TaxTMI 
TaxTMI 
2021 (11) TMI 382
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....nces of the case, the Income Tax Appellate Tribunal was right in holding that there was no violation of Section 13(1)(c) of the Income Tax Act, 1961, while not considering the facts and material brought on record by the Assessing Officer for the period in question; and the Tribunal has erred in not adjudicating on the issue of denial of deduction in its proper perspective? 2. Whether collection of capitation fees in the name of voluntary contribution and general of huge surplus would tantamount to commercialization of education by the assessee and, therefore, the assessee - institution was rightly not considered by the Assessing Officer as existing solely for educational purposes within the meaning of Section 2(15) or Section 10(23)(c) of the Income Tax Act, 1961 and the Tribunal has erred in dismissing the appeal of the revenue on the issue of generation of huge surplus without appreciating the material on record?" 3. The assessee - trust is running various institutions offering degree/training in various academic courses in Bangalore and was granted registration under Section 12A(a) of the Act. Relating to the assessment years under consideration, the assessee filed i....
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....endered any services for which she was remunerated. It was only diversion of funds of the assessee - trust. The breach of Section 13(1)(c) being apparent, the Tribunal ought to have allowed the appeal filed by the revenue. The assessee collecting the capitation fee in the garb of voluntary contribution amounts to commercial activities. Such institutions cannot be considered as charitable institutions within the meaning of Section 2(15) of the Act. 6. Learned counsel for the assessee justifying the impugned order submitted that mere existence of surplus does not mean that the assessee is not engaged in the charitable activity of imparting education. No violation of provisions of Section 13(1)(c) was made by the assessee and the order of the Assessing Officer has been rightly reversed by the CIT (Appeals) and the Tribunal. The Assessing Officer merely on surmises and conjectures had come to a conclusion that the salary/remuneration paid to the two trustees was highly excessive and not in proportionate to the services rendered by them. The department cannot regulate the management of the assessee - trust. Indeed, the salary/remuneration paid to the trustees were duly accounted and ....
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.... of the Act. The Tribunal has rightly rejected the plea of the revenue as bereft of merit. The alleged breach of Section 13(1)(c) of the Act based on these factors is baseless, wholly untenable. Thus, we answer the substantial question of law No.1 in favour of the assessee and against the revenue. Re. Substantial Question of Law No.2. 10. Section 2(15) of the Act reads thus "2(15) "Charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including water-sheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless.- (i) such activity is ....
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....ion of Section 11(5) read with Section 13(1)(d) by the assesseetrust attracts the maximum marginal rate of tax and the entire income of the trust?" was considered and held that in case of contravention of Section 13(1)(d), the maximum marginal rate of tax under Section 164(2), proviso is applicable only to that part of income of the trust which has forfeited exemption and not the entire income. The Hon'ble Delhi High Court in the case of DIT (Exemption) vs. Agrim Charan Foundation reported in (2002) 253 ITR 593 (Delhi) has held that the legislature has clearly contemplated that in a case, where the whole or part of the relevant income is not exempted under Section 11 by virtue of violation of Section 13(1)(d) of the Act, tax shall be levied on the relevant income or a part of the relevant income at the maximum marginal rate. The Co-ordinate bench of this Court concurring with these judgments has held that for violating Section 11(5) of the Act, the entire income of the assessee - trust cannot be assessed for tax. The same analogy would be applicable even to Section 13(1)(c) of the Act also. Thus, the entire income of the respondent - trust cannot be assessed for tax even for violat....