TaxTMI 
TaxTMI 
2022 (11) TMI 137
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....scends beyond the mystical cycle of birth, but also to achieve terrestrial satisfaction and then mundane goals. It is a tool to eradicate social injustice. Globalization in every field has resulted in creation of more opportunities. Every rational parent, not privileged by affluence, strives to get their children educated beyond their means. Their quest to fulfil their dreams through their children has envisioned certain educational institutions to metamorphose the service, once known and worshipped to be a noble occupation, into an opportunity to make money. Our Constitution, under various Articles has enunciated the principles for equality and equal opportunity, the requirement to protect women, children and the youth of this nation and to prevent them from exploitation. 2. Education has been dealt with in the Constitution, in the following manner: "Article 14. Equality before law.-The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India. Article 15. Prohibition of discrimination on grounds of religion, race, caste, sex or place of birth.- (1) The State shall not discriminate aga....
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....or the purposes of this article and article 16, "economically weaker sections" shall be such as may be notified by the State from time to time on the basis of family income and other indicators of economic disadvantage. ..... Article 19. Protection of certain rights regarding freedom of speech, etc.- (1) All citizens shall have the right- ...... (g) to practise any profession, or to carry on any occupation, trade or business ..... (6) Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,- (i) the professional or technical qualifications necessary for practising any profession or carrying on any occupation, trade or business, or (ii) the carrying on by the State, or by a corporation owned or control....
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....ight guaranteed under that clause. (2) The State shall not, in granting aid to educational institutions, discriminate against any educational institution on the ground that it is under the management of a minority, whether based on religion or language. Directive Principles of State Policy .... Article 37. Application of the principles contained in this Part.-The provisions contained in this Part shall not be enforceable by any court, but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State to apply these principles in making laws. Article 38. State to secure a social order for the promotion of welfare of the people.-(1) The State shall strive to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life. (2) The State shall, in particular, strive to minimise the inequalities in income, and endeavour to eliminate inequalities in status, facilities and opportunities, not only amongst individuals but also am....
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....nt or guardian to provide opportunities for education to his child or, as the case may be, ward between the age of six and fourteen years. Article 243G. Powers, authority and responsibilities of Panchayats.- Subject to the provisions of this Constitution, the Legislature of a State may, by law, endow the Panchayats with such powers and authority as may be necessary to enable them to function as institutions of self-government and such law may contain provisions for the devolution of powers and responsibilities upon Panchayats at the appropriate level, subject to such conditions as may be specified therein, with respect to- (a) the preparation of plans for economic development and social justice; (b) the implementation of schemes for economic development and social justice as may be entrusted to them including those in relation to the matters listed in the Eleventh Schedule Extract of Eleventh Schedule. .... 17. Education, including primary and secondary schools. 18. Technical training and vocational education. 19. Adult and non-formal education. 20. Libraries Article 243W. Powers, authority and responsibilities....
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.... Constitution, right to free education until the age of 14 years was held to be absolute and education thereafter, though was still the responsibility of the State, was subject to economic capacity and development of the State, by the the 86th Amendment Act, passed in 2002, the Right to education was made a fundamental right upto the age of 14 by inserting Article 21A to the Constitution with effect from 01.04.2010. The States were also required to promote and protect the educational and economic interest of the weaker section of the people and protect them from social injustice and exploitation. Therefore, by the very First Amendment to the Constitution in 1951, Article 15 was amended to save the challenge to any action taken by the State to protect the interest of the weaker sections. The minorities are guaranteed a right to establish and maintain educational institutions. The local bodies have been entrusted with duties to promote education under the Constitution as found in the eleventh and twelfth schedule. By the Constitution 42nd Amendment Act, 1976, the subject of education was moved from State list to Concurrent list. The primary responsibility of education, though was rep....
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....y the Revenue assailing the orders dated 12.04.2017 and 13.11.2019 passed by the Income Tax Appellate Tribunal, Chennai, in favour of the respondents/Assessees. 5. On 15.06.2021, this Court admitted the Tax Case Appeal Nos. 303, 304, 305, 306, 307, 308, 309 and 310 of 2021 by framing the following substantial questions of law: "(1) Whether on facts and in the circumstances of the case, the Tribunal was right in holding that the Assessee is entitled for benefit of Section 11 with respect to the receipts of the capitation fees/monies under the head donation from its sister trusts. (2) Whether on facts and in the circumstances of the case, the Tribunal was right in not appreciating that the said monies are the capitation fee received by the trusts in a quid pro quo manner for allotment of seats to the students in the college run by the sister trusts having common controlling trustee and the same was illegally passed on as voluntary donation. (3) Whether on facts and in the circumstances of the case, the Tribunal was right in not appreciating the Assessees' aiding of illegal action of receipt of capitation fee is against the public policy and the provision....
