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Issues: (i) Whether the assessee was entitled to exemption under section 11 and/or section 10(23C) where the Revenue alleged collection of amounts over and above prescribed fees from students; (ii) whether depreciation was allowable where the cost of the assets had already been treated as application of income under section 11.
Issue (i): Whether the assessee was entitled to exemption under section 11 and/or section 10(23C) where the Revenue alleged collection of amounts over and above prescribed fees from students.
Analysis: Exemption for an educational institution cannot be claimed if amounts described as donation, building fund, auditorium fund, or similar receipts are compulsorily collected from students over and above the prescribed fee. The record did not show that the factual aspect of such collections had been properly examined by the Revenue authorities, and the matter required verification in the light of the principles governing capitation fee.
Conclusion: The issue was restored to the Assessing Officer for fresh examination. Exemption would not be available if any money over and above the prescribed fee had been collected from students.
Issue (ii): Whether depreciation was allowable where the cost of the assets had already been treated as application of income under section 11.
Analysis: Depreciation depends on whether the cost of each asset had in fact already been allowed as application of income. If the full cost of an asset had been treated as application under section 11, depreciation on that asset could not again be allowed; if not so allowed, depreciation could be granted at the applicable rate. The matter therefore required asset-wise verification.
Conclusion: The issue was remitted to the Assessing Officer for fresh decision after verifying each asset.
Final Conclusion: The Revenue's appeal succeeded only to the extent that both issues were set aside for fresh adjudication, and the substantive claims were left to be determined again on remand.
Ratio Decidendi: An educational institution is not entitled to exemption where compulsory collections over and above prescribed fees amount to capitation fee, and depreciation is not allowable on an asset if its full cost has already been allowed as application of income.
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