TaxTMI 
TaxTMI 
2016 (5) TMI 1024
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....e to the said notice, the assessee submitted a copy of the latest order under Rule 11AA(4) for exemption granted u/s. 80G upto 31-03-2009. However, the trust could not produce the certificate of registration u/s.12A of the I.T. Act, 1961. The AO noted that the CIT-II, Pune vide letter dated 14-05-2010 has also not granted the approval u/s.80G since the assessee trust has not submitted the certificate of registration u/s.12A of the I.T. Act. In view of the above, the AO issued a show cause notice dated 28-12-2010 asking the assessee to explain as to why exemption u/s.11 should not be denied as the assessee has failed to produce the certificate of registration u/s.12A of the I.T. Act. 3. It was submitted by the assessee that the assessee trust is claiming exemption u/s.11 from A.Y. 1999-2000 over the years and prior to that the income of the society was exempt u/s.10(22). It was submitted that all the applications u/s.80G for continuance for the approval made by the assessee to the CIT from 2000 onwards were accepted and the approval was granted after making the necessary enquiries with the trust about the exemption of its income u/s.11 as otherwise the approval could not have bee....
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....rdingly, the assessee has to be assessed in the status of an AOP. 6. The AO further noted that the assessee has claimed to have received donation of Rs. 3,07,42,484/- during the year, all of which have been claimed towards the corpus of the trust. From the balance sheet submitted by the assessee along with the return of income the AO noticed that there was a deduction from the head "corpus" mentioned as "paid during the year Rs. 2,29,300/-". The AO, therefore, asked the assessee to furnish the details and purpose of return of such donation from the corpus of the trust. In response to the same, the assessee vide reply dated 26-11-2010 replied as under : "Copy of list of Trust Fund paid during the year of Rs. 2,29,300/- is enclosed. The amount pertains to amount refunded on account of cancellation of admissions of students, refund of deposits to students take as donation for admission, refund of membership fees, etc." 7. From the above, the AO inferred that the society has taken donations for admissions. He, therefore, asked the assessee to furnish the details of their students who took admission, courses taken, fees paid, donations paid, date of admission cancelled and all ....
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....ut verification. 9. As regards the refund of donation it was submitted that there are no records with the society to state which admission was cancelled for refund of donation. In view of the above, the AO inferred that the students were admitted in different courses against consideration of the donations/capitation fee collected from them or in the name of others under the guise of corpus donation. Such donations were paid in relation to the admission of students. Under no circumstances such payments could be said to be either voluntary or towards the corpus of the trust. It is pure commercial consideration for admission. The AO referred to provisions of section 2(a) of the Maharashtra Educational Institutions (Prohibition of Capitation fee) Act, 1987 according to which capitation fees means : "Section 2(a) - "Capitation fee" means any amount by whatever name called, whether in cash or kind paid or collected directly or indirectly, in excess of the prescribed or, as the case may be approved rates of fees regulated under section 4. 10. According to the AO in view of the definition of "Capitation fee" as above there need not be a quid-pro-quo for admissions or the admission....
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....e and are against the stated objects of the trust. He, therefore, denied exemption u/s.11 of the I.T. Act to the assessee. The AO accordingly determined the total income at Rs. 10,15,45,927/- by making addition of Rs. 3,05,16,500/- to the income of Rs. 7,10,29,427/- as per the income and expenditure account. While doing so, the AO also denied deduction u/s.54 from the long term capital gain on sale of flat at Vasi on the ground that the same is not allowable to entities other than individuals and HUF. 13. Before CIT(A) the assessee made elaborate submissions based on which Ld.CIT(A) called for a remand report from the AO. After considering the remand report of the AO and comment of the assessee to such remand report the Ld.CIT(A) upheld the action of the AO in determining the income of the assessee at Rs. 10,15,45,927/-. 13.1 So far as the denial of exemption u/s.11 in absence of 12A registration certificate is concerned the CIT(A) upheld the action of the AO by observing as under : "3.4 I have considered the submission made by the appellant and perused material on record. Registration is one of the condition precedent for availing of exemption u/s 11 and 12. As per see 12....
