Can't grant income tax exemption to VTU from 1998, Centre tells state

 Union Finance Minister Arun Jaitley has refused to accede to the state government’s request to grant income tax (I-T) exemption to Visvesvaraya Technological University (VTU) with retrospective effect from 1998 and asked the varsity to get a court direction in this regard.

State Higher Education Minister Basavaraj Rayareddi, who met Jaitley here on Tuesday to discuss the matter, told reporters, “Jaitley said it was not possible to give exemption with retrospective effect and asked us to get a court direction in this regard.” 

During the meeting, which was attended by Union Fertilisers Minister Anant Kumar and Union Human Resources Minister Prakash Javadekar as also senior officials of the Central Board of Direct Taxes, Jaitley cited the objections from the Comptroller and Auditor General in several such instances earlier, as reason for refusing to intervene in this issue, Rayareddi said.  In 1999, VTU had applied for exemption from tax on its income under Section 12A and donations under 80G of the I-T Act. The varsity had got tax exemption only on donations, not on its income.

The I-T department, in 2015, had seized VTU’s bank accounts having a balance of Rs 441 crore and imposed a penalty of Rs 127 crore, saying VTU earned interest by depositing donation money in banks. Though the VTU approached the High Court and Supreme Court, challenging the attachment of its accounts, the judgement was in favour of the I-T department.  Despite the fact that VTU was given tax exemption on income with effect from 2015-16, the state government has been demanding similar exemption from 1998, which the finance ministry has been opposing, saying there is no such provision in law. 

“VTU has no option, but approach the apex court under a different clause and this will take some time. Till then, fund crunch will affect the functioning of the varsity,” Rayareddi said. The varsity is facing fund crunch due to seizure of bank accounts and has taken a loan of Rs 15 crore. It has no funds to pay next month’s salaries to its employees, the minister said.

The state 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 VTU, with four lakh students pursuing various courses, Rayareddi said.