The Karnataka High Court ruled that no service tax is chargeable on affiliation fees paid to universities.
The Division Bench dismissed the Revenue’s writ appeal against order of Single Judge by holding that no service tax could be charged on affiliation fees paid to the Universities;
The bench observed that income earned by leasing/licensing of immovable properties for providing canteen facilities to the students, faculty & staff shall remain exempted.
The court found that, income from the rentals of buildings leased/licensed for banking facilities would be amenable to service tax while finding force in Revenue’s contention that the levy of tax is ‘activity-centric’ and does not depend on the nature of service provider;
The court stated that the university is an educational institution in terms of Section 66D(l) of Finance Act 1994 and the services provided are by way of education as a part of curriculum for obtaining qualification recognized by law.
It was explained by the court that the affiliation being done by the University in discharge of public duties enjoined in law, such acts do not fit into the expression ‘activities carried for consideration’ as the same does not have commercial elements.
Quoting extensively from decisions of SC, HC, House of Lords and from religious scriptures such as Bhagavath Gita, Bench observed that universities are not amenable to service tax on educational activities.
The court directed the appellant-Revenue to restructure & reissue the subject Show Cause Notice in the light of observations made within six weeks.
Case Information
Case Name: Principal Additional Director General V/S M/S Rajiv Gandhi University Of Health Sciences, Karnataka
Judicial Level & Location : High Court Of Karnataka
Case Number : Writ Appeal No.856 Of 2022 (T-Res)
Date of Decision : 30/07/2024
Decision in favor of: Appellant
Judges: Justice Krishna S Dixit And Justice Ramachandra D Huddar