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....eived by the Assessee as donations from number of persons. In order to verify the same, elaborate exercise was undertaken by the Assessing Officer by issuing summons to various persons and their sworn statements were recorded. 8.3. During the enquiry, it revealed that the said amount was paid to M/s.United Educational Foundation, in lieu of procuring seats in Sri Venkateswara College of Engineering located at Sriperumbudur, Kancheepuram District, which is a unit of the Assessee - Sri Venkateswara Educational and Health Trust. On further analysis, the Assessing Officer concluded that there was a nexus between M/s. United Educational Foundation, M/s. MAC Charities, M/s. MAC Public Charitable Trust and Sri Venkateswara College of Engineering. The Assessing Officer also concluded that the Assessee utilised M/s.United Educational Foundation, M/s. MAC Charities, M/s.MAC Public Charitable Trust as a tool for transfer of capitation fees received from the students and thereby virtually sold education for a price. Such practice of receiving donation and/or capitation fee as a condition precedent for admitting a student is opposed to the provisions of the Tamil Nadu Educational Institution....
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....undation, were summoned, examined on oath and stated that the donations were paid in lieu of admission of some students known to them in the college run by the Assessee. Thus, it is clear that the Assessee is running a college and for admitting the students in the same, they have collected fees from the students in accordance with the AICTE norms; apart from the applicable fees, they have also collected various other amounts towards tuition fees, campus recruitment, transport etc., in the form of donation with specific direction that these donations shall form part of the corpus; and no donations have been collected from any of the students. However, the reply of the assessee was not accepted by the assessing officer. According to the assessing officer, the Assessee trust and other trusts are connected with each other. The capitation fee has been received in lieu of procuring seats in Sri Venkateswara College of Engineering as donation by M/s. United Educational Foundation and it was systematically routed through the other "pass-through" trusts belonging to Mr. A.C. Muthiah and ultimately it reached Sri Venkateswara College of Engineering operating under the name and style of M/s.S....
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....ne trust to other trust under the guise of charity. While so, the assessing officer held that the amount of non-voluntary contribution i.e., capitation fees received of Rs.3,60,00,000/- was treated as income not eligible for exemption under section 11 and taxed protectively in the hands of the assessee at the rate applicable to an Association of Persons (AOP) and accordingly, passed the assessment order on 31.03.2014, determining the taxable income at Rs.3,60,00,000/- and tax payable at Rs.1,65,27.680/- for the assessment year 2011-12. On the same reasoning, by order dated 27.12.2016, the Assessing Officer completed the assessment for the assessment year 2014-2015, determining the taxable income at Rs.8,00,00,000/- by treating the same as not eligible for exemption under section 11 of the Act. It was further observed that penalty proceedings against the Assessee under Section 27 (1) (c) of the Act will be initiated separately. 10.1. The Assessee viz., M/s. United Educational Foundation / respondent in TCA Nos.59/2022, 305 and 306/2021 relating to the AY 2011-12, 2013-14 and 2014-15 respectively, is a registered trust under Section 12AA of the Act, vide order passed in DIT (E) No....
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....ings, the assessing officer issued a show cause notice dated 07.03.2014 calling upon the Assessee to explain as to why exemption under section 11 should not be denied for the income of Rs.22,03,77,500/-. An explanation was offered by the Assessee on 18.03.2014 stating that the donations received from the donors are voluntary. It was also stated that the Assessee trust is an independent trust and it is in no way connected with Sri Venkateswara Engineering College. It was also stated that donations to other trust is proper application of funds and there is nothing wrong in the donations given to MAC Charities etc. The Assessing Officer, after considering the explanation of the Assessee, was of the opinion that the amount of non-voluntary contribution i.e., capitation fee received at Rs.22,03,77,500/- has to be treated as income and the Assessee was not eligible for exemption under section 11 of the Act, for the assessment year 2011-12. 10.3. On the above said reasoning, the assessing officer passed the orders of assessment dated 31.03.2016 and 31.12.2016, relating to the assessment years 2013-14 and 2014-15, determining the tax payable by the assessee at Rs.16,22,60,670/- and Rs.1....