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....e immediate location of certificate u/s 12A is a matter of records, compliances and the spirit with which the maximum marginal rate is provided is one wherein such an assessee is expected to be treated at a highest point of taxing statute and such treatment is contrary to the appellant's pursuit of engaging in education. 4.1 I have considered the submission made by the appellant and perused material on record. The appellant had not raised this ground before the Assessing Officer, however, taxation of charitable trust is governed by section 164(2) and 164(3). When the income of a charitable trust becomes taxable, it is taxed at the rate applicable to an AOP subject to certain exception when it is chargeable at maximum marginal rate. The tax in the case of wholly charitable trust is determined as per provision of sec 164(2) and (3). In the present case the exemption u/s 11 has been denied by the Assessing Officer and which has also been upheld while adjudicating ground of appeal No.2 and in such a circumstance the applicability of the taxation at maximum marginal rate is an automatic process under the law and the contention raised by the appellant is not tenable. 4.3 In vie....
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.... appellant has also in categorical terms accepted vide order sheet noting dated 22-12-2010 that the appellant society had taken donations of Rs. 3.05 crores for the management seats during the course of assessment proceedings for AY 2008-09. However, the appellant subsequently claimed that the AR. was pressurized to furnish inaccurate facts arid accordingly an affidavit has also been filed. However.jhe same cannot be considered at this stage because the same ought to have been filed during the assessment proceedings before completion of assessment. The Assessing Officer on examination of the receipt books which were produced for verification found the entire donation to have been received in cash and each receipt was below Rs. 20,000/- and there were 3542 donors/receipts. The Assessing Officer has clearly mentioned that on many days more than one receipt were issued in the name of a single person as found by him in the case of the donor Dr. Mrs. Hazra S. The Assessing Officer also sought the explanation regarding the issue of receipts in the name of donors and not the students seeking admission and the appellant explained that the receipts were made out in the names given by the do....
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....s donations and admission is not found to be true and , tenable in view of the above fact on record which indicate that the Assessing Officer has concluded not on assumption but derived the conclusion from the facts brought on record. The reliance placed by the Assessing Officer on the decision of the Madras High court in the case of P.S. Govindasamy Naidu & Sons Vs ACIT (2010) 324 ITR 44 (Madras) is found to be appropriate and fits into the fact of the present case. The court held as under: "5. It is seen from the order of the assessing authority that on examination of a random number of parents who admitted the children into the college, if was found that the amount paid was not to the corpus donation account but it was collected only by way of capitation fee. The assessee treated it on its own as corpus donation and issued receipts as corpus donation and credited it under the corpus donation. The assessing authority rightly held that it is immaterial how the recipient, namely the assessee herein, accounted for the same and issued receipts towards charitable purpose at the time of receipt of the income. Admittedly, it was towards capitation fee. In such circumstances, th....
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....t. The decision relied upon by the appellant in the case of CIT Vs Willington Charitable Trust (supra) for the proposition that any donations taken for admission and used for cause of the trust does not lead to violation of section 11 being reasonable, but the fact in that case related to acquisition of property and in the said case the trust was registered u/s.12A(a). However, in the present case the facts relate to receipt of donation and the trust is also not registered u/s.12A. The other case laws relied upon by the appellant are on different set of facts and hence the same are not applicable to the present case. In view of the above facts, the detailed and well reasoned order passed by the Assessing Officer is liable to be upheld. 6.5 In view of the above facts the grounds of appeal No.1 & 5 for A.Y. 2008-09 and for A.Y. 2009-10 ground of appeal No.1 & the additional ground No.6 raised by the appellant are dismissed." 15. As regards the argument of the assessee that depreciation has been calculated at commercial rates and with respect to the original cost of acquisition of the fixed assets the Ld.CIT(A) dismissed the ground holding that such issue was never raised before....
