Following the recent Appellate Division verdict mandating a 15% tax on all private universities in the country, trustees express legal concerns. The move, effective February 27, raises questions about the lawfulness of subjecting institutions governed by the Trust Act to income tax.
The University Grants Commission (UGC) suggests a comprehensive review in collaboration with the government to address the complex legal landscape. Amidst this, the Association of Private Universities of Bangladesh (APUB) appeals to President Mohammed Shahabuddin for guidance, citing concerns about the judiciary’s decision.
In a petition signed by Sheikh Kabir Hossain, APUB Chairman, on March 3, reference is made to a recently resolved writ appeal filed in 2021. The decision deems the imposition of a 15% income tax on non-profit private universities inconsistent with the law, emphasizing their status as non-profit entities under the Private University Act 2010.
The petition also highlights Section 44 (7) of the Private University Act 2010, specifying the dedicated use of funds from the university’s general fund for necessary expenses only. Compliance with the income tax directive, however, poses a legal dilemma, as entrepreneur-founders are prohibited from receiving funds from the university.
UGC Chairman (additional charge) Prof Muhammad Alamgir emphasizes the need for a review, suggesting discussions with the government. He notes that university administrators should present their observations effectively for consideration in the review process.
Income tax lawyer Khan Babul Hossain explains the feasibility of taxing educational institutions governed by trust laws, emphasizing that profit generation triggers income tax obligations. However, for institutions under trustees’ administration with no profit or loss, the situation differs, though successive accounts and returns remain obligatory.
Lawyer Mohammad Siraj Uddin points to the Income Tax Act 2023’s Sixth Schedule, exempting voluntary contributions for religious or charitable purposes from income tax. He underscores that private universities, operated by trusts, are distinct from charity organizations.
Dr Chowdhury Mofizur Rahman, UIU Vice-Chancellor, highlights the financial vulnerability of private universities. The proposed income tax could exacerbate their financial struggles, potentially leading to increased tuition fees for students.
The private university association seeks assistance from the Minister of Education and UGC Chairman. Notably, previous attempts in 2007 and 2010 to impose a 15% income tax were invalidated by the High Court in 2016, citing the exemption of non-profit private universities from taxation under trust.
