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2016 (6) TMI 1336
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....e's Representative on the other hand vehemently insisted for the appeal to be heard. On perusing the matter the Bench decided to proceed with the hearing of the appeals because on the identical issue arising out of the same search proceeding U/s.132 of the Act, same seized materials and same facts for the assessment year 2001-02 the Learned CIT(A) in ITA No.165/2008-09 vide order dated 28/05/2010 as well as the Chennai Bench of the Tribunal in ITA No.1332/Mds/2010 and C.O.No.94/Mds/2010 vide order dated 09.06.2011 had already decided the matter. Moreover, the Revenue was continuously pursuing coercive action for recovery of tax from the assessee and the assessee was again and again seeking stay from such recovery of tax by the Department which was hotly contested by the learned Departmental Representative before the Tribunal. Thus the Revenue was vehemently insisting for adjournment of these appeals from being heard and at the same time bent upon colleting the demand of tax. In this situation, the Bench decided to proceed for hearing the appeals since the appeals were also not transferred to the Hyderabad Bench of the Tribunal before the Special Bench for hearing till date, and the....
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....ent years which is having status of deemed university from 19.6.2001. 5. On 06.06.2006, search & seizure proceedings under section 132 of the Act was initiated in the premises of the assessee and chairman & founder trustee Shri G.Vishwanathan and his four sons. Notice under section 153A of the Act was issued to the assessee on 23.09.2008 and duly served on the assessee. Subsequent to which assessments were completed under section 153A of the Act on 31.12.2009 for all the three relevant assessment years including the assessment year 2001-02. Ground No.1: Validity of notice under section 153A: 6. On the issue of validity of notice under section 153A of the Act, the learned Commissioner of Income Tax (Appeals) has observed as follows:- "6.1 Appellant raised grounds against the issue of notice U/s.153A and assessment for assessment years 2002-03 to 2004-05: The appellant has contended against the issue of notice under section 153A for the assessment years 2002-03 to 2004-05 on the ground that search U/s.132 itself was invalid as no unaccounted income or assets were discovered from it or its founder and managing trustee Shri G.Vishwanathan and the income retur....
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....e further submitted that various incriminating documents were seized during the course of the search and therefore, the learned Assessing Officer is legally empowered as per section 153A(b) of the Act to assess or reassess the total income of the assessee for the six assessment years immediately preceding the assessment year. Reliance was placed in the decision of Hon'ble Allahabad High Court in the case of CIT Vs.Raj Kumar Arora reported in 52Taxmann.com /172 wherein it was held that the Assessing Officer has power to reassess the returns of the assessee not only for undisclosed income found during the search operation but also with regard to materials that was available at the time of original assessment. He also placed reliance in the decision of Hon'ble Karnataka High Court in the case of Canara Housing Development Co. Vs. DCIT reported in 49 Taxmann.com 98, wherein it was held that initiation of proceedings under section 153A of the Act does not depend on any undisclosed income being unearthed during the course of search. 9. After hearing both sides, we are of the considered view that initiation of proceedings under section 153A of the Act by the learned Assessing Officer i....
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....itution. v) From the statement of the Admission Officer Shri James Jebaseelan recorded on 6.6.2007, it is clear that the management quota is filled up by admitting students on payment of donation. vi) In sheet no.11 under seized item ANN/CRK/LS/S/7 & in sheet No.1 to 6 under seized item ANN/MM/B & D/S-34 portrays that there is management and NRI quota and from sheet Nos.5, 4, 8 to 30 etc., reveal that the admissions are made on discretionary basis who are referred by several key personalities. vii) From the above, it is evident that the institution has management quota to be filled up by using its discretionary powers which gives scope for receiving "capitation fees" in the garb of "donations". viii) The assessee has been crediting every year with sizeable amount towards corpus fund apart from the surplus generated from the activity of running the institution. These amounts are increasing year after year. ix) In the sworn statements recorded on 6.6.2007 from Mr. V.Sankar, Pro-Chancellor, son of Mr. Viswanathan, Managing Trustee, he has admitted for receiving Rs. 8,00,000/- as capitation fee for granting admission to B.Tech & Bio-Technolo....
