brickbats for not creating infrastructure facilities in its colleges and post-graduation centres?  K Balaveera Reddy, who was vice chancellor of VTU from 2001-07, said the varsity has failed to utilise the funds it has for establishing PG centres.

“In the beginning we did try to get funds for the varsity. But post-2007, it has failed to create infrastructure facilities. Housing quarters built for the staff of VTU in Belgaum have not yet been allotted. The PG centre in Mysore is yet to be opened. There are no tie-ups with industries. The chairs set up by Canara Bank and State Bank of Mysore are yet to become functional,” he pointed out.

Reddy said the Vision 2020 document prepared in 2003 served as a blueprint for the growth of VTU. But the recommendations have not yet been implemented. Bangalore should have got a well-established research centre by now. “It is sad that the university, instead of spending the money it has, now has to end up paying tax.”

Former vice-chancellor of Bangalore University, N R Shetty, said that he was unaware of any varsity paying I-T. “The I-T department must have extended its scope. Maybe, this will become the norm henceforth.”

Reserve funds

But VTU vice-chancellor Maheshappa argued the funds were kept as reserve in order to avoid dependence on the government to pay staff salaries. VTU is not a commercial venture to pay I-T, he said.

“In 2010-11, our expenditure was Rs 125 crore against the income of Rs 85 crore. We have 193 colleges and four PG centres. We have to fill up 160 vacant posts in the PG centres alone. When no other university is paying tax, why should only VTU be penalised? We will seek justice in Supreme Court, if required. VTU is meant to provide education to poor students and not pay tax. We will face a deficit of Rs 30 crore. So how can we pay tax?”

Asked why all these days the varsity did not make use of the money, Maheshappa said there has been delay in making staff appointments by the government.

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