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....thout prejudice to Grounds 1 to 5, the appellant is entitled for exemption u/s.10(23C)(iiiab) since the appellant is existing solely for educational purposes and substantially financed by the Government." 18. The Ld. Counsel for the assessee strongly objected to the order passed by the CIT(A). He submitted that the assessee trust was established in 1934 under the Bombay Public Trust Act. It is owning around 58 educational institutions with about 4800 students and more than 3500 teachers and staff. The assessee trust was having registration u/s.80G since last so many years which was getting renewed from time to time. During the impugned assessment year the AO denied the exemption u/s.11 on the ground that 12A certificate was not produced and the assessee is collecting capitation fee in the guise of corpus donation from various persons for giving admission. He submitted that the AO has issued summons and examined 21 donors who have denied to have made any donation for admission. Referring to page 187 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the order of the CIT dated 31-07-1995 granting exemption u/s.80G of the Act for the period from 0....
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....ration u/s.12A said to have been issued to the assessee trust in the past is not traceable with the assessee nor the order is traceable with the department. 19. Referring to the decision of the Pune Bench of the Tribunal in the case of Phaltan Education Society Vs. CIT reported in Pune Chartered Accountants Society Journal for April 2009 he submitted that the Tribunal in the said decision has held that when the trust was granted all the benefits such as exemption u/s.11, eligibility u/s.80G etc. for past as many as 30 years, merely for the reason that assessee trust is not able to produce the age old registration certificate u/s.12AA the department cannot take a stand that trust was not granted registration u/s.12A for all the past years. The burden is on the revenue to demonstrate that such registration was not granted earlier. He accordingly submitted that merely because the 12A certificate registration is not traceable, the CIT(A) was not justified in denying the exemption u/s.11 when the assessee trust was granted 80G benefits in the past so many years. He submitted that 80G benefit is not available unless registration u/s.12AA is there. 20. So far as denial of exemption ....
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....agement quota seats are sold/auctioned/charged commercially, etc. etc. The only pursuit of the trust is to explore some help to the compelling expenditures of the trust. E) Your goodself will appreciate, there is no single instance wherein, any of the management quota seats are charged at differential rates. There is no any finding as to any commercial pursuit in the whole process." 21. Referring to the statements of some of the donors recorded by the AO during the course of assessment proceedings, copies of which are placed at pages 157 to 171 of the paper book the Ld. Counsel for the assessee submitted that none of the donors has stated that donations have been given for getting admission. Referring to page 227 of the paper book the Ld. Counsel for the assessee submitted that the admission as per chart in order u/s.143(3) varies from 1% to 17%. It is only 17% in the case of preprimary curriculum and 2% in Junior college whereas in remaining colleges it is only 1% or sometimes less than that. He submitted that the assessee has universally asked for donation and is accepting donation. He submitted that 14 persons were summoned by AO whose statements were recorded and the copi....
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.... trust cannot be relied upon. Neither it can be presumed from mere assumptions that BDS seats are allotted after payment of capitation fee in the absence of any material. Even otherwise, the Assessing Officer has not found any irregularity in the accounts of the trust. There is no document to show that the trust is being run for any purpose of profit except that for educational purposes. 8. In view of this, no interference is called for in the pure findings of fact given by the Tribunal. No substantial question of law arises from the order of the Tribunal. Thus, both the aforementioned appears are dismissed being without any merit." 24. He also relied on the decision of the Chennai Bench of the Tribunal in the case of ACIT Vs. Balaji Educational and Charitable Public Trust reported in 48 SOT 281. 25. The Ld. Counsel for the assessee submitted that even if the assessee has received capitation fees, if the same is applied for charitable purposes, then the same is not taxable. For the above proposition he relied on the following decisions : 1. ACIT Vs. M/s.Padanilam Welfare Trust - ITA No.1766 to 1772/Madras/2011 order dated 19-06-2012 for A.Yrs. 2002-03 to 2008-09 2. S....
