TaxTMI 
TaxTMI 
2018 (2) TMI 602
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....y way of an appeal was available to the petitioner - Trust against the said order. 2. The facts leading to filing of the present writ petitions in a nutshell are like this:- 3. The petitioner - Trust situate at Mantralayam Road, Raichur, is said to be running 13 Educational Institutions including a Medical College, a Dental College, an Engineering College, a School and other Colleges at its Campus located in the Main Road, Raichur, Karnataka, under the Trust Deed dated 11/12/2009. It was granted exemption from payment of Income Tax under the Certificate issued by the Commissioner of Income Tax vide Annexure B dated 18/04/2007 under Section 12-AA (1) of the Act. 4. To avail the exemption under Section 10(23-C) of the Act, the Chief Commissioner of Income Tax, Hubli granted such approval in favour of the petitioner - Trust vide Annexure D order dated 13/02/2009. The provisions of Section 10(23-C) of the Act requires that any University or other Education Institution existing solely for educational purposes and not for purposes of profit, which may be approved by the prescribed Authority shall be entitled to such exemption and such approval is required to be periodically revi....
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....confronted to it and as against a short Show Cause Notice, Annexure F dated 28/11/2017 despite the explanations and objections furnished by the petitioner - Trust, a detailed 68 pages order has been passed by the Respondent - Authority, withdrawing the exemption or the approval under Section 10(23-C) of the Act with retrospective effect from 01/04/2009 i.e. A.Y. 2010-11 onwards. 10. Mr. Naganand relying upon certain Case Laws referred to herein below submitted that the petitioner - Trust continues to run various Educational Institutions and the sole purpose of the petitioner - Trust is to run the said Educational Institutions only and thus the basic conditions for grant of exemption under Section 10(23-C) stand satisfied by the petitioner - Trust and the assessment in pursuance of the search and seizure operations under Section 132 of the Act is an independent exercise and the petitioner - trust has even filed its returns for A.Y.2016-17, adding back to the declared income the 'Anonymous Donations' at the rate of 30% amounting to Rs. 18.24 crores as against its total receipts of Rs. 95.00 and odd crores and paid Advance Tax of Rs. 19.20 crores on 15/12/2015 itself. 11. He the....
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....16. Hence, the statement prepared as shown in page no.82 cannot be estimate. It is a real statement showing the real state of affairs of NET. However, in the consolidated Income & Expenditure account, as per regular books of account, the cash collections of Rs. 27,99,60,550/- which is appearing in the seized page no.-82 does not find any place. This is due to the fact that this cash receipt of Rs. 27,99,60,500/- is nothing but the cash Donation amount which has been collected from students and which has not been accounted for in the regular books of account. However, the entry of cash collection amount of "Rs.27,99,60,550" on page no.82, clearly establishes the fact that this figure indicates the cash Donation amount. 12.5. Therefore, there is cross reference of cash Donations in various documentary evidences found and seized. The evidences not only show how the Donations are received but also how they are applied. Therefore, the contention of Shri Sunki Rajender Reddy that no Donations are received by NET is untrue and deserved to be rejected summarily. 13.1 From the above details, it is clear that despite stringent regulations and strongly worded judgme....
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.... 13.2 As it cannot legally collect the amount of Donation, NET invariably collects the Donation in cash without issuing any receipts. No seat is allotted unless the amount of Donation specified is paid. The allotment of a seat is at an astronomical price. Therefore the conduct of NET while giving admissions is opposed to public policy which is against capitation fees. The evidences found in the course of search reaffirm this conclusion. 13.3. Though NET is aware, and in fact it maintains a complete record for its own purpose the amounts collected/to be collected from students as Donations/capitation fee, it does not bring on record the names of such persons who in all are contributing a staggering sum of about Rs. 50-100 crore of unaccounted money every year. This is also opposed to the public policy of curbing circulation of black money. 14. It is also noticed that the assessee trust has violated the provisions of Section 10(23C) of the I.T. Act. The search has revealed that all the money so collected as Donation is not being used for the sole purpose for which the NET has been established, i.e., education. Evidence has been found in the form of Receipts and ....
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....unity of being heard was provided to the assessee by issuing a notice on 28-1-2017 to show cause why the approval u/s 10(23C)(vi) of the Income-tax Act should not be withdrawn for violating the provisions of Section 10(23C)(vi) of IT Act and the case was posted for hearing on 06-12-2017 at 12 PM. The Authorised representative of the trust requested for adjournment via email and the same was granted. Shri Rajendra Reddy, Chairman of Navodaya Education Trust and Shri Anand Partani, CA appeared on 11-12-2017 before the undersigned and filed written submissions. The said written submissions are taken on record and duly considered. The assessee has relied upon the following judicial pronouncements which are discussed, as under:- a) Chief Commissioner of Income tax Vs Geetanjali University: In this case, the Issue involved is the irregularities in admission procedure for particular year i.e. for A.Y.2008-09 and the same is pending before the Hon'ble Apex Court, hence not relevant to the present case. b) Commissioner of Income tax Vs Balaji Educational & Charitable Public Trust: In this case, the Hon'ble High Court of Madras had observed that the assessee trust had appro....