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....d for a particular discipline in that year. The statements show that the nomenclature of "Donation to corpus fund" is a misnomer and therefore they constitute pecuniary consideration for admission, which goes against the objectives of the trust in the trust deed which were reproduced elsewhere in this order. The fact that the said amounts are collected in demand drafts (not by Cheques) cannot alter the nature of the said receipt and the treatment given for the same in the books of accounts is incorrect and it has to be taken to be receipts in the normal course of business and would form part of the surplus. xiii) The statement recorded from the parent Shri Surendra Lachuman Das recorded on 10.10.2007 confirms that he has paid donation of Rs. 8,00,000/- by demand draft to VIT for admitting his son. Another seized document ANN/MM/B&D/S/19 also confirms that the parent has paid donation of Rs. 8,00,000/- to admit their daughter. Statement recorded from the parent Shri Hari Krishnan on 10.10.2007 also reveals that he has paid Rs. 9,00,000/- as donation for admitting his son. Statements were also recorded from the following persons from which make it evident that they have paid....
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....rly establishes the nexus between the alleged donation and admission of a student. * The donations cannot be the subject matter of discussion, negotiation and concession as is seen in the case of candidates admitted with influential references. * Donations cannot be the subject matter of refund where the candidate fails to clear the school examination or scores less than the requisite percentage of marks in the subjects Maths, Physics and Chemistry. * Donations cannot change its colour according to season - before the declaration of results of secondary school examination in the form of advance and thereafter partake the character of corpus donations. * Donations cannot be the subject matter of convenience accounting by obtaining multiple forms so as to suit the contingencies of the management to account for the same as donation to corpus or to account for a portion to corpus fund and balance as advance fees received and thereafter to refund the same back to students on the basis of standard formats on which signatures of parents are obtained as if they seek refund of the advance fees citing financial constraints and agreeing to pay the fees as a....
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.... evident that such payments are not donations but capitation fees. ii) The investigation wing at the time of search had obtained statements from the parents who have stated that they have paid capitation fees. iii) The remand report obtained by the Assessing Officer states as follows:- (page No.45 of CIT(A)'s Order) "Only 3 persons as against 200 persons required for personal examination, have been produced by the assessee. All the three appeared before the ADIT (Inv) and it is seen from the ADIT's report that out of the three one person denied having filed any affidavit and had also stated that she has not paid any amount to VII towards donation. Thus overall it can be seen that apart from furnishing the affidavit, the assessee had not substantiated his case by producing the persons called for to carry out a meaningful verification in view of the inherent contradictions in their statement at different point of time. Though letters have been filed by 103 of them, it cannot be given any credence, in the absence of any independent confirmation by way of a sworn statement before the undersigned, as the assessee did not produce these people in ....
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....ctivities on the lines of commercial principles with profit motive and therefore the assessee cannot be considered as a charitable institution under section 2(15) of the Act and hence, it is not eligible for exemption under section 11 of the Act. 12.1 The learned Commissioner of Income Tax (Appeals) further relied in the decision of the following cases: a) V.S.Govindasamy Naidu & Sons Vs. ACIT reported in 324 ITR 44 wherein it was held that "having regard to the fact that the amount that had been received was capitation fees, it could not be characterized as donation. Since it does not involve any interpretation as regards section 10(22) of the I.T. Act, we do not find any justification to admit this case. In such circumstances, the tax case appeal is rejected at the admission stage itself and is accordingly dismissed." b) CIT Vs. Durga Prasad More reported in 82 ITR 540 and Sumati Dayal reported in 214 ITR 801 wherein it was held that human probabilities and realities are to be taken into consideration while dealing with in complex matters. Therefore, it is for the assessee to prove that why so many parents and guardians of the students studying in this instit....
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....o were not employed during the relevant assessment years, could not have any knowledge on the state of affairs of the assessee for the relevant assessment years. e. The approval under section 80G of the Act was periodically renewed and available to the assessee during which period the assessee has received donations and the donors were allowed the benefit of 80G. f. Various higher judiciary and the Tribunal has held that as per section 2(15) the activity of education per se is charitable in nature and does not require the subjective satisfaction of the Revenue authorities and moralistic and altruistic grounds. Reliance was placed in the following decisions:- i) DDIT Vs. Shanti Devi Progressive Education Society -340 ITR 320(Del) ii) DIT Vs. Garden City Educational Trust -330 ITR 480 (Kar) iii) Gaur Brahmin Vidya Pracharini Sabha Vs. CIT - 34 SOT 371(Del) iv) ITO Vs. Kaushalya Medical Foundation -31 SOT 119 (Mum) v) ACIT Vs. Graphic Era Educational Society -108 TTJ 608 vi) Reliable Educational & Alliance Society Vs. CIT - 126 TTJ 407 (Del) vii) DCIT Vs. Beer Shiva Educational Social Welfare society 107 ....
