TaxTMI 
TaxTMI 
2018 (7) TMI 1613
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....t of accumulated income etc. necessary and relevant for exemption of income. 3. Whether Ld.CIT(A) is justified in law to import the concept of 'pure charity' in place of words "Charitable purpose" when there is no such requirement in Sections 11, 12, &13 of the Act. 4. Whether Ld. CIT(A) is correct in law to issue enhancement notice based on arbitrary and imaginary propositions of law ignoring actual provisions of Income Tax Statute relating to charitable institutions/trusts. 5. Whether Ld. CIT(A) is correct in law to hold that educational institutions can only claim exemption u/s lO(23C)(iv) and IO(23C)(vi) and not under section 11 of the Act. 6. Whether Ld. CIT(A) is correct In law to hold that educational trusts or institutions cannot collect fee etc from students and charging of such fee etc. will render the objects of the trusts/institutions as uncharitable. 7. Whether Ld. CIT(A) is justified in law to ignore the principle of application Of income u/s 11 (1)(a) for claim of exemption and holding that expenditure incurred on imparting of education is not to be set off against fee and other income of the Appellant. 8.....
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....s. 2,61,15,153/-. Ld. CIT(A), discussed the concept and theory of charitable purposes as defined in section 2(15) and conditions laid down in section 11 to section 13 of the Act. He held that once the income of educational institution is exempt, it was on account of the fact that imparting education is matter of pure charity and educational institutions are not permitted to receive or recover the cost of charity by way of charging fee as according to him it would be uncharitable activity. He relied upon the decision of the Hon'ble Supreme Court decisions cited in his order in this regard. Ld. CIT(A) further held that assessee is not entitled for the benefit of section 11 and 12 and its income has to be assessed as income from other source u/s 56 against which no deduction u/s 57 will be allowed and thus, Ld. CIT (A) held the entire receipts as taxable. Against the order of Ld. CIT(A), assessee is in appeal before the Tribunal. 3. At the time of hearing Ld. Counsel for the assessee drew our attention to a similar order passed by the same CIT(A), on 30.03.2017 in the case of M/s Aadarsh Public School, which was made part of the paper book from page 23-51. It was shown by Ld. Couns....
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....e exercising his power of enhancement u/s.251(2) and taxing the entire receipts of Rs. 1,04,85,689/- as income from other sources. It is an admitted fact that assessee society has been formed and registered under the 'Registration of Societies Act, 1860', with the sole object of providing education and in pursuance of such an object it has set up an infrastructure in the form of school which is named as 'Adarsh Public School', from where it is providing education upto Senior Secondary level. Looking to its object which is for 'charitable purpose' in terms of section 2(15) and is solely for imparting education, it has been granted registration u/s.12A by the competent authority, i.e., Ld. CIT Ghaziabad. Once registration u/s.12A is granted, then it is fait accompli and accordingly, all its receipts / income are subject to computation and benefit u/s.11 to 12 and restrictions provided u/s 13. Such a registration u/s 12A has neither been withdrawn nor has any action been taken by the competent authority to withdraw such certificate of exemption granted u/s.12A. That is the reason why the assessments have completed u/s. 143(3) for the subsequent assessment year, wherein the assessee ha....
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....t the two provisions operating simultaneously and as such the claim for exemption under section 11 was available to the assessee-Council provided it satisfied 11 the requirements of that provision. We may point out that there are other allied provisions like for instance clause (23C) in section 10 which clearly indicate that the Legislature did not intend to rule out section 11 when exemption was claimable under such specific provisions of section 10. It was after negativing the contention in this manner that the Tribunal went on to consider the claim for exemption made by the assessee-Council under section 11 but on merits found that there was no material or evidence on record to show whether or not the securities were held by the assessee- Council for any of the charitable purposes and, therefore, it remanded the case. The remand order was never challenged by the revenue by seeking a reference on the ground that a remand was unnecessary because section 11 was ruled out by reason of exemption having been obtained by the assessee- Council under section 10(23A) nor was any such contention raised when reference was sought by the assessee- Council nor when the matter was being argued ....