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....CIT is for the reasons to be recorded in writing satisfied that the person in receipt of the income was prevented from making the application before the expiry of the period aforesaid for sufficient reasons. 29. Referring to the decision of Hon'ble Gujarat High Court in the case of CIT Vs. Mayur Foundation reported in 274 ITR 562 he submitted that the Hon'ble High Court in the said decision has held that proceedings before the Tribunal are meant to correctly assess the tax liability of an assessee. If this be so, it follows that the assessment cannot be said to be complete and is pending till the appeal is heard and disposed of by the Tribunal and the order of the Tribunal is given effect to by the assessing authority by computing the correct tax liability of an assessee. In other words, whether an assessee is required to pay tax or becomes entitled to a refund, would be ascertained by the assessing authority after giving effect to the order of the Tribunal. 30. So far as the additional ground is concerned the Ld. Counsel for the assessee referring to the memorandum explaining the Finance Bill 2014 and the decision of the Pune Bench of the Tribunal in the case of Deccan Educa....
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.... to deny benefit of deduction u/s.11 since without such certificate, the department could not have and would not have granted deduction u/s.80G. Similarly, the allegation of the AO that assessee has received capitation fees in the guise of donations for giving admissions under the Management Quota and therefore there is complete violation of section 11(1)(d) is also without any merit since the entire amount of corpus donation has been accounted for in the books of account and has been utilized for the purpose of charity, i.e. Education and that no part of the money has been siphoned off by any of the trustees and no complaint has been filed either by any of the donor or the AO himself before the competent authority for violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. It is also the alternate claim of the Ld. Counsel for the assessee that the assessee trust is entitled for exemption u/s.10(23C)(iiiab) since the assessee is existing solely for educational purposes and substantially financed by the Government. 35. We find merit in the above arguments of the Ld. Counsel for the assessee. As regards the denial of exemption u/s.11 for no....
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....a Blind Men's Association has directed the concerned CITs under his jurisdiction that in deserving cases the production of certification u/s.12A may not be pressed for. The relevant order of the CCIT is reproduced as under : "To The Commissioner of Income Tax-I/II/V, Pune Sir, Sub : Grant of renewal of exemption u/s.80G - Reg. Kindly refer to the above. 02. In this matter, I am directed to inform that this office has received a petition from The Poona Blind Men's Association, Pune a renowned organization of Pune, which is functioning since 1952 and registered under Bombay Public Trust Act and Societies Registration Act. The said organization is stated to have been receiving I.T. exemption u/s.80G and presently holds registration u/s.80G upto 31- 03-2001. It has also received I.T. exemption u/s.35AC. 03. The said organization has approached this office with a request that since the registration certificate u/s.12A is not traceable, the duplicate certificate may be issued to it for record purpose. From the facts of the case, it is seen that since the organization is receiving exemption u/s.80G continuously for last 54 years and one of the document requir....
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....having the same management, which is also a registered public charitable trust, also applied for the registration under section 12A on the same date. According to the petitioner, on 31- 7-1989, both the trusts were granted registration under section 12A. While the other trust, Adivasi Pragati Mandal, has its registration certificate in its possession, the registration certificate in the case of the petitioner is not traceable. The difficulty faced by the petitioner is that they have filed returns of their income for the assessment years 1991- 92 to 1994-95 and claimed exemption under sections 11 to 13 of the Act and which have been accepted by the revenue. However, for the assessment year 1995-96, the ITO demanded production of the certificate of registration under section 12A. As the same is not traceable, the petitioner has applied for issue of duplicate certificate. However, no response has been received from the revenue. 3. The learned counsel for the revenue urges that, though the application dated 11-1-1989 is on record, the order made thereon is not traceable with them either. In these circumstances, assessment for the assessment year 1995-96 has been completed by treatin....
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....he Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. 40. We find a somewhat similar issue had come up before this Bench of the Tribunal in the case of Deccan Education Society Vs. ACIT vide ITA No.1480/PN/2014 for A.Y. 2008-09. We find the Tribunal vide order dated 13-07-2015 (to which both of us are parties) has decided the issue in favour of the assessee by holding that assessee is entitled to exemption u/s.10(23C). The relevant observation of the Tribunal from para 66 to 73 are as under : "66. The second question that arises for our consideration as to whether the trust is for profit motive. It is the allegation of the Revenue that the assessee trust was collecting the capitation fee in the garb of donation and was therefore running with a profit motive. We find the Assessing Officer has not reported the violation, if any, by the assessee trust to the Government of Maharashtra for taking any action for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. None of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complaine....
