The Hindu Business Line : ICAI moots tax on educational institutions run on commercial lines

EDUCATIONAL institutions run on commercial lines should be corporatised and taxed as business activity, the Institute of Chartered Accountants of India (ICAI) has said.

This is one of the measures suggested by the ICAI in its pre-budget memorandum for widening the income-tax base and increasing tax revenues of the Government.

The ICAI, which is the regulator for chartered accountancy profession, has also suggested that persons paying electricity bills exceeding Rs 25,000 per annum and those transferring immovable property for a consideration exceeding Rs 5 lakh should be required to necessarily file their income-tax returns.

On corporatising educational institutions, the ICAI has held that educational and medical institutions are not contributing any income-tax to the exchequer. "The reason for the same is that no recognition is given to an educational institution by an education board or university unless such institution is a society or trust," the ICAI memorandum has said.

Accordingly, all educational institutions perforce are required to operate as charitable trusts/society and become eligible for exemption either under Section 10(23C) or Section 11 of the Income-Tax Act.

ICAI has also highlighted that it is an admitted fact that most of the educational institutions are being run on commercial basis and having huge surplus and no tax is offered on such incomes.

"In case the education boards or universities amend their regulations withdrawing the conditions of recognising only those institutions that are societies or trusts, then all these educational institutions would go for corporatisation and would contribute substantial amounts to the revenue every year," ICAI pre-budget memorandum said.

ICAI has also held that this issue also applies to medical institutions and hospitals, which are also required perforce to operate as a society or a trust to get benefit of allotment of land at a concessional rate and to meet the requirement of State laws.

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