The Karnataka High Court has held that the service tax cannot be levied on the affiliation fee and other incidentals including renting collected by the Universities.
The Court was considering writ petitions filed by M/s. Bangalore University, and M/s. Rajiv Gandhi University of Health Sciences wherein the petitioners challenged the show cause notices issued to them proposing to demand service tax on affiliation fees and other incidentals including renting collected by the Universities.
After hearing arguments from both sides, Justice M I Arun quashed the demand of service tax along with interest and equivalent penalties, observing that the negative list of service, set out in section 66D of the Finance Act, 1994 are not chargeable to service tax. Clause (l) of said section 66D (supra) covers services provided by educational institutions and consequently the educational services are not chargeable to service tax.
“From the provisions of the statutes under which the said universities are formed, it is clear that apart from providing higher education through their own institutions, the said universities impart education through affiliated colleges and also conduct examinations. Therefore, the said universities would qualify to be educational institutions and services provided would not be chargeable to tax on the affiliation and other incidental charges collected from colleges,” the Court said.
With regard to the issue of rents collected by university towards allowing canteen facility and banking facilities, the Court, by referring to Section 66F(3), Finance Act, 1994, observed that these being incidental to main activity of education, the same is also excluded / exempt from, service tax.
The Petitioner was represented by Senior Advocate Mr. V. Raghuraman, Advocate Bhanu Murthy J S and Advocate C.R.Raghavendra and Respondent was represented by Mr.Jeevan Neeralgi and Mr. Amit Despande, Advocates for the respondents.
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