TaxTMI 
TaxTMI 
2021 (8) TMI 30
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....ister of Society, Uttar Pradesh. The society was granted registration under section 12AA of the Income-tax Act, 1961 (in short 'the Act') by the competent authority vide order dated 16/12/2005. During the scrutiny proceedings, the Assessing Officer observed that various fees charged to students by the medical colleges are fixed by the state level fixation committees, whereas the assessee has charged fees in excess, which was calculated by the Assessing Officer as under: Course Name Fees collected per student (a) No of students (b) Total Fees (a*b) Fees to be collected per student (c) Total Fees to be collected (c*b) Excess fees collected (a-c)*b MBBS 1 year 600000 99 59400000 407000 40293000 19107000 11 year 650000 100 65000000 407000 40700000 24300000 III year 715000 100 71500000 407000 40700000 30800000 BAMS 1 year 75000 50 3750000 15000 750000 3000000 II year 75000 50 3750000 15000 750000 ' 3000000 111 year 150000 50 ....
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....348.23 Balance Receipts after deducting excess fees (B) 16,70,40,848.23 15% of Above (C ) 2,50,56,127.23 To be Utilised B-C=D 14,19,84,721.00 Utilised 28,59,66,154.00 Less: Depreciation added back as disallowed as discussed above 0.00 Total Utilised (E ) 28,59,66,154.00 Short Utilisation (1)- E) 0.00 (F) Total Taxable Under MMR (no set to be allowed)= (A)+(F) 10,32,13,500.00 2.4 The Ld. CIT(A) after considering detailed submission of the assessee, deleted the addition mainly on the ground that there was no violation of section 11, 12 and 13 of the Act and Assessing Officer is concerned with the application of the income only. The relevant finding of the leaned CIT(A) has reproduced as under: "In the assessment order, the AO has alleged that the appellant society has charged fees in excess of the fees fixed by the fixation committee. However, the appellant has explained that the order of the fee fixation committee dated 14.09.2011 is an interim order which is applicable only for the academic year 2011-12 and is irrelevant for the year under consideration. It has been contended that for the relevant year no fee ....
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....come and it is not significant how hat income was earned. As no violation of IT Act has been indicated by the AO, o adverse view can be taken in the assessment of the society's income." 3. Before us, the parties appeared through Video conferencing facility. The assessee filed an affidavit by the trustee declaring that no fee was fixed by the Fee fixation committee for the academic year relevant to the assessment year 2014-15. 4. Before us, the learned DR relied on the order of the Assessing Officer and submitted that in view of the capitation fee received, the assessee was engaged in the business and not charity. The learned DR also relied on the decisions cited by the Assessing Officer. 5. On the contrary, the learned counsel of the assessee relied on the order of the Ld. CIT(A) and decision of the Hon'ble Supreme Court in the case of Queens Education Society (2015) 55 taxmann.com 255. 6. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the society is registered under section 12AA of the Act by the Competent Authority for charitable activity of "education" and said registration is in operati....
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....tution, and the manner in which admissions could be granted was also considered. This Court held that private unaided recognized/affiliated educational institutions running professional courses were entitled to charge a fee higher than that charged by government institutions for similar courses, but that such a fee could not exceed the maximum limit fixed by the state. It held that commercialization of eduction was not permissible, and "was opposed to public policy and Indian tradition and therefore charging capitation fee was illegal." With regard to private aided recognized/affiliated educational institutions, the Court upheld the power of the government to frame rules and regulations in matter of admission and fees, as well as in matters such a recruitment and conditions of service of teachers and staff. Though a question was raised as to whether the setting up of an educational institution could be regarded as a business, profession or vocation under Article 19(1)(g), this question was not answered. Jeevan Reddy, J., however, at page 751, para 197, observed as follows:- ".....While we do not wish to express any opinion on the question whether the right to establish an ....
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....ed to establish and/or administer a professional college (b) that 50% of the seats in every professional college should be filed by the nominees of the Government or University, selected on the basis of merit determined by a common entrance examination, which will be referred to as "free seats"; the remaining 50% seats ("payment seats") should be filled by those candidates who pay the fee prescribed therefore, and the allotment of students against payment seats should be done on the basis of inter se merit determined on the same basis as in the case of free seats (c) that there should be no quota reserved for the management or for any family, caste or community, which may have established such a college (d) that it should be open to the professional college to provide for reservation of sets for constitutionally permissible classes with the approval of the affiliating university (e) that the fee chargeable in each professional college should be subject to such a ceiling as may be prescribed by the appropriate authority or by a competent court (f) that every state government should constitute a committee to fix the ceiling on the fees chargeable by a professional college or class of....