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....nder section 10(23C)(vi) and (via), what is required for the purpose of seeking approval is that the university or mother educational institution should exist ''solely for educational purposes and not for purposes of profit". It was nowhere the case or the finding of the Chief Commissioner that on account of the defect in the admission procedure, assessee ceased to exist solely for educational purposes or it existed for the purposes of profit. Further, it was not the case of the Revenue that the students who were admitted were not imparted education in the college in which they were admitted or the admissions granted were fake or non-existent or that the income generated by admitting the students was not used for the purpose of the assessee. The emphasis on the part of the Chief Commissioner that the purpose of education would not be served if the education is for students who have been illegally admitted and the purpose of education as contemplated in the section would be served only if the students have been legally admitted and not otherwise, went beyond the requirements of the section. Of course, the requirement of an educational institution to provide admissions strict....
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....stitutions (Prohibition of Capitation Fee) Act, 1987, we find there is no such complain before the Government of Maharashtra or AICTE or any other Government Department either by the Income Tax Department or by any of the student/parents stating that the assessee society has charged Capitation fee for giving admission which is in violation of the Maharashtra Educational Institutions (Prohibition of Capitation Fee Act) 1987. Even the CIT who is alleging that the assessee trust has collected huge donation for admission of students to various institutes run by it has not informed the Government of Maharashtra if he was serious about any such violation done by the society. The submission of the Ld. Counsel for the assessee that as against 70 Management Quota Seats it has collected donation from 9 students and such donation is within the permissible limit prescribed by the Government of Maharashtra and that all such receipts are reflected in the accounts could not be controverted by the Ld. Departmental Representative. 8.4. . . . . . . . . . . . . 8.5 . . . . . . . . . . . . 8.6 . . . . . . . . . . . . 8.7 We find the Hon'ble Delhi High Court in the c....
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....o appreciate the doubts cast or the possibilities expressed about there being something more to it in view of the funds being deposited in private banks. The opinion is completely based on surmises and conjectures as it seems to suggest that merely because funds were in a private bank, there may have been divergence of funds to the members of the Society. Similarly, the factum of construction being carried out by Ahluwalia Construction Co. (P) Ltd., stated to be a family concern of the President, was not material as there was no allegation of any inflated cost of construction or unreasonable profits being derived from the same by third parties as a mode of divergence of funds." 8.8 We find the Pune Bench of the Tribunal in the case of Dr. D.Y. Patil Education society (Supra) has observed as under : "13. Though the assessee has denied receipt of capitation fee/donations and running on commercial lines, however, without going into the merits of such plea, the pertinent question is the consequences of acceptance of capitation fee/donations by the assessee at the stage of examining assessee's application for registration under section 12AA of the Act. Somewhat sim....
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....received income from its property, then find out how the said income has been expended, and whether it can be said that the income is utilized towards charitable and religious purposes. Therefore, for the purposes of registration u/s. 12AA of the Act, what the authorities have to satisfy is the genuineness of the activities of the trust or institution and how the income derived from the trust property is applied to charitable or religious purposes and not the nature of the activity by which the income was derived to the trust. 50. The above judgment proposes that what is to be looked into is the character of application of funds and the character of the activities carried out by an assessee and not the colour and nature of the sources out of which necessary funds were collected by the assessee. In other words, the source of funds is not an important ingredient in assessing the character of the activities carried on by a Charitable Institution. The Allahabad High Court in the case of CIT Vs. Red Rose School [163 Taxmann 19] has held that educational activities carried on by a Society are for charitable purposes and not against the public policy. Therefore, the activities ca....