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....institution or trust or any university or other educational institution or any hospital or other medical institution and to the Assessing Officer: 16.3 Thus, the Prescribed Authority is allowed to withdraw the exemption granted u/s 10(23C), if the prescribed authority is satisfied that educational institution has not applied its income exclusively and wholly for educational purposes, or invested or deposited funds in violation of clause (b) of third proviso, or the activities of the educational institutions are not genuine or are not being carried out in accordance with all or any of the conditions subject to which it was approved, the prescribed authority may withdraw the approval, after giving a reasonable opportunity of being heard. A copy of the order will be served on the educational institution and to the Assessing Officer. The charging of "capitation fee" would amount to breach of the provisions of the laws and invite withdrawal of exemption. 16.4 The Hon'ble Apex Court in the case of Ms. Mohini Jain v. State of Karnataka & Ors. (1992) 3 SCC 666, held that capitation fee was nothing but price of selling education and such "teaching shops" were contrary to t....
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....or u/s 11 of the IT Act....." 17. After carefully considering the facts of the case and the decisions of various judicial authorities, I find that this is not a fit case for continuing the exemption granted u/s. 10(23C)(vi) of the Income-tax Act, 1961. For the above reasons, I hold that the assessee society is not eligible for exemption u/s 10(23C)(vi) of the Income Tax Act. Therefore, the approval granted u/s 10(23C)(vi) of the IT Act by the Chief Commissioner of Income-tax, Hubli is hereby withdrawn w.e.f. 01-04-2009 i.e. A.Y. 2010- 11 onwards. Sd/- (B.R. BALAKRISHNAN) Director General of Income-tax(Inv.), Bangalore." 14. It would be also appropriate to quote the relevant portion of Section 10(23-C) of the Act, clause (vi) and also third Proviso of the said provision. "INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME Incomes not included in total income. Section 10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included - (1) agricultural income; (Section 23-C) any income received by any person on behalf of - ....
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....ity, this Court is of the considered opinion that the present writ petitions have no force and deserve to be dismissed. The reasons are as under. 16. The petitioner - Trust in question having the cloak of an Educational Trust, to enjoy the exemption from Income Tax obtained the approval under Section 10(23-C) of the Act, was thoroughly misused and abused by the Trustees who appear to be Members of the same family or closely related and appear to have used the entity of an exempted juristic person of the petitioner - Trust for purposes other than the pure Educational purposes. 17. The facts unearthed during the course of search and seizure under Section 132 of the Act which have been succinctly narrated, analyzed and discussed by the Respondent - Authority reveal that the petitioner - Trust not only acted against public policy and the directions of the Hon'ble Supreme Court by collection of Capitation Fees from various students for Admission to its Medical College and a staggering sum of Rs. 52.00 crores was collected by them under the innocuous name given to part of it as 'Anonymous Donations' and which the learned Counsel for the petitioner - Trust also tried to explain that....
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....er Trustees who were Members of the same family and it can be reasonably ascertained that they would know of the case against them. The burden clearly lied upon them to establish their bona fides in the matter to prove that the Educational Trust in question was not being used for other purposes other than within the four corners of Section 10(23-C) of the Act. 21. The compliance with the principles of natural justice was fully made in the present case in as much as the Show Cause Notice was duly given to the petitioner - Trust on 28/11/2017 in which even reference to search action under Section 132 of the Act was made and it was also stated that the amounts collected by way of donations were used by the Trustees for their personal purposes and for purchase of personal assets and for obtaining accommodation entries etc. and thus it was a comprehensive Show Cause Notice to which even a detailed Reply was filed by the petitioner - Trust but which was not found to be satisfactory by the Respondent Authority and in the opinion of this Court rightly so. Thus the breach of principles of natural justice is not at all found in the present case for allowing the petitioner - Trust to assai....
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....xemption under Section 10(23-C) of the Act and the Courts were not dealing with a fact situation which after the grant of exemption could result in the withdrawal of the same upon misuse of approval under Section 10(23-C) of the Act. Therefore, those cases are clearly distinguishable on facts, while there being no quarrel on the propositions of the law laid down in the same. 26. In the leading case of Queen's Educational Society Vs. Commissioner of Income Tax, reported in (2015) 8 SCC 47 relied upon by the learned counsel for the petitioners, the Apex Court held that if the activity is primarily for educating persons, the fact that Institution makes a surplus/profit which arises incidentally from the Educational activities or public utility activities does not render the Institution a profit making Institution. In the very same judgment, the Hon'ble Supreme Court warned that if they are not found to be genuine or such activities are not being carried out in accordance with all or any of the conditions subject to which approval has been given under Section 10(23-C) of the Act, such approval and exemption must be withdrawn forthwith. The relevant paragraph 11 is quoted below fo....
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....esent case and is of no help to the petitioners. 28. In Chief Commissioner of Income Tax Vs. Geetanjali University Trust (2013) 352 ITR 433 (Raj), a Division Bench of the Rajasthan High Court held that the approval for exemption under Section 10(23-C) of the Act could not be denied to the Trust and while upholding the remand of the case to the Chief Commissioner of Income Tax for reconsideration the Court observed that merely because a defect in the Admission procedure was found in the case of the petitioner - Trust, by the High Court which order was ultimately modified by the Hon'ble Supreme Court, it cannot be said that the petitioner - Trust did not exist solely for educational purposes. The Division Bench of the Rajasthan High Court though observed in paragraph 12 that 'Of course the requirement of an Educational Institution to provide Admissions strictly in accordance with the prescribed Rules, Regulations and the Statute cannot be less emphasized, rather the same need to be adhered to in true letter and spirit but then the said violation cannot lead to its losing the character as an entity existing solely for the purpose of Education' and there upon the Court upheld the....