Wrong tax exemption to South Asian University registrar cost exchequer Rs 90 lakh: Parliamentary panel

New Delhi: An MEA gazette notification wrongly extended income tax exemption privileges to the registrar of the South Asian University, causing a loss of more than Rs 90 lakh to the exchequer, a parliamentary panel has noted.

The Public Accounts Committee, chaired by Congress MP Adhir Ranjan Chowdhury, in its report tabled in Lok Sabha on Monday, noted that the Ministry of External Affairs first became aware of the error in 2011 when it was approached for a diplomatic identity card and tax exemption certificate for the university's first registrar.

"The committee is perplexed to note that the error crept in despite the notification vetted by various departments of the government. The procedure followed for issuance of gazette notification by the Ministry needs to be reviewed and strengthened, more so for notifications issued by MEA which may have international ramifications," the report said.

The panel has recommended creation of a 'Procedural Standards Cell' for examining all aspects related to provisions being notified and published through gazette notification so as to prevent such aberrations in the future.

The committee noted that the Inter-governmental agreement signed for the establishment of South Asian University by the SAARC member-nations states that the taxation and social protection of the citizens of the founding states employed by the university is regulated in accordance with the national legislation of the respective states.

"The audit found that the incumbents to the post of Registrar were Indian nationals who are subject to the taxation laws of Government of India. The submissions made by MEA that the anomaly in the gazette notification was a genuine error which occurred at the time of printing and there is no malafide intention on part of any officer of the Ministry, is neither convincing nor sufficient to completely rule out the possibility of complicity. The committee desires that the Ministry investigates the matter in detail and appropriate action on the officials who may be found responsible for the lapse," the report said.

The panel found that the MEA had in 2011 informed the university of the anomaly and advised them not to grant tax exemption to the Registrar and reiterated the same in 2012.

"Not withstanding the MEA's clear advice, the university kept issuing tax exempt certificates to the Registrar between 2011-20. The committee is surprised that the university overlooked the advice of MEA and granted tax exemption to the Registrar. This led to a substantial loss of revenue to the government amounting to Rs 90.06 lakhs from July 11 to December 2017. The committee is of the view that the MEA instead of merely assuming compliance should have followed up the matter appropriately," the report said.

The panel has also flagged 'lack of vigilant' scrutiny by the Income Tax department in verifying the eligibility of individuals for tax exemptions and acceptance of such certificates without consultation with MEA.

"The MEA also lagged behind in providing timely information to the income tax department despite being aware of the wrongly extended tax exemption," it added.

The panel has also sought to know the status of recovery made by Income Tax department after the MEA issued an amended notification in 2021 removing the post of registrar from enjoying privileges and immunities.

The has also advised the MEA to liaise with SAU authorities and India's representatives in their Board of Governors to pursue for strengthening of the existent Internal Audit Mechanism by extending its scope to cover critical financial and operational areas that affect the interests of the Host country.