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....n under Section 11 of the Act. Accordingly, the assessing officer passed an order of assessment dated 31.03.2014 determining the taxable income at Rs.10,65,00,000/- and tax payable at Rs.4,45,51,040/- for the AY 2011-12. On the same reasoning, similar assessment orders were passed by the assessing officer determining the tax payable at Rs.14,53,56,240/- and Rs.7,76,87,580/- in respect of the assessment years 2013-14 and 2014-15 respectively. 12. Assailing the orders of assessment passed by the Assessing Officer for various assessment years, the Assessee Trusts filed statutory appeals before the Appellate Authority namely the Commissioner of Income Tax (Appeals). Before the CIT(A), on behalf of the Assessees, it was contended that the donations were received voluntarily; and the Assessee Trusts were in no way connected with the securing admission of students in Sri Venkateswara College of Engineering for the children of the donors. In the records of the Assessee Trusts, they had shown these donations as income only and applied the same for charitable purposes as per law. As a charitable institution, there is no prohibition under law to receive donation from another charitable ins....
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.... crores from M/s. United Education Foundation which is also registered u/s.12A(a) of the Act. The Assessee paid donation of Rs.3.60 crores to M/s. Sri Venkateswara Educational and Health Trust which is also registered u/s.12A(a) of the Act. The Assessee also received donation from other trusts and paid donation to other trusts also. It is a fact that Dr.A.C.Muthiah is a trustee in M/s. United Education Foundation from which Rs.3.60 crores was received as donation by the Assessee trust. He is not a trustee in Sri Venkateswara Educational and Health Trust. The donation given by M/s. United Education Foundation to the Assessee trust is on its own volition and there is no coercion by the Assessee trust exerted on the donor trust. The AO did not bring any evidence to prove that the donation given by M/s. United Education Foundation to the Assessee trust is either by undue influence or intimidation. The alleged collection of capitation fee by the United Education Foundation for admission to engineering college owned by Sri Venkateswara Educational and Health Trust is no way connected with the activities of the trust. No evidence was brought on record by the AO to prove that the Assessee ....
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....o delete the addition of Rs.3,60,00,000/- made in the assessment order. 4.4 Regarding the deposit of Rs.17,95,000/- with M/s. SPK MAC Charitable Trust as on 31.03.2011, the Assessee contended that the said amount is not an investment but a loan transaction. In the Assessee's own case, the jurisdictional Tribunal held that it is not in violation of Sec.13 of the Act. Respectfully following the decision, the AO's finding is rejected and it is held that there is no violation of Sec.13 of the Act by the Assessee trust. Reliance is also placed on the decision of Delhi High Court in the case of DIT (E) vs. ACME Educational Society (2010) 326 ITR 146. 4.5 Regarding the treatment of donation paid by the Assessee to other trusts as non-application, it is to be observed that the Assessee not only donated money to Sri Venkateswara Educational and Health Trust but also donated to ten other trusts. The donations other than corpus donations shall for the purposes of sec.11 be deemed to be income derived from property held under trust for wholly charitable or religious purposes and the provisions of that section and section 13 shall apply accordingly as per sec.12 (1) of....
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....rom various persons. 15. The Tribunal, by a common order dated 12.04.2017, rejected the contentions so made on the side of the Revenue by observing that the statements recorded from the donors revealed that they made the donations voluntarily to the charitable institutions. Further, the Assessing Officer did not examine the source of investment made by the donors. While so, it could be inferred that the Assessing Officer had coerced the individual donors and obtained the statements. The Tribunal also, was of the view that none of the donors or the parents/students studying in the educational institutions did make any complaint to any of the authorities complaining the so-called extortion of money in the form of donation for securing admission in the educational institutions run by M/s. Sri Venkateswara Educational & Health Trust. It was the further view of the Tribunal that there is no bar for the Assessee Trusts to receive and/or accept voluntary donations from the donors or from the relatives/parents of the students studying in the educational institutions connected with the charitable trusts. In effect, the Tribunal opined that the Assessing Officer had not brought out credib....