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....the following decisions:- i) CIT Vs. Tolly Gunge Club Ltd - 107 ITR 776 (SC) ii) Sri Venkata Satyanarayana Rice Mills Contractor Vs. CIT - 223 ITR 101 (SC) iii) DIT(E) Vs. Jaipur Golden Charitable Clinical Lab.Trust - 311 ITR 365(Del) iv) CIT Vs. SRMT Staff Association - 221 ITR 234 (AP) v) ACIT Vs. Nagarjuna Educational Society - 46 SOT 501 (Visa) vi) DCIT Vs. Nasik Gymkhana - 77 ITD 500 (Pune) vii) DCIT Vs. Vellore Institute of Technology - 12 Taxman.com 272 (Chennai) viii) CIT Vs. Bengal Mils & Steamers Presbyterian Association - 140 ITR 586(Cal) 12.6 The learned Authorized Representative further argued by stating that more than 85% of the corpus donation received by the assessee was utilized by the assessee trust for the purpose of education. It was further submitted that various judicial authorities have held that the corpus donation cannot be treated as "capitation fees". Reliance was placed in the following decisions:- i) CIT Vs.Karnataka Lingayat Education Society - 371 ITR 249(Kar) ii) CCIT Vs.Geetanjali University Trust - 352 ITR 433 (Raj) iii) Padanilam Welfare Trust Vs.....
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....e & Brakes India seeking admissions at VIT 2003-04 228 to 230 Various letters from Sundaram Finance & Brakes India seeking admissions at VIT 2004-05 231 to 234 29 lakhs donation paid by Brakes India, Light Alloys Products, ABI Showwatech, Turbo Energy seeking admissions at VIT 2004-05 170 to 171 Seized materials ANN/MR/B &D/S 100 (Sheets 1 to 100 letter from Dr.Suresh Kumar Gupta, Alwar Rajasthan seeking admissions at VIT for B.Tech , Bio Tech for his son Mridul Deep Gupta by paying Rs. 8 lakhs 2004-05 90 Book maintained by the assessee under the caption Donation paid by cash by parents of B.Tech students (2003-04 Academic Year) 2004-05 102 To 109 Seized materials ANN/MR/B &D/S2 - Book maintained by the assessee under the caption MANAGEMENT ADMISSIONS PG Courses (2003-2004 academic year) 2004-05 110 to 130 Seized materials ANN/MR/B &D/S4 - Book maintained by the assessee under the caption MANAGEMENT ADMISSIONS MBA Courses (2003-2004 academic year) 2004-05 131 to 139 Book maintained by the assessee under the caption MANAGEMENT ADMISSIONS IT networking (2003-04 academic year) 2004-05 140 to 168 Seized materials A....
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....aced in the following decisions of the Hon'ble Apex Court:- i) Miss. Mohini Jain Vs. State of Karnataka reported in 2 SCC 666 (SC) wherein it was held that capitation fees collected by private educational institution is nothing but price for selling education. The concept of "teaching shop" is contrary to the constitutional scheme and is wholly abhorrent to Indian culture and heritage. Some of the State legislatures passed legislation prohibiting collection of capitation fee and also made the same a punishable offence. ii) Islamic Academy of Education Vs. State of Karnataka reported in 6 SCC 697(SC) wherein directions were given to the State Govts. to constitute a committee headed by a retired High Court judge for prescribing fee structure in professional colleges. The Apex Court further held that if any amount is charged other than the fee prescribed by the committee under any head the same would amount to capitation fee. Therefore, collection of money over and above the fee prescribed by the committee would amount to collection of capitation fees. f) The education would remain as charity where it is imparted systematically for a fee prescribed by the Go....
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....facts and circumstances brought to light by the search operations. The appellant has not produced any satisfactory explanation to any of the defaults, omissions and commissions pointed out in the notice of the Commissioner of Income Tax which shows that the appellant has no proper or satisfactory explanation on facts to sustain its claim for exemption us 11/12. 2. The appellant trust has been showing huge surplus year after year as seen from the following statistics for the past 3 years. Assessment year Surplus Corpus fund donation Total surplus 2000-01 51932115 59765000 57908615 1999-00 27155378 55006760 82162138 1998-99 19985049 35408920 55393969 3. Investigation during and subsequent to the search disprove the claim of the appellant that the donations were voluntary contribution towards corpus fund and prove that donations were, in fact and substance, only capitation fees collected in violation of the laws of the state. 4. The appellant has been charging very high fees from students and making various recoveries much above its costs of operation as is evident from huge surpluses in the income ....
