Centre denies I-T exemption to VTU with retrospective effect

The Centre has denied income tax exemption to the Karnataka-based Visvesvaraya Technological University (VTU) with retrospective effect from 1999 and asked the varsity to get a court direction in this regard.

In 2000, the VTU had applied for exemption from tax on its income under the section 12A as well as donations under 80G of the Income Tax Act. The varsity had got the tax exemption only on donations, not on its income. The issue was taken up seriously until the I-T department in 2014-15 had seized the VTU's bank accounts with Rs 441 crore and imposed a penalty of Rs 127 crore.

After much persuasion, the VTU was given the tax exemption on income with effect from 2015-16, but the state has been demanding so with retrospective effect. Several representations were made to the Centre. Even the state chief minister had discussed the issue with the Prime Minister.

The issue was discussed again yesterday at a meeting with Finance Minister Arun Jaitely and Karnataka Higher Education Minister Basavaraja Rayareddi. Central ministers Ananth Kumar and Prakash Javadekar as also senior officials of the Central Board of Direct Taxes (CBDT) were present.

"In the meeting, Jaitley said it was not possible to give exemption with retrospective effect and asked to get a court direction in this regard. It is unfortunate. This will affect the functioning of the varsity," Rayareddi told reporters. Now, the VTU has no option but to approach the apex court and this will take some time. Till then, funds crunch will affect the functioning of the varsity, he said.

The varsity is facing funds crunch due to seizure of bank accounts and has taken a loan of Rs 15 crore. It has no funds to pay the next month salary, he added.

Asserting that the central government has all powers to change norms and give exemption in view of public interest, the state minister said, "CBDT officials have misled the FM that it cannot review as the VTU has lost a Supreme Court case. But we clarified that the VTU had lost the SC case as it had appealed under Section 10 (23C) of the I-T Act and the apex court had said this section does not apply and dismissed the matter."

Rayareddi said the state government is asking the Centre to provide relief under Section 119(2)(b) of the I-T Act in view of public interest as 217 engineering colleges are affiliated to the VTU with 4 lakh students pursuing various courses. He said many private universities have been granted with tax exemptions and denial of the same to the VTU would be a "great injustice".