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....n the compilation in the light of the case laws cited. 11.1 The law now introduced is to streamline the "Procedure for registration" and by saying so we do not want to enter into the controversy whether the applicability of s. 12AA(3) was retrospective or prospective in nature. Rather we can make an observation that this issue stood answered by Co-ordinate Benches. We want to express that earlier to this section there was no guidelines in the statute for refusal of registration, therefore it was considered eminent to introduce in the statute the said procedure. What bothered the Tribunals and High Courts in the recent past is the scope and the purpose of introduction of s. 12AA in the statute. All those judgments as listed above, in agreement have said that the activities ought to be in fulfilment of the objects for which a trust is created. Sentiments should be in line with the purpose for which the trust is created. The purpose should be philanthropic, charitable, or for public general utility. Service without profit has to be the motive. As in the present case the objects are to undertake, to run and to improve the educational institution for imparting education in dive....
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....h documents and information in order to satisfy himself about the genuineness of the activities and also to enquire that those genuine activities are as per the objects of the trust for which it is seeking registration. The objects and activities should be philanthropic and not against the public interest must be for the benefit at large instead for the benefit of particular individual or group of individuals. 11.4 In the recent past sub-s. (3) was inserted in s. 12AA w.e.f. 1st Oct., 2004 which gives power of cancellation of registration to the CIT, if he finds that the activities are not genuine or not being carried out in accordance with the object of the trust. The need for the enactment had arisen due to belief of some quarter that in the absence of explicit law the CIT cannot exercise the power of cancellation of registration. To overcome this hurdle this sub-section is incorporated and now in operation. Naturally these powers are conferred with a view to ensure that if once a registration has been granted under s. 12AA, a trust or institution may not take any such liberty of misuse of the registration or the provisions by going haywire rather furthering the objects ....
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....and to get away from the ambits of the tax. An institution has to follow the norms as laid down in other related sections for availing prescribed benefits. 11.6 Procedure of registration is a first step and a preliminary stage where the CIT shall restrict the enquiries as to whether the trust is actually and whole heartedly performing all the duties and activities for which it was created. On careful reading of this section it was gathered that at this initial stage there is no scope of any apprehension of misutilization of funds or to judge the taxability income. The scheme of the Act otherwise does not subscribe and allow a trust to take the benefit of the provisions of ss. 11 and 12 unless it establishes the prescribed utilization of the income, even if, at all the trust holds the registration in its hands. Therefore at the stage of granting registration the CIT is not expected to bother himself about the other provisions of the Act and supposed to confine himself to the procedure of registration as laid down therein. For this view, we draw support from the order of the respected Co-ordinate Bench Tribunal, New Delhi pronounced in the case of Aggarwal Mitra Mandal Trust....
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....he activity of running educational institutions. The established factual position is that the institution is not doing in any other activity except running educational institutions. In such circumstances, can we uphold the action of cancellation of registration ? Answer is obvious no. 11.8 While reading the precedents cited from the side of the appellant we come across a decision of a respected Co-ordinate Bench Tribunal, Kolkata pronounced in the case of Kalinga Institute of Industrial Technology (supra) and have found that almost on identical situation, as in the present appeal, it was held that consequence upon a search while the assessment proceedings are pending a cancellation of registration by invoking s. 12AA(3) is a premature action on the part of CIT, because it is expected from him to take precaution to let the assessment get completed, if possible expeditiously, instead of rushing to cancel the registration which shall effect and interrupt the other proceedings under the Act and so prematurely punish a person without judicious hearing as prescribed by the statute. Held portion is worth reproduction as did in para (xii) p. 35 ante. 11.9 We have also gon....
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.... rendering these services of pollution control measures. We are unable to see any substance in learned CIT's stand that the income earned by assessee as licence fees, consent fees and testing charges are receipts in consideration of rendering the services to trade, commerce or business. What is termed as consent fees is in fact fees accompanying the application for obtaining consent (i.e., permission) of the assessee Board to set up a new unit. It cannot be anybody's case that the processing of applications by itself has s commercial motive, or that fees for processing of applications is a fees collected for rendering of service of pollution control which is undisputed sole object of the assessee trust. Similarly, fees for testing charges and licence fees are not also towards rendering of any services of pollution control either. These are not the services with a profit motive but essentially only to recoup the cost of getting the samples tested or processing of licences. In any event, these activities, if these can be at all be construed as rendering of services, these are wholly subservient to the public utility objective of pollution control, and, it cannot be anyone'....