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....able purpose to include education. The word 'education' is not defined in the I.T. Act but it is fairly well settled that running an educational institution would amount to engaging the in the activity of education. The appellant trust which is running an engineering college is therefore prima facie engaged in the education and so is eligible to be treated as a 'charitable trust'. 17. Though the Assessing Officer has concluded that the appellant is engaged in the activity of education as business, no evidence has been shown to support such a conclusion. While an adverse inference on the genuineness of the donations made by Shri Gopinath or by others who were not found in the addresses given or who have not responded to the questionnaires of the AO may be made no positive inference can be made that the corpus donations were nothing but payments received for admissions given in return by a quid pro quo. Details of admission procedures given by the appellant clearly show that the appellant did not have much discretion in making the admissions so that it could collect capitation fees for the admissions. 18. The burden is on the appellant to show that he is eligible fo....
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.... the registration u/s 12AA(3), statements recorded during the course of search from Sri V. Sankar son of the managing trustee and Sri R. Vijayakumar, Secretary to the other Pro- Chancellor, letters from parents and refund files of donations, the details of all of which have been clearly mentioned in the assessment order. 1.c. The learned Commissioner of Income Tax (Appeals) has erred in holding that the assessee has discharged its burden regarding proving the claim u/s 11 without considering that the assessee has delayed furnishing the list of donors for the relevant year especially when the A.O. has proved the facts for the later assessment years. 1.d. The learned Commissioner of Income Tax (Appeals) has erred in holding that "the details of admission procedures given by the appellant clearly show that the appellant did not have much discretion in making the admission so that it could collect the capitation fee for the admission" which is contrary to the established fact and evidence available on record especially when the management had sufficient flexibility in admitting the students under the management quota, the seats were literally sold and the alleged dona....
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....d them to charge higher fees for the different categories. We find from the admission regulations and other documents submitted that 5% of the seats sanctioned by the University of Madras can be given to NRI students who are required to pay the highest scale of fees of Rs. 39200/- + 1000 Dollars. Out of the remaining seats 50% is under the "Free seats category" for which the fee prescribed is only Rs. 12800/-, the remaining 50% falls under "Payment seat category" which attracted a much higher fee of Rs. 47200/-. The reason for narrating the above facts is to appreciate the bigger picture in the field of education in our country. Traditionally education and health were considered the exclusive obligations of the State and was expected to be provided free of cost; subsidized rates or, at cost, to the different segments of the society, depending on their need for support from the State. However, over a period of difficult financial times, and population explosion, when the State was unable to find the necessary resources to discharge its traditional or constitutional obligations, the State found new ways of catering to its citizens in the fields of education and health. One of the way....
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....ions, by an unaided self financing educational institutions cannot deter the "charitable" nature of the activity and in any view make such activity "Commercial" in nature. 15. There is one more angle from which the present case can be approached. Although, charitable institutions earn surplus, if the promoters or the trustees or members of such a charitable institutions are precluded from and did not in fact participate or gain distribution of the surplus and the entire surplus is only applied or accumulated for charitable purposes, then occurrence of the surplus will not in any way militate against the claim of "Charitable" nature of the institutions or make it a commercial venture - CIT vs Pulikkal Medical Foundation Private Limited 210 ITR 301 (Ker). 16. We find from clauses 19 and 20 of the trust deed placed at pages No.6 to 17 of the statement of facts that, there is an absolute embargo on any benefits or remuneration to the trustees or their relatives. It is not also the case of the Revenue that any such benefits have been conferred by the assessee during the year. Hence, for this reason too, the occurrence or recurrence of surplus of the assessee through it....
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.... 2004-05; the retracted statements of V. Sankar and R. Vijayakumar who were neither employed nor had any position in the assessee trust during the relevant year and therefore, could not have had knowledge of the assessee's affairs during the year relevant to assessment year 2001-02; or the letters from parents in 2004 and later, requesting for refund of money, can be relied upon by the Revenue to deny the exemption u/s 11 for assessment year 2001-02." c) By earning surplus, it cannot be said that the assessee is carrying on business activity. "23. Not being content with defending the order of the ld. CIT(A) restoring the exemption u/s 11 and assailing the Revenue's grounds of appeal, the ld.AR advanced erudite arguments on law to justify the grant of exemption u/s 11 which are dealt with hereunder: I. Exemption not anathema to "Surplus" arising out of charitable activity - if "surplus" is applied for "charitable" purposes. a. That the Revenue is importing the language of sec. 10(22) (deleted on 1.4.1999) that the educational institution should "exist solely for education purposes and not for purposes of profit" into sec.11 which has no su....