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....he aforesaid binding judicial precedents, we reject the observation and finding of the ld. CIT (A) that assessee cannot claim exemption/benefit of Section 11 or is not entitled for benefit u/s 11 as assessee was eligible for such an exemption u/s. 10(23C). 15. Ld. CIT(A) while denying the exemption of Section 11 to assessee society has held that, since imparting of education is a matter of pure charity, therefore, the educational institution is not permitted to receive or recover the cost of charity from its beneficiary by way of fees, i.e., charging of fees itself would amount uncharitable activity. We are unable to subscribe to this proposition at all, because if fees is not charged from the students then how the activity of imparting education can be carried out. Fees collected from the students itself feeds the charity, unless some other considerations are received for profiteering and personal gains of trustees or members of the society. Strong reliance has been placed by the ld. CIT (A) upon the judgment of Hon'ble Apex Court in the case of ACIT vs. Surat Art Silk Cloth Manufactures Association (supra). In our humble understanding of the said judgment and the pri....
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....ring, itself culled out the exception in the following manner:- 66. In such professional unaided institutions, the Management will have the right to select teachers as per the qualifications and eligibility conditions laid down by the State/University subject to adoption of a rational procedure of selection. A rational fee structure should be adopted by the Management, which would not be entitled to charge a capitation fee. Appropriate machinery can be devised by the state or university to ensure that no capitation fee is charged and that there is no profiteering, though a reasonable surplus for the furtherance of education is permissible. Conditions granting recognition or affiliation can broadly cover academic and educational matters including the welfare of students and teachers." [Emphasis added is ours] 16. Thus, the Hon'ble Apex Court held that in principle there should be no 'capitation fee' or profiteering, but reasonable surplus to meet the cause of education and augmentation of facility does not amount to profiteering. Nowhere the Hon'ble Apex Court has held that educational institution is debarred from taking any kind of fees from the s....
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....students during the year the details and bifurcation of which is as under:- Class TUTION FEES MON THS NO. OF STUD ENTS BUS (300*1 2) STUDE NTS TRAVE LLING BY BUS REST ANNUAL ADMISS ION FEES Total NUR 500 12 60 3,60,000 1,000 3,600 5 18,000 60,000 LKG 500 12 78 4,68,000 1,000 3,600 7 25,200 78,000 UKG 500 12 70 4,20,000 1,000 3,600 8 28,800 70,000 1 600 12 69 4,96,800 1,000 3,600 12 43,200 69,000 2 600 12 83 5,97,600 1,000 3,600 15 54,000 83,000 3 600 12 80 5,76,000 1,000 3,600 10 36,000 80,000 4 600 12 78 5,61,600 1,000 3,600 17 61,200 78,000 5 600 12 70 5,04,000 1,000 3,600 15 ....
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.... in Section 2(15). Section 12 of the Act clearly provides that any voluntary contribution received by a trust wholly for charitable or religious purpose, then for the purpose of Section 11 it is deemed to be income derived from the property held under the trust. Such a deeming provision of revenue contribution is held as income derived from the trust which is subject to computation and conditions laid down in Section 11 to 13. If the assessee is carrying out any obligation for educational activity, then it has to be treated as the 'trust' under the provision of Section 11; and this proposition has been clearly held by the Hon'ble Supreme Court in the case of CIT vs. Gujarat Maritime Board (Supra), that if the assessee is under legal obligation to apply the income then it is entitled to be registered as charitable trust. In the case before the Hon'ble Supreme Court, the authority Gujarat Maritime Board was carrying out the development of minor port which was in the realm of 'carrying out objects of general public utility'. The Hon'ble Apex Court held that such an authority is to be reckoned as charitable trust for the purpose of Section 11. In this case one of the main objec....
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....object are to promote the welfare of the general public the purpose would be charitable purpose. When an object is to promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry- CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). If the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity- Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC). 15. The present case in our view is squarely covered by the judgment of this Court in the case of CIT v. Andhra Pradesh State Road Transport Corpn. [1986] 159 ITR 1 in which it has been held that since the Corporation was established for the purpose of providing efficient transport system, having no profit motive, though it earns income in the process, it is not liable to income- tax. 16. Applying the ratio of the said judgment in the case of Andhra Pradesh State Road Trans....