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....t of advancement of education as also the object of general public utility are carried out with due sincerity then the claim of registration is within the ambiguity of s. 12A of the Act. 11.11 As far as the objective of the appellant is concerned this is not the case of the Revenue that the assessee was not imparting education. As we know the term education means to teach subjects to students for the development of his mind and also to equip students to deal with reality. The training process is either theoretical or practical but student has to be taught the essentials of the selected subjects so as to develop his skill and knowledge for the subjects studied by him. The appellant institute, admittedly, fulfils the requirements of imparting formal education by a systematic teaching and instructions. Since the question about the imparting of education has not been doubted or challenged by the Revenue therefore. In our considered opinion the impugned order passed by the respondent is unsustainable in law. Strange enough there is nothing on record to prove sightlessly that the purpose of imparting of education was not fulfilled by this institute thus the Revenue Department ha....
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....me of the deliberation made in detail hereinabove is that percurian opinion is to debar the CIT to enter into the area of investigation of source of income and also application of income, so that the amount of correct exempt income be not prejudged. 11.13 The aspect of morality as touched by the learned CIT is appreciable. Every vigilant and law abiding citizen has to be fair in his conduct and should refrain from immoral activities. But existing blue laws are derived from the numerous extremely rigorous laws designed to regulate morals and conduct. These laws are enacted in such a fashion that if implemented correctly and efficiently then there is no scapegoat for an offender. We are tempted to write an idiomatic language due to the sensitivity of the issue, that a CIT cannot be allowed to hold a baton of morality in his hand to hit an immoral; but the statute has given him a flexible stick for inflicting tax on defaulter; that includes a trust or educational institution. The gist is that if the CIT had an information of some wrongful means of earning fees in the form of a donation or the information tells about excessive charging of fees; then the CIT in his rights can p....
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....ng education; then such an institution must bear the consequence of cancellation of registration since ipso facto infringed s. 12AA(3) condition. Second aspect is, that though the donations received are meant to fulfill the objects but together with fees have infringed Anti Capitation Prohibition Act; then comes within the clutches of that Act but definitely not under s. 12AA(3) provisions. The third aspect is, that the donation plus fees do not exceed the prescribed limit of Anti Capitation Fee Act i.e., five times the normal fees; further that no evidence of misutilization other than the prescribed activity then no action can be suggested under s. 12AA(3). The assessee's case falls under the third category. With the result, totality of the circumstances thus warrants, in the light of the foregoing discussion, not to endorse the view of the learned CIT; consequence there upon reverse those findings. The order of cancellation of registration is hereby revoked. Grounds allowed." 8.10 In view of the above cited decisions, we hold that the finding given by the Ld.CIT that the assessee was collecting huge donation for admission of students to various institutes run by it i....
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....ed exemption u/s 11 and 12-Some of the educational institutions run by assessee were aided institutions, and as per norms fixed by State Government, assessee was entitled to give 50% of admissions under management quota in respect of PU Course-Assessee filed its returns of income, admitting 'Nil' income for AYs 2006-07 & 2008- 09 and declaring a loss for AY 2007-08 after claiming exemption u/s 11(1)(a) and 11(1)(d)-In meanwhile, survey was conducted u/s 133A in assessee's premises and certain books and documents containing details of student wise donations collected by way of DDs and donation receipt books for admissions given during FYs 2005-06 and 2006-07 relating to fees and alleged donations collected from students who got admissions into the schools/college run by the assessee were impounded and statement of secretary of assessee was also recorded-AO observed that assessee was collecting voluntary contributions/building fund/development funds against admissions given under management quota in institutions run by assessee and was not entitled to claim deduction u/s.11(1)(a) and 11(1)(d) -CIT(A) upheld findings of AO holding that there was a direct nexus between admi....