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....xpenditure, if any surplus results incidentally..." "...it will not cease to be one existing solely for educational purposes, since the object is not one to make profit. The decisive or acid test is whether, on an overall view of the matter, the object is to make profit. In evaluating or appraising the above, one should also bear in mind the distinction / difference between the corpus, the objects and the powers of the concerned..." "...10(22) should be evaluated or investigated every year and only if it was found that the 'institution' existed for educational purposes in the relevant year and even if any profit resulted which was only incidental to the purpose of education, the income would be...". American Hotel & Lodging Association Educational Institutes vs. CBDT - 301 ITR 86 (SC) "...The mere existence of profit / surplus did not disqualify the institution ...". ACIT vs. Surat Art Silk Cloth Manufacturers Association - 121 ITR 1 (SC) - 5 member bench "... Not involving any activity for profit - meaning and scope ..." "... So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the defini....
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....ulation of income will not disqualify an institution for the benefits of section 10(23). Surplus is to be understood in contradistinction to generation of income with the sole motive of profit if one has to properly understand the legislative intent of section 10(23C)(vi)..." "... Though charity is a laudable object, that consideration is irrelevant under the said provision. What is relevant is purpose and administration of the institution only for education and nothing more or nothing less or anything else ..." Breach Candy Hospital Trust vs. Chief Commissioner (BOM) - 322 ITR 246 (BOM) 25. On a thorough reading of the judgments relied on, extracts from which are given above, we find that they apply in greater force to the assessee, whose claim for exemption is u/s 11, although most of the judgments have been rendered under sec.10(22). We notice that, while sec 10(22) had an express condition that the institution should exist "not for purposes of profit" sec.11 does not impose any such condition. If the incidence of profit is not an impediment for allowing exemption u/s 10(22), as decided by the above line of cases and CBDT Circular, we fail to see the R....
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.... the poor, education, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities. 2.2 entities whose object is 'education' would also continue to be eligible or exemption as charitable institutions even if they incidentally carry on a commercial activity subject to the conditions mentioned above." 27. The ld.AR has relied on a line of decisions below, which have held unequivocally that 'education' per se is 'charity' and that there are no strings attached. P.C. Raja Ratnam Institution vs. Municipal Corporation of Delhi & Others - 181 ITR 354 (SC) "...Test of charitable purpose satisfied by proof of any of the three conditions of relief of poor, education or medical relief...." DIT vs. Garden City Educational Trust - 330 ITR 480 (KAR) "... so long as a trust has education as one of its objects which is one of enumerated heads which qualifies and comes within scope of charitable purpose as enumerated in section 2(15), it has to be accepted that trust is having a charitable purpose as its object and may qualify for claiming exemption in terms of sections 11 ...." ....
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.... Revenue to litigate on what is perhaps one of the simplest definitions under the Income Tax Act. Be that as it may, our task in subscribing to this submission is made easy by the direct decisions on this issue cited above, apart from the unequivocal pronouncement in the CBDT circular reproduced above. 29. In coming to the above conclusion, we have also followed the decision in the case of Jaypee institute of information technology society vs DGIT (Exemptions) 28 DTR 242 (Del), which has held that " ..... very fact that it is granted the status of deemed University by UGC is a clinching factor insofar as institutionalized education conducted by the petitioner is concerned ...", when the Revenue sought to deny exemption u/s 10(23C) on account of objects not considered as `educational' by it. No doubt the assessee became a `Deemed University' only from the following year. However, we are noticing this decision only for the purpose of reinforcing our finding that assessee was only engaged in the activity of education, which, per se, is a charitable purpose u/s 2(15). 30. As regards 'Education is NOT business', it was submitted before us, again, in our....
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....on of the said income for religious and charitable purposes". 34. While interpreting 'not involving any activity for profit' governing the 4th limb of sec. 2(15), the Supreme court in additional CIT vs. Surat Art Silk Cloth Manufacturers Association 121 ITR 1 (SC) has held that "so long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and It is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or NOT. 35. Other decisions in support of the above preposition relied on by the assessee are: Dharmadeepthi vs. CIT 114 ITR 454 (SC) CIT vs. Aroor 115 ITR 418 (KAR) Additional CIT vs. A.L.N. Rao Charitable Trust 102 ITR 474 (KAR) 36. In the assessee's case, it is not the case of the Revenue that income has not been 'applied' for charitable purposes. We have held above that 'education' per se is a charitable purpose. The assessee's only source of income is the surplus arising from operating the educational institution, which is 'income derived from property held for charitab....
