TaxTMI 
TaxTMI 
2013 (5) TMI 305
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....A.Y. 1997-98 and onwards. However, on record it was observed that the assessee filed returns of income as follows: A.Y. 1999-2000 - On 06.10.2004 A.Y. 2000-2001 - On 11.10.2004 A.Y. 2002-2003 - On 11.10.2004 A.Y. 2003-2004 - On 14.10.2004 3. Subsequently, notice was issued u/s. 148 for A.Ys. 1998-99 to 2002-03 on 9.12.2004, served on the assessee on 9.12.2004 by ACIT, Kurnool. In pursuance of the said notice, the assessee filed letter dated 17.12.2004 to treat the returns of income filed on earlier occasion, as stated above, as filed in response to the notice u/s. 148. However, another notice u/s. 148 was issued for A.Ys. 1999-2000 and 2000-01 on 21.3.2006 and for A.Ys. 2002- 03 and 2003-04 on 27.3.2007. This Notice u/s. 148 was issued by the DDIT (Exemptions)-II after recording that income received on behalf of the G. Pulla Reddy Engineering College, Kurnool and G. Narayanamma Institute of Science & Technology, Hyderabad which is chargeable to tax in the absence of mandatory approval u/s. 10(23C)(vi), has escaped assessment as its gross receipts exceeded Rs. 1 crore. On reopening of the assessment, the Assessing Officer brought to tax development fee collected by th....
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....on dated 30-9-2004 on the above college, it came to light that the assessee did not file return of income from assessment years 1997-98 onwards. 6.1 The assessee filed return of income voluntarily on 15.10.2004 for assessment years 1997-98 to 2003-04. There was no issue of any notice by the assessing officer calling for returns even 15 days after the date of TDS inspection. The assessee has voluntarily filed returns of income. It is factually incorrect on the part of the assessee to say that the returns were filed at the behest of the department. There is no evidence to show that the department insisted upon the assessee to file returns of income. 6.2 The assessee after voluntarily filing returns at Kurnool in October 2004 never raised the question of jurisdiction up to 6.1.2005 i.e., after completion of penalty proceedings vide order dated 4.1.2005. The issue of jurisdiction was raised for the first time during assessment proceedings for the assessment years 2003-04 vide letter dated 6.1.2005. 6.3. After the filing of returns on 15.10.2004, the following proceedings were initiated by the department during which no objection was raised by assessee up to 6.1.2005. a) Pen....
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....ter the completion of the assessment whichever is earlier. b) When he has made no such return, after the expiry of the time allowed by the notice under sub section (2) of section 115WD or sub section 1 of section 142 or under sub section 1 of section 115WH or under section 148 for the making of the return or by the notice under first proviso to section 115WF or under the first proviso to section 144 to show cause why the assessment should not be completed to the best of the judgement of the assessing officer whichever is earlier. 6.8. A careful reading of section 124(3) and comparison with the earlier provision 'clearly shows that the emphasis is on the time allowed u/s 148 or 139(2) or 142(1). The section clearly divides the assessee into two categories (i) a person who has made return of income u/s 139(1) i.e. who has filed regular return within due date is covered under sub section (a). (ii) The above sub section (b) starts with where he has made no such return, meaning no return as envisaged under clause (a) regular return. In case the assessee does not file regular return, the assessee's case is covered by notice u/s 142(1) or 148. The clause clearly states that the time....
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....t the issue of notice u/s. 148 was by the ACIT, Kurnool Range for A.Ys. 1999-2000, 2000-01, 2001-02, 2002-03, 2003-04 and 2004-05. The assessee also filed a letter before that authority to treat the returns already filed with Kurnool Range as the returns filed in response to the notice u/s. 148 of the Act. On that basis, the belated returns are validated and also for filing the returns belatedly for these assessment years there was levy of penalty u/s. 272A(2)(e) of the Act. This levy of penalty was also confirmed by the Tribunal. Once the jurisdiction is vested with the Kurnool Range, there cannot be framing of assessment or issue of notice u/s. 148 or framing assessment by any other authority than the Kurnool Range. The argument made before us by the Department is devoid of merit. There cannot be one authority for levying of penalty on assessment at Kurnool and another authority for framing assessment. Being so, issue of notice u/s. 148 by the Hyderabad Range of the Department is not correct. As the issue of notice itself is bad in law by the Hyderabad Range of the Department, consequent framing of assessment is bad in law. Being so, we quash the reopening of assessment for all t....
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....cer brought total income to tax. Further, the Assessing Officer also brought on record that there was a diversion of the trust fund of Rs. 4 lakhs which was paid to Sri G. Pulla Reddy and it attracted provisions of section 13(1)(c) of the Act. On further appeal, the CIT(A) was of the opinion that the assessee is not entitled for exemption u/s. 10(23C)(vi) as there was no mandatory approval. Even otherwise, the assessee is not entitled for exemption u/s. 11 as it collected fees over and above the regular fees for various studies. Against this the assessee is in appeal before us. 12. The learned AR submitted that there is no violation in collection of development funds at the time of admission of the students to the institution of assessee's trust. As there was keen competition for admission, students come forward voluntarily for payment of development fund fee to get management quota seats. As there was only 10% seats are available to management, to get these seats people come forward voluntarily to pay development fund fee. Only management quota seats are left to the assessee's trust to get them filled and majority seats are going to the government allottees. Whatever the develo....