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....horities regarding extortion by way of donations for securing admission in the educational institutions managed by M/s. Sri Venkateswara Educational & Health Trust. It is a well-known fact that accepting donations for granting admission in the education institutions is against the law of the land viz., The Tamil Nadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992 and in violation of the same leads for penal action which includes imprisonment. In the case of Assessee trust, nothing is brought before us to point out that the law enforcing authorities of the State Govt., or the Central Govt., have initiated any coercive action against any of these Assessees for violating any provisions of the relevant Act. Further nothing is brought before us to establish that the Assessee trusts are barred from accepting donations from the relatives/parents of the students studying in the educational institutions connected to those charitable trusts. In the case of MAC Educational Foundation, the Assessee trust had received from M/s. United Education Foundation. Though the Ld.AO state that the Assessee Trust has received the donation for granting admission to student....
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....e activities. Considering these facts and circumstance of the case, we are of the considered view that no interference is necessary in the decision of the Ld.CIT(A) who had extensively analysed the issue and decided the matter by placing reliance on the various decisions of higher judiciary. Therefore, we hereby sustain the order of the Ld.CIT (A) in the case of all the Assessees trusts mentioned hereinabove." The aforesaid order of the Tribunal dated 12.04.2017 is under challenge in TCA Nos.59, 60, 62 and 63 of 2022 at the instance of the Revenue. 16. In the mean while, challenging the orders dated 31.12.2018 passed by the CIT(A) relating to the AYs 2012-13, 2013-14 and 2014-15, the Revenue filed appeals before the Tribunal. It was contended on behalf of the Revenue that the Appellate Authority erred in deleting the disallowance made by the Assessing Officer and accepted the claim of the Assessees towards receipt of the amount as voluntary donation. It was further contended that the donations were in fact collected by the Assessee Trusts towards capitation fee as a condition precedent for admitting the students in the Engineering College run by Sri Venkateswara Educational a....
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.... of the case and by recording the statement of individual donors as well as some parents. Adding further, the learned senior standing counsel submitted that the Appellate Authority as well as the Tribunal, did not take note of the nexus between M/s. United Educational Foundation, M/s. MAC Charities, M/s. MAC Public Charitable Trust and M/s. Sri Venkateswara College of Engineering in successfully channelising the donations received from one Trust to the other; the amount received in the form of donation was in fact towards capitation fee to procure seat for the student in the college; and therefore, it cannot be said that the amount received was a voluntary contribution. 18.2. The learned Senior Standing Counsel for the Revenue further submitted that the founder trustee of the Assessee trust namely MAC Public Charitable Trust Dr. A.C. Muthiah is also the trustee of M/s.United Educational Foundation, which gave donation to the Assessee trust; the said Dr. A.C. Muthiah is also the founder trustee of Sri Venkateswara Educational and Health Trust, which owns the College viz., Sri Venkateswara College of Engineering; and thus, the Assessee Trusts are having nexus with one another and ....
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....g Officer. When the entire transaction has been made in a quid pro quo manner, which could be evident from the statements made by some of the parents of the students, it was a clear case of involuntary donation and therefore, the Assessing Officer was wholly justified in passing the orders of assessment. It is also submitted that the exemption granted to the respondents / trusts under Section 12(1) of the Act is to enable them to receive voluntary contribution; the donations and/or contributions received by the respondent trusts are proved to be involuntary; and hence, they are not entitled to the exemption any longer. 18.5. The learned Senior Standing Counsel for the Revenue further submitted that the capitation fee received was for allotment of seats by the Trust and hence, it cannot be said to be a voluntary contribution/donation to the trust. Such receipt of capitation fee cannot be passed on as a donation by one trust to another and claimed exemption thereof. The nature of money received by the respondent Trusts had lost their character of voluntary donation/contribution at the time of original receipt itself. Therefore, the manner in which the monies spent subsequently wil....
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.... Hence, the Assessing Officer need not depend upon the State Government authorities to initiate action under the Tamil Nadu Educational Institutions (Prohibition and Capitation Fee) Act 1992. With these submissions, the learned Senior Standing Counsel prayed for allowing the Tax Case Appeals by setting aside the orders passed by the Appellate Authority as well as the Tribunal. 18.8. In support of his contentions, the learned Senior Standing Counsel appearing for the appellant placed reliance on the following decisions: (i) In T.M.A. Pai Foundation and others v. State of Karnataka and others [2002 (8) SCC 481], the Constitutional Bench of the Hon'ble Supreme Court in Para Nos.28, 57 and 69, held as follows: "28. We will now examine the decision in Unni Krishnan's case. In this case, this Court considered the conditions and regulations, if any, which the State could impose in the running of private unaided/aided recognised or affiliated educational institutions conducting professional courses such as medicine, engineering etc., The extent to which the fee could be charged by such an institution and the manner in which admissions could be granted was also consid....