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....f the trust or the institution is a institution ..." DIT(E) vs. Willington charitable trust - 330 ITR 24 (MAD) "... Charitable purpose - exemption - business income if utilized towards achievement of object of assessee - trust it would be incidental to achievement of object - assessing officer to decide as to whether such business income used for attainment of object ..." "...Held, when a business income was used towards the achievement of the object of the trust it would be incidental to the achievement of the object of the trust notwithstanding the profit and gain involved therein. Asst. CIT vs. Thanthi Trust (2001) 247 ITR 785 (SC) applied ..." "... Honourable apex court in the above said judgment was pleased to hold - sufficient is that the income derived from the business from a property held in trust by the assessee is utilized towards the attainment of the objectives - held that it is irrelevant if the business is run on a commercial expediency with a profit motive..." "... We are of the view that when a business income is used towards the achievement of the object of the trust it would amount to incidental to the achievement of the object of the trust notw....
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....al purpose and in that regard to raise or collect funds, donations, gifts - 10(22) ..." CIT vs. Nahata Charitable Trust - 246 ITR 450 (MAD) "... Charitable purposes - charitable trust - exemption - exemption cannot be denied solely on ground that trust carries on business - Income tax Act, 1961 sec. 11..." Sri Aurobindo Ashram Harpegon Workshop Trust vs. ACWT - 271 ITR 553 (MAD) CIT vs. Pulikkal Medical Foundation Pvt. Ltd. - Pra 20, 28 & 29 - 210 ITR 299 (KER) CIT vs. Economic & Entrepreneurship Development Foundation - 188 ITR 540 (CAL) "... That since the assessee was registered under section 25 of the Companies Act, 1956, it could not have any profit to declare any dividend ..." Governing body of Rangaraya Medical College vs. Tax Officer, Award, Circle I Kakinada - 117 ITR 284 (AP) "... Merely because certain surplus arose from society's operations, it cannot be held that the institution was run for purpose of profit so long as no person or individual was entitled to any portion of the profit and the said profit was utilized for the purpose and for the promotion of the objects of the institution ..." CIT vs. Kshatriya Girl Schools Managing Board - 245 ITR ....
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.... excess of income over expenditure. If such excess called profit is distributed to the persons without any consideration then under those circumstances, it will be held that the institution is for the purpose of profit. If the excess over expenditure of income is subsequently spent within the institution directly and indirectly for the development of various fields and branches closely linked with the system of imparting education then under such circumstances, it cannot be held that the institution is run for the purpose of profit. The basic test for determining the institution for profit is the application of profit ..." Indian Institute of Bank vs. DDIT - 74 TTJ 523 (MUM) "...Fact that the assessee is earning surplus consistently in each year is not proof per se of a profit motive - memorandum of association of assessee prohibits distribution of profits to its members by way of dividends - that could not be permitted to be changed in absence of any strong factual or legal grounds ..." "If the profits or income of trade or business is devoted towards charitable purpose and no part thereof is distributed among the members as dividends or bonus, then that trade or business....
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....und account. The ld AR contends, in our opinion rightly, that the Revenue has no basis whatsoever to rechristen the `corpus donation' as `capitation fee' except on his presumptions and assertions in the assessment order and on account of statements by Sri V. Sankar and Sri R. Vijayakumar. 43. The ld. AR has furnished a list of trustees during the year relevant to assessment year 2001-02, in which the name of Sri V. Sankar is not found. The assessee has also filed a certificate from the Trust that Sri V. Sankar was co-opted as a Trustee only on 15.12.2006. Similarly, Sri R. Vijayakumar, secretary to the Pro-Chancellor became an employee of Vellore Institute of Technology only on 2.8.2004, vide copy of his appointment order filed. He was transferred to be Secretary to the Pro-Chancellor only on 9.6.2006, as per copy of office order filed. It is claimed that the statements from the aforesaid 2 persons were obtained under duress and by coercion and have been retracted. Be that as it may, the fact remains that neither Sri V. Sankar nor Sri R. Vijayakumar were either employed or occupying any official position in the Trust during the year relevant to assessment year 2001....
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....above reasons and following the above judgments, the donations received by the assessee towards `corpus fund' cannot be treated as `capitation fees'. We may add that, independent of the aforesaid decisions, another bench of this Tribunal, of which one of us was a member, has in the case of ACIT vs. Balaji Educational and Charitable Public Trust, ITA Nos. 1476 to 1482 /NDS/2010 dt. 5.4.2011, held that "in the absence of proper enquiries or evidence, donations received cannot be treated as capitation fees" following the decisions in: Director of Income Tax (Exemptions) vs. Sri Belimatha Mahasamasthana Socio Cultural and Educational Trust - 46 DTR (KAR) 290 Maharashtra Academy of Engineering and Educational Research vs. CIT - 133 TTJ 706 (PUNE) Governing Body of Rangaraya Medical College vs. ITO - 117 ITR 284 (AP) Ramarao Adik Education Society vs. CIT - ITA No. 5742/MUM/2007 dt. 11.2.2008 Padanilam Welfare Trust vs Dy. CIT - I.T.A.No. 444/Mds/2010 dated 24.12.2010. 47. The alternate submission of the ld. AR, again wearing the hat of caution by stating that without admitting or conceding that, even if the corpus donations received are indeed capitation fees, ....
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.... the institution, it will not cease to be 'voluntary' so as to fall outside the ambit of sec. 11(1)(d) or 12(1). We may add that if such donations were collected from students/parents after the admission, then the Revenue's case may be on a better footing, as then, it could be said that such donations were not `voluntary', but under compulsion, as the student was at the mercy of the institution. However, we fail to see how the assessee could have compelled a student/parent before being admitted to its institution. We are inclined to look at this matter from another dimension too. Sec. 2(24)(iia), sec. 11(1)(d) and sec. 12(1) all use the term 'contribution' and not 'donation'. Neither of these 2 terms have been defined by the Income Tax Act. We will therefore, have to adopt the plain English meaning of these words some of which are: Contribution Law Definition 1. The right of a debtor who has paid the entirety of a debt owed by her and others to recover the others Â' proportionate share of the debt. 2. The right of a joint tortfeasor who has paid more than her proportionate share of a judgment to recover the amount in exces....
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....lled by or subject to individual volition: voluntary muscle contractions. * Capable of making choices; having the faculty of will. * Supported by contributions or charitable donations rather than by government appropriations: voluntary hospitals. Law a. Without legal obligation or consideration: a voluntary conveyance of property. b. Done deliberately; intentional: voluntary manslaughter. [Middle English, from Latin volunt rius, from volunt s, choice, from velle, vol-, to wish; see wel-1 in Indo-European roots.] Synonyms: voluntary, intentional, deliberate, willful, willing These adjectives mean being or resulting from one's own free will. Voluntary implies the operation of unforced choice: "Ignorance, when it is voluntary, is criminal" (Samuel Johnson). Intentional applies to something undertaken to further a plan or realize an aim: "I will abstain from all intentional wrongdoing and harm" (Hippocratic Oath). Deliberate stresses premeditation and full awareness of the character and consequences of one's acts: taking deliberate and decisive action. Willful implies deliberate, headstrong persistence in a self- determined course of....
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....voluntary contributions directed to be held as part of the corpus of the donee cannot be held to be income for the purpose of applying sec. 12(2) ..." . In page 32-33 - "... The matter may be looked at from the point of view of the charity as well. It may be that a charity lives on voluntary contributions and public donations. In most cases, the charities may have to too long to obtain the donations or voluntary contributions. The charity may also have to look everywhere, even heavenward, for contributions and donations of money and windfalls. There is no exercise of control over windfalls in the sense that one cannot say that some more is expected or would come in or that enough had already been secured. The essence therefore, of a windfall or voluntary contribution as opposed to income is that it is unexpected. The characteristic of income is that it is a periodical monetary return coming in with regularity or at least expected regularity. So, voluntary contributions per se are not dealt with by sec. 12(1) of the Act. They need not be, in order to stand outside the field of taxation, because, they are windfalls and hence the very antithesis of income and, therefore, there is no n....
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....iled before us that these `corpus donations' are only 'voluntary contributions' envisage by sections 2(24)(iia), 11(1)(d) and 12(1) and therefore, we hold that these corpus donations are exempt u/s 11(1)(d). 57. The ld.AR further advanced another attractive argument by relying on CIT vs. Tollygunge Club Limited - 107 ITR 776 (SC) to submit that the corpus donation, even assuming, without admitting, was collected at the time of admission, it will not form part of 'income' of the trust but would only be a capital receipt. In that case, a surcharge was levied on the admission of members into a club for the purpose of charity and the surcharge was claimed to be held in trust for charitable purposes and was actually expended for charitable purposes. It was held that "... the surcharge was not a part of the price for admission but was a payment made for the specific purpose of being applied to local charities. ... the only requisites which must be satisfied are that there should be "purposes independent of the donee to which the subject matter of the gift is required to be applied and an obligation on the donee to satisfy those purposes" 58. Applying....
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....23 SOT 124 (HYD) "... Charitable trust - exemption under section 11 - role of Assessing Officer after registration under sec. 12AA - after registration under sec. 12AA, the role of Assessing Officer is limited to denying exemption under sec. 11 qua income not found applied for charitable purposes and does not extend to holding that trust or institution is not established for charitable purpose hence not eligible for exemption under sec. 11 ..." "... The role of the Assessing Officer in such cases stops here. But he cannot go further overruling a superior authority to hold that the trust or institution is not established for charitable purpose. Therefore, the Assessing Officer has exceeded his jurisdiction in saying that the assessee is not entitled to exemption under sec. 11. He can say so, only when the income is not applied for the stated purpose, but not otherwise ..." ITO vs. Trilok Tirath Vidyavati Chuttani Charitable Trust - 90 ITD 569 (CHD) "...When once the character of the institution being charitable is accepted by the Commissioner at the time of granting registration, the Assessing Officer cannot question the charitable character of the institution at t....
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....he ld. CIT(A) in holding that the trust is eligible for exemption u/s 11 in respect of its surplus from education activities and corpus donations received and dismiss the Revenue's appeal." 15. From the above, it is evident that the Tribunal in ITA No.1332/Mds/2010 & C.O.No.94/Mds/2010 vide order dated 9.6.2011 on the earlier occasion in the assessee's own case for the assessment year 2001-02 based on the same search materials, in the same search proceedings and on the same facts has decided that :- a) "Corpus donations" received by the assessee cannot be treated as "capitation fees" and the surplus earned cannot be treated as "income from business". b) The employees of the assessee could not have knowledge on the assessee's affairs. c) By earning surplus, it cannot be said that the assessee is carrying on business activity. d) The assessee is entitled to the benefit of section 11(4A) of the Act. e) Corpus donation received cannot be treated as capitation fee and therefore assessee cannot be denied benefit under section 11. Therefore, for the relevant assessment years 2002-03, 2003-04 and 2004-05 where the assessments are based....
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....0 to 175 also refers to payment such as Rs. 8,00,000/- 2,00,000/- 1,00,000/- and 4,00,000/-, however no conclusive inference can be made that they are capitation fees. j) Page No.176 to 193 contain sheets wherein the remark column it is mentioned as "To Pay 2" To Pay 3 "To Pay 4" Nil Payment etc., however no conclusive inference can be made that they are capitation fees. k) Page 194 to 199 contains letters for refund of donations but there is nothing to suggest that they are forced payments though an air of suspicion may arise. l) Page No.200 to 238 also contains certain requests for refunds from candidates and letters from companies such as Sundaram Finance, Brakes India Ltd., etc., requesting for their candidates to be accommodated on sponsorships. We do not find this practice to be in violation of any law. m) In Page No.239 & 240 there are reference about some payments, admissions etc., but they cannot be conclusively said that it is capitation fee though it may raise an air of suspicion. n) Page No.241 shows course-wise summary of donation which cannot be concluded that they are capitation fees. o) Page no.242 to 244 shows t....
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....roceeded on a wrong premise without any basic materials to establish a case of violation of section 13 of the Act. Therefore, the Tribunal was right in deleting the addition of capitation fees. (ii) That the Assessing Officer had accepted the disclosure of the seized cash as the income of the individual and, therefore it could not be said that assessee-trust had violated the provisions of section 13(1)(d)." ii) In Queen's Educational Society Vs. CIT reported in 372 ITR 699(SC) the Hon'ble Supreme Court held as follows:- "The law common to sub-clauses (iiiad) and (vi) of section 10(23C) of the Income-tax Act, 1961, may be summed up as follows : (1) Where an educational institution carries on the activity of education primarily for educating persons, the fact that it makes a surplus does not lead to the conclusion that it ceases to exist solely for educational purposes and becomes an institution for the purpose of making profit. (2) The predominant object test must be applied-the purpose of education should not be submerged by a profit-making motive. (3) A distinction must be drawn between the making of a surplus and an institution being carried on "for profit". ....
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....ar 2001-2 will prevail for the assessment years 2002-03, 2003-04 and 2004-05 also, which is as follows:- a) "Corpus donations" received by the assessee cannot be treated as "capitation fees" and the surplus earned cannot be treated as "income from business". b) The employees of the assessee could not have knowledge on the assessee's affairs. c) By earning surplus, it cannot be said that the assessee is carrying on business activity. d) The assessee is entitled to the benefit of section 11(4A) of the Act. e) Corpus donation received cannot be treated as capitation fee and therefore assessee cannot be denied benefit under section 11. Accordingly, we hereby direct the learned Assessing Officer to grant the benefit of section 11 to the assessee and delete the addition made by denying such benefits for all the relevant assessment years 2002-03, 2003-04 & 2004-05. Thus, the ground nos. 2 & 4 is decided in favour of the assessee. We also make it clear that we have perused the citations relied upon by the learned Departmental Representative, however we find the same are distinguishable to the facts of the cases herein before us. Ground Nos....