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....e fixing of a rigid fee structure, dictating the formation and composition of a government body, compulsory nomination of teachers and staff for appointment or nominating students for admissions would be unacceptable restrictions. "56. The decision on the fee to be charged must necessarily be left to the private educational institution that does not seek or is not dependent upon any funds from the government. "57 There can, however, be a reasonable revenue surplus, which may be generated by the educational institution for the purpose of development of education and expansion of the institution." The above passage clearly brings out the competence of private un-aided educational institution not dependent upon any funds from the government to decide on the fee to be charged. 15. The AR also relied on the order of the Tribunal, Pune Bench in the case of Maharashtra Academy of Engineering & Educational Research (MAEER) vs. CIT dated 8.9.2009 in ITA No. 1669/PN/007 wherein observed as follows: "3.1. The main allegation of the Investigation Wing of the IT Department after the search and survey was that the trust was taking the donation and capitation fees for admission tho....
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.... admission different amounts comprised of different funds in respect of building, education research, education infrastructure, library, sports, staff welfare and students welfare - Parents/Students made contribution towards the corpus funds which were required to be utilized for objects of the trust and therefore were exempt u/s 12 of the IT Act 1961. (j) He relied on Memorandum explaining provisions reported in 298 ITR St. 200 and CBDT circular dated 19th December, 2008 reported in 308 ITR at page 5. 17. According to him if the assessee carried on commercial activity then only the assessee is not entitled for exemption u/s. 11 of the Act. He submitted that the order of the Tribunal in the case of Vodithala Education Society (20 SOT 353) is not applicable on the facts of the case. The finding in the order of the Vodithala Education Society is that if any amount is collected over and above the prescribed fees, it must be construed as capitation fees or price for selling education. Under the Constitution, sale of education is not permitted and the concerned university has to initiate steps to withdraw the approval/recognition for such educational institutions. The finding of t....
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....charged in excess of the fees, can it be said that the receipt of such amount vitiates the charitable character; c) whether the receipt is voluntary or not, is only for the limited purpose of treating it as income or not and not for denying the exemption u/s 11 itself; d) whether the test of charitable nature of the institution depends upon the actual application of income for educational purposes; 18.1 The cases which have not been cited and which have not been dealt with in the order in Vodithala's case relate to the above mentioned aspects. Therefore the decision of Vodithala Education Society's case can be restricted to the facts in that particular: case only, and cannot have universal application; 18.2 In the subsequent MA order in Vodithala Education Society's case in Miscellaneous Application No.43/Hyd./2008 dt. 30-1-2009 arising out of the same appellate order, the Tribunal itself clarified that its order has been passed denying the exemption because there was violation of the provisions of section 13 (l)( c) of the LT Act and not for other reasons. 19. He submitted that in the said order, the learned Vice President (one of the members who decided the appeal)....
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....ous in law because of the above stated reasons. This aspect becomes all the more relevant/when the country held that mere receipt of donation cannot be taken to be capitation fees and even if the amounts are received, yet it does not vitiate the character of educational institution as a charitable institution. Therefore, he submitted that the Tribunal may consider the issue on the factual position existing in the appellant's case and the case law cited in support its claim for exemption. A Compilation of precedents on the subject has been separately filed in a paper Book by AR. He submitted that where two views or two judgments is available on the subject, that judgment which favours the subject is to be adopted. He relied on the Supreme Court Judgement in CIT vs. Vegetable products 88 ITR page 192. 22. Further he submitted that the amount kept with Sri G. Pulla Reddy over safe custody for that reason cannot be said that section 13(1)(c) is attracted. He submitted that the amount was returned to the assessee in the A.Y. 2006-07 and credited in the books of account of the assessee. Now, Sri G. Pulla Reddy is very old person, aged about 80 years and he is not aware of the intricac....
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....ng on Engineering College, High School, Junior College, Degree College, Pharmacy College and separate Engineering College for women at Hyderabad. The whole set of these institutions are functioning on account of unbiased and devotional effort put by Sri G. Pulla Reddy. In these circumstances, we cannot hold that a person of such calibre taken off a meagre amount of Rs. 4 lakhs for his personal benefit. The circumstances stated by the AR show that the money was kept with Sri G. Pulla Reddy for safe custody. Considering the circumstances under which it was kept with Sri G. Pulla Reddy, we are not in a position to hold that there is diversion of fund for the personal benefit of Sri G. Pulla Reddy. Accordingly, we cannot hold that provisions of section 13(1)(c) are attracted in the peculiar circumstances. 25. Regarding benefit of exemption u/s. 11 for collection of fee in case of prescribed limit by the State Government, we find similar issue was considered by this Tribunal in the case of Vasavi Academy of Education, Hyderabad in ITA No. 1794/Hyd/ 2008 dated 4th February, 2010 which applies squarely to the facts of the present case wherein the Tribunal in paras 3 and 4 observed as f....
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....4/Hyd/2007 and 518/Hyd/2008 for the assessment years 2002- 2003 and 2004-05 and Sri Sai Sudhir Educational Society, Hyderabad in ITA No.999/Hyd/20-06 for the assessment year 2003-04. Therefore, we set aside the orders of the lower authorities and remit back the matter to the file of assessing officer with a direction to assessing officer that he shall reconsider the entire issue in the light of judgement of Supreme Court in the case of M/s Islamic Academy of Education & Another Vs. State of Karnataka and Another (supra), and in the cased of T.M.A. Pai Foundation and Others Vs. State of Karnataka and Others (Supra), and find out whether the assessee has received any money over and above the fees prescribed and thereafter decide the issue afresh in accordance with law after giving reasonable opportunity of hearing to the assessee . We make it clear that the assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students. 4. Respectfully following the ratio laid down by the Tribunal in the above order,....