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....the registration of a charitable organization-Capitation fee per se is not in the nature of illegal income-There is nothing to show in the seized materials that the assessee had made any profit out of the activities carried on by it and any portion of that profit has been enjoyed by any of the trustees or the relatives. Surplus funds of the assessee-trust year to year have been used only for the purposes of furthering the objects of the assessee-trust-There is no distribution of profit or such other benefits to the trustees or relatives of the assessee-trust-Therefore action of the CIT in withdrawing the registration granted to the assessee under s. 12AA is not sustainable in law Held : It is found that the first ground pointed out by the CIT to cancel the registration granted to the assessee under s. 12A on the ground of accepting capitation fees is not sustainable in law. The CIT is not to conduct investigation into the sources of 72. We find the Hon'ble Supreme Court in the case of M/s. Queen's Educational Society vs. CIT vide Civil Appeal No.5167/2008 order dated 16-03-2015 has approved the decision of the Hon'ble Punjab and Haryana High Court in the case of P....
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....horities, to comply with proviso thirteen (un-numbered). Accordingly, it has to be ascertained whether the educational institution has been applying its profit wholly and exclusively to the object for which the institution is established. Merely because an institution has earned profit would not be deciding factor to conclude that the educational institution exists for profit. (2) The provisions of Section 10(23C)(vi) of the Act are analogous to the erstwhile Section 10(22) of the Act, as has been laid down by Hon'ble the Supreme Court in the case of American Hotel and Lodging Association (supra). To decide the entitlement of an institution for exemption under Section 10(23C)(vi) of the Act, the test of predominant object of the activity has to be applied by posing the question whether it exists solely for education and not to earn profit [See 5-Judges Constitution Bench judgment in the case of Surat Art Silk Cloth Manufacturers Association (supra)]. It has to be borne in mind that merely because profits have resulted from the activity of imparting education would not result in change of character of the institution that it exists solely for educational purpose. A work....
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....aid discussion, these petitions are allowed and the impugned orders passed by the Chief Commissioner of Income Tax withdrawing the exemption granted under Section 10(23C)(iv) of the Act are hereby quashed. However, the revenue is at liberty to pass any fresh orders, if such a necessity is felt after taking into consideration the various propositions of law culled out by us in para 8.13 and various other paras. 8.16 The writ petitions stand disposed of in the above terms." 24. The view of the Punjab and Haryana High Court has been followed by the Delhi High Court in St. Lawrence Educational Society (Regd.) v. Commissioner of Income Tax & Anr., (2011) 53 DTR (Del) 130. Also in Tolani Education Society v. Deputy Director of Income Tax (Exemption) & Ors., (2013) 351 ITR 184, the Bombay High Court has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows: ".....The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasonin....
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.... the three Supreme Court judgments stated above, namely, Surat Art Silk Cloth, Aditanar, and American Hotel and Lodging, would all apply to determine whether an educational institution exists solely for educational purposes and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carried out in accordance with all or any of the conditions subject to which approval has been given, such approval and exemption must forthwith be withdrawn. All these cases are disposed of making it clear that revenue is at liberty to pass fresh orders if such necessity is felt after taking into consideration the various provisions of law contained in Section 10(23C) read with Section 11 of the Income Tax Act." 73. From the submission of the Ld. Counsel for the assess....
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.... of the I.T. Act. We accordingly set aside the order of the CIT(A) and direct the AO to allow the claim of exemption u/s.11 of the I.T. Act. Grounds raised by the assessee are accordingly allowed. 42. Since the assessee succeeds on the grounds of appeal No.1 to 4, ground No.5 and the additional ground raised by the assessee being academic in nature are not being adjudicated. ITA No.1167/PN/2014 (A.Y. 2009-10) : 43. Grounds raised by the assessee are as under : "1. The learned CIT(A)-II, Pune erred in law and on facts in upholding the taxable income worked out by the learned AO at Rs. 9,44,98,180/- and corresponding tax liability amounting to Rs. 4,49,67,903/- on the appellant. The learned CIT(A)-II and the learned AO ought to have appreciated that the appellant is a bonafide Charitable Trust solely engaged in education. 2. The learned CIT(A)-II, Pune erred in law and on facts in upholding AO's contention that the appellant is not eligible to claim exemption u/s 11 of the ITA, 1961 in the absence of 12A Registration certificate. The learned CIT(A)-II, Pune ought to have considered the genuine and bonafide cause of education for which the appellant exists for past ....