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....s well. 31. Counsel for the institutions, as well as the Solicitor General, submitted that the decision in Unni Krishnan's case, insofar as it had framed the scheme relating to the grant of admission and the fixing of the fee, was unreasonable and invalid. However, its conclusion that children below the age of 14 had a fundamental right to free education did not call for any interference. 32. It has been submitted by the learned counsel for the parties that the implementation of the scheme by the States, which have amended their rules and regulations, has shown a number of anomalies. As already noticed, 50% of the seats are to be given on the basis of merit determined after the conduct of a common entrance test, the rate of fee being minimal. The "payment seats" which represent the balance number, therefore, cross- subsidize the "free seats". The experience of the educational institutions has been that students who come from private schools, and who belong to more affluent families, are able to secure higher positions in the merit list of the common entrance test, and are thus able to seek admission to the "free seats". Paradoxically, it is the students who co....
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....grant of such affiliation and recognition. The private institutions are right in submitting that it is not open to the Court to insist that statutory authorities should impose the terms of the scheme as a condition for grant of affiliation or recognition; this completely destroys the institutional autonomy and the very objective of establishment of the institution. 37. The Unni Krishnan judgment has created certain problems, and raised thorny issues. In its anxiety to check the commercialization of education, a scheme of "free" and "payment" seats was evolved on the assumption that the economic capacity of first 50% of admitted students would be greater than the remaining 50%, whereas the converse has proved to be the reality. In this scheme, the "payment seat" student would not only pay for his own seat, but also finance the cost of a "free seat" classmate. When one considers the Constitution Bench's earlier statement that higher education is not a fundamental right, it seems unreasonable to compel a citizen to pay for the education of another, more so in the unrealistic world of competitive examinations which assess the merit for the purpose of admission solely on th....
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....ght of rational selection, which it devised for itself, subject to the minimum qualification that may be prescribed and to some system of computing the equivalence between different kinds of qualifications, like a common entrance test. Such a system of selection can involve both written and oral tests for selection, based on principle of fairness. 41. Surrendering the total process of selection to the state is unreasonable, as was sought to be done in the Unni Krishnan scheme. Apart from the decision in St. Stephen's College v. University of Delhi, which recognized and upheld the right of a minority aided institution to have a rational admission procedure of its own, earlier Constitution Bench decision of this Court have, in effect, upheld such a right of an institution devising a rational manner of selecting and admitting students. 42. In R. Chitralekha and Anr. v. State of Mysore and Ors., while considering the validity of a viva-voce test for admission to a government medical college, it was observed at page 380 that colleges run by the government, having regard to financial commitments and other relevant considerations, would only admit a specific number o....
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...., however, amounted to profiteering. 6.1.2 In the case of Islamic Academy (supra) also held that each institute must have the freedom to fix its own fee structure taking into consideration the needs to generate funds to run the institution and to provide facilities necessary for the benefit of the students, however, there can be no profiteering and charging of capitation fees. 6.1.3 In P.A. Inamdar (supra), the Supreme Court while answering question no. 3 held that every institution is free to devise its own fee structure but the same can be regulated in the interest of preventing profiteering. No capitation fee can be charged. Leverage was allowed to educational institutions to generate reasonable surplus to meet cost of expansion and augmentation of facilities which would not amount to profiteering. The Court upheld the two Committees for monitoring admission procedure and determining fee structure as held in Islamic Academy was permissible as regulatory measures aimed at protecting the interest of the student community as a whole as also the minorities 6.2 Before the learned CIT(A), the assessee has submitted that pursuant to Supreme Court decision's mentioned above,....
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....thic Medical Colleges only which is clearly mentioned in the order and has no application on the private ayurvedic medical colleges. As regards fee for paramedical courses, it is submitted that Uttar Pradesh State Medical Faculty, U.P. had granted permission to start the paramedical courses vide letter no. 3461/12 dated 23.05.2012. As per point 3 of the aforesaid letter the college is permitted to charge tution fee of Rs. 36000/- per student. The assessee college has charged the total fee of Rs. 37500/- which includes tution fee Rs. 36000/- and examination fee Rs. 1500/-. Thus the assessee has not charged any excess fee than fixed by the authorities. Ld. AO has taken the fee fixed at Rs. 28000/- as per own imagination. The copy of letter of U.P. State Medical Faculty is enclosed and Marked as ANNEXURE-G. In view of the discussion and facts stated above it is very clear that no fee has been fixed by the Govt, or and other Competent Authority for MBBS and BAMS courses run by the assessee, for the academic session 2013-14 (relevant to A.Y. 2014-15). 19. That with regards to question no 2 as to whether assessee has charged fee in excess of fee fixed ....