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....ropriated by payment of capitation fee. Profession has to be distinguished from business or a mere occupation. Where in business, and to a certainextent in occupation, there is a profit motive, profession is primarily a service to society wherein earning is secondary or incidental. A student who gets a professional degree by payment of capitation fee, once qualified as a professional, is likely to aim more at earning rather than serving and that becomes a bane to society. The charging of capitation fee by unaided minority and non-minority institutions for professional courses is just not permissible. Similarly, profiteering is also not permissible. Despite the legal position, this Court cannot shut its eyes to the hard realities of commercialisation of education and evil practices being adopted by many institutions to earn large amounts for their private or selfish ends. If capitation fee and profiteering is to be checked, the method of admission has to be regulated so that the admissions are based on merit and transparency and the students are not exploited. It is permissible to regulate admission and fee structure for achieving the purpose just stated." (iii) In P.S. Govindasa....
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....interpretation." (iv) In Brij Basi Education and Welfare Society (supra), it was held by the Delhi High Court as follows: "15. The law regarding reopening of assessment is well-settled. The reliance placed upon the findings of the earlier assessment proceedings is misplaced. If the assumption of jurisdiction is held to be valid, the Appellant cannot place undue credence on the earlier assessment proceedings. Once an assessment is reopened, the initial order of assessment ceases to be operative and the proceedings start afresh. The Appellant's contention that since the AO had originally accepted the donations to be genuine, he is precluded from treating them to be bogus and making additions, is untenable. The Tribunal has noted that though the Assessee had initially submitted the confirmation of donation at the time of original assessment, however, during investigation by the CBI, some of the donors have confessed that they have not given any such donation. Under interrogation of the donors it was unearthed that the donation detail submitted by the Assessee in the original assessment proceedings was false. Thus, the genuineness of the donors could not be established.....
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....reme Court Cases 690], in para No.8, it was held by the Hon'ble Supreme Court as follows: "8. The crux of the statutory exemption under Section 11 (1) (a) of the Act is not the income earned from property held under the trust but the actual application of the said income for religious and charitable purposes. It is, therefore, necessary to indicate in the trust deed the broad objectives for which the income derived from the property is to be utilised. There is no mention in the trust deed as to how the income derived from the trust property is to be utilised. The public uses the building on payment of rent to the trustees. What is to be done with the money so collected has not been provided in the trust deed. There is no mandate in the trust deed that the income derived from the trust property is to be spent on religious or charitable purposes." (ii) In Commissioner of Income Tax, Bombay City-VII v. Trustees of the Jadi Trust [1981 SCC Online Bombay 347 = (1982) 133 ITR 494] the Bombay High Court held as follows: "22. So far as the provision of s.11 of the Act which was in force at the material time is concerned, we do not think that the legal position is i....
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.... no dispute about the fact that the Assessee exists only for educational purposes, namely, for running a school and not for purposes of profit. it is an educational institution. Section 10 (22) of the Act exempts "any income" of such institution. That would clearly include dividend income as well. 8. Counsel for the Revenue, however, contended that this Court has held in the case of Addl CIT vs. Aditanar Educational Institution (1979) 118 ITR 235, that a society merely running a college cannot utilise the provision as an instrument for exemption in respect of all its sources of income which had no connection with its educational activity. The decision of the Supreme Court in Aditanar Educational Institution vs. Addl. CIT, (1997) 224 ITR 310, to which a reference has already been made was the decision in an appeal from the judgment of this Court in the case of Addl. CIT vs. Aditanar Educational Institution, (1979) 118 ITR 235, and the Supreme Court has not in that judgment held that the width of language of Section 10 (22) notwithstanding income qualifying for exemption should be limited or restricted, having regard to its proximate connection or otherwise with the activity....
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.... The Director of Income Tax (Exemptions) Ward-w [ILR 2006 Kar 4043], it was held by the Karnataka High Court held as follows: "5. Section 11 of the Act deal with exemptions available to income from property held for charitable or religious purposes. Exemption from tax will be allowed only in respect of the income actually applied to the purposes of the trust. Income derived for trust property must be determined on commercial principles. In order to be eligible for the aforesaid exemption the Assessee has to get the trust registered under Section 12A of the Act. The Assessee has to make an application in the prescribed form and comply with the other legal requirements mentioned in the aforesaid section. On receipt of such application for registration the Commissioner is under an obligation to follow the procedure prescribed under Section 12AA before he grants or refuses registration. What he is expected to do on receipt of such an application is, he shall call for such documents or information from the trust in order to satisfy himself about the genuineness of the activities of the trust or institution. In addition to securing information in the aforesaid manner, it is open....
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....ticular donation, he could have summoned the office bearers of the organisation which received that donation. That having not been done, he could not have disputed the genuineness of the donations. 10. There was absolutely no material before the Assessing Officer to show that the funds given to these NGOs/Institutions were used for personal benefit of HCL Perot System or any of its Directors. Therefore, it cannot be said that the finding of fact recorded by Commissioner of Income Tax (Appeals) and Income Tax Appellate Tribunal upholding genuineness of the donations is perverse, calling for intervention by this Court. No contravention of Section 13 of Income Tax Act having been made out and the genuineness of the donations having been accepted by Commissioner of Income Tax (Appeals) as well as by the Income Tax Appellate Tribunal, there is no ground for interference by this Court under Section 260A of Income Tax Act. No substantial question of law arises for our consideration in this case. The appeal as well as CM 3907/2010 for condonation of delay are hereby dismissed." 20. We have heard the learned Senior Standing Counsel for the appellant / revenue and the learned cou....
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....23) (subsequently omitted), or by a fund or trust or institution referred to in sub-clause (iv) or sub-clause (v) or by any university or other educational institution referred to in sub-clause (iiiad) or sub-clause (vi) or by any hospital or other institution referred to in subclause (iiiae) or sub-clause (via) of clause (23C) of section 10 or by an electoral trust. Explanation: For the purposes of this sub-clause, "trust" includes any other legal obligation;] ............ Earlier, prior to the Amendment Act, 1987, sub-clause (iia) stood as follows: (iia) voluntary contributions received by a trust created wholly or partly for charitable or religious purposes or by an institution established wholly or partly for such purposes, not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution. The provision was amendment by Amending Act, 1987 by omitting the words "not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution" with effect from 1-4- 1989. Subsequently the provision was amended and stands as above at the re....
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....r charitable purposes which may be approved by the prescribed authority, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States; or (v) any trust (including any other legal obligation) or institution wholly for public religious purposes or wholly for public religious and charitable purposes, which may be approved by the prescribed authority, having regard to the manner in which the affairs of the trust or institution are administered and supervised for ensuring that the income accruing thereto is properly applied for the objects thereof; (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or (via) any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes an....
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....und, trust or institution or any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1973; (ia) any asset, being equity shares of a public company, held by any university or other educational institution or any hospital or other medical institution where such assets form part of the corpus of any university or other educational institution or any hospital or other medical institution as on the 1st day of June, 1998; (ii) any assets (being debentures issued by, or on behalf of, any company or corporation), acquired by the fund, trust or institution or any university or other educational institution or any hospital or other medical institution before the 1st day of March, 1983; (iii) any accretion to the shares, forming part of the corpus mentioned in sub-clause (i) and sub-clause (ia), by way of bonus shares allotted to the fund, trust or institution or any university or other educational institution or any hospital or other medical institution ; (iv) voluntary contributions received and maintained in the form of jewellery, furniture or any other article as the Board may, by notificat....
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....he assent of the President*, shall, at any one time, have effect for such assessment year or years, not exceeding three assessment years (including an assessment year or years commencing before the date on which such notification is issued) as may be specified in the notification: Provided also that where an application under the first proviso is made on or after the date on which the Taxation Laws (Amendment) Bill, 2006 receives the assent of the President, every notification under sub-clause (iv) or sub-clause (v) shall be issued or approval under sub-clause (iv) or subclause (v) or sub-clause (vi) or sub-clause (via) shall be granted or an order rejecting the application shall be passed within the period of twelve months from the end of the month in which such application was received: Provided also that where the total income, of the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or subclause (vi) or sub-clause (via), without giving effect to the provisions of the said sub-clauses, exceeds the maximum amount which is not chargeable to ....
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....al institution referred to in subclause (vi) or any hospital or other medical institution referred to in subclause (via), is approved by the prescribed authority and subsequently that Government or the prescribed authority is satisfied that- (i) such fund or institution or trust or any university or other educational institution or any hospital or other medical institution has not- (A) applied its income in accordance with the provisions contained in clause (a) of the third proviso; or (B) invested or deposited its funds in accordance with the provisions contained in clause (b) of the third proviso; or (ii) the activities of such fund or institution or trust or any university or other educational institution or any hospital or other medical institution- (A) are not genuine; or (B) are not being carried out in accordance with all or any of the conditions subject to which it was notified or approved, it may, at any time after giving a reasonable opportunity of showing cause against the proposed action to the concerned fund or institution or trust or any university or other educational institution or any hospital or other medical i....
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....is section [other than clause (1) thereof] shall operate to exclude any income received on behalf of such fund or trust or institution or university or other educational institution or hospital or other medical institution, as the case may be, from the total income of the person in receipt thereof for that previous year. Explanation.-In this clause, where any income is required to be applied or accumulated, then, for such purpose the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this clause in the same or any other previous year;] Section 11 of the Income Tax Act,1961 now under consideration prior to Direct Tax Laws (Amendment) Act, 1987, stood as follows: Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- [(a) income derived from property held under trust wholly for charitable or religious purposes, t....
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....se referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount,may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) or sub-section (2) of section 139 whether fixed originally or on extension for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in sub-clause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and, in the case referred to in sub-clause (ii), during the previous year immediately following the previous year in which the income was derived.] [(1A) For the purposes of sub-section (1),- (a) where a capital asset, being property held under trust wholly for charitable....
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....n with such transfer.] [(1B) Where any income in respect of which an option is exercised under clause (2) of the Explanation to sub-section (1) is not applied to charitable or religious purposes in India during the period referred to in subclause (a) or, as the case may be, sub-clause (b), of the said clause, then, such income shall be deemed to be the income of the person in receipt thereof- (a) in the case referred to in sub-clause (i) of the said clause, of the previous year immediately following the previous year in which the income was received, or (b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately following the previous year in which the income was derived.] [(2) [Where seventy-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not b....
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....so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the [Assessing] Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes [***]. [(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income, being profits and gains of business, unless- (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette; or (b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution, and separate books of account are maint....
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....gistered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36; (x) investment in immovable property. Explanation : "Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building)even though attached to, or permanently fastened to, anything attached to the earth;] [(xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964).]] Section 11 of the Act was omitted by Amendment Act, 1987 with effect from 1-04-1989. By Amendment Act, 1989, the provision was reintroduced with effect from 1-4-89 with certain modifications and the amended provision stood as under: "Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total inc....
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....ear, or (ii) for any other reason, then- (a) in the case referred to in sub-clause (i), so much of the income applied to such purposes in India during the previous year in which the income is received or during the previous year immediately following as does not exceed the said amount, and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income (such option to be exercised in writing before the expiry of the time allowed under sub-section (1) [* * *] of section 139 [* * *] for furnishing the return of income) be deemed to be income applied to such purposes during the previous year in which the income was derived; and the income so deemed to have been applied shall not be taken into account in calculating the amount of income applied to such purposes, in the case referred to in subclause (i), during the previous year in which the income is received or during the previous year immediately following, as the case may be, and....
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....to that expression in subclause (b) of clause (1) of section 55; (iii) "net consideration" means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.] [(1B) Where any income in respect of which an option is exercised under clause (2) of the Explanation to sub-section (1) is not applied to charitable or religious purposes in India during the period referred to in subclause (a) or, as the case may be, sub-clause (b), of the said clause, then, such income shall be deemed to be the income of the person in receipt thereof- (a) in the case referred to in sub-clause (i) of the said clause, of the previous year immediately following the previous year in which the income was received or (b) in the case referred to in sub-clause (ii) of the said clause, of the previous year immediately following the previous year in which the income was derived] [(2) [ Where seventy-five per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is n....
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.... by such person in the application under this sub-section were a purpose specified in the notice given to the [Assessing] Officer under clause (a) of sub-section (2),] (4) For the purposes of this section" property held under trust" includes a business undertaking so held and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the 92[Assessing] Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking such excess shall be deemed to be applied to purposes other than charitable or religious purposes[* * *]. [(4A). Sub-section (1) or sub-section (2) or sub-section (3) or subsection (3