TaxTMI 
TaxTMI 
TaxTMI 
2016 (7) TMI 170
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....r the provisions of the Societies Registration Act of Karnataka. It is formed for the purpose of running several educational institutions in the Mysore City. It was duly registered under the provisions of sec.12A of the Income-tax Act, 1961 [hereinafter referred to as 'the Act' for short]. Return of income for the assessment year 2006-07 and 2007-08 were filed disclosing 'nil' income after claiming exemption u/s 11(1)(a) and 11(1)(d) of the Act. Survey operations under the provisions of sec.133A of the Act were conducted on 17/05/2007. It was found by the Assessing Officer (AO) during the course of survey proceedings that certain books and documents relating to receipt of money alleged to be capitation fee/donation collected by the assesseesociety from the students who got admission into school and colleges. Such amount was disclosed in the return of income as voluntary donations and claimed exempt u/s 11 of the Act. The AO had examined on oath the honorary secretary of the trust on this issue who admitted that the assessee-society had been collecting amount over and above the fees prescribed by the Government. He admitted that no receipts were issued in respect of such do....
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.... u/s 11(1) of the Act. He accordingly, upheld the assessment done by the AO for the assessment years 2006-07 and 2007-08. However, for the assessment year 2010-11, the CIT(A) relied on the decision of the jurisdictional High Court in the case of DIT(Exemptions) vs. Sri Bellimatha Mahasamsthana Socio Cultural and Educational Trust (336 ITR 694) held that even though the amount was collected as donation, since it was applied for charitable purpose, the same is exempt from tax. 5. Against this background, the assessee-trust is in appeal before us in ITA Nos.1492 & 1493/Bang/2010 for assessment years 2006-07 and 2007-08 and the revenue is in appeal before us in ITA no.675/Bang/2014 for assessment year 2010-11. 6. Before us, learned counsel for the assessee submitted that voluntary contributions are exempt u/s 11(1) of the Act. He also submitted that the judgment of the Hon'ble Supreme Court in the case of Islamic Academy of Education (supra) and TMA Pai Foundation vs. State of Karnataka (8 SCC 481) are not applicable to the facts of the case. He further submitted that the assessee-trust neither demanded any donations from parents of the students, nor there any direct nexus can be est....
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....t collected over and above the prescribed fee is in the nature of capitation fee. The Hon'ble Supreme Court had heavily deprecated the practice of collecting capitation fee from students in the case of Islamic Academy of Education (supra) as follows: "Collection of capitation fee is contrary to the constitutional scheme and prohibited by State enactment. Moreover, education was used as an apparatus/mode to collect capitation fee. In other words, exorbitant money was collected illegally in the guise of running the educational institution. When the assessee used the charitable activity/educational institution as an apparatus for selling the education, in our opinion, the element of charity no longer remains in the activity of the assessee. In other words, when the assessee sells the seat of the professional course and collects capitation fee, the activity of the assessee cannot remain a charitable activity, within the meaning of sec.2(15) of the Income tax Act. Education would remain as a charity only in a case where the education was imparted systematically in a fee prescribed by the Government. In our opinion, it is not intention of the Parliament to recognize any body/society or....
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....tion of the provisions of law, the relevant provisions of sections 11(1)(a) and 12 are extracted below: "Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart27 is not in excess of fifteen per cent of the income from such property; ...................................." "Income of trusts or institutions from contributions. 12. (1) Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to ....
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....in error in allowing the appeal for the assessment year 2010-11 following the decision of the jurisdictional High Court in the cases of Sri Bellimatha Mahasamsthana Socio Cultural and Educational Trust (supra) and Garden City Educational Trust (supra). Further, the co-ordinate bench of Tribunal in ITA Nos.206 & 207/Bang/2014 dated 17/06/2016 in the case of Deputy Director of Income Tax (Exemptions), vs. M/s. Kammavari Sangham (to which one of us viz. Accountant Member is a party) held in identical facts as follows: "18. From a careful perusal of the orders of the lower authorities and details of receipt of donation/voluntary contribution, we find that these donations/voluntary contributions were received over and above the tuition fees. There is no iota of evidence produced by the assessee to support that these donations were towards the corpus. Had it been a case of donation towards corpus, there should be a specific narration on the donation receipts that this contribution was made towards the corpus. Moreover in Karnataka receipt of donation/capitation fee is strictly prohibited by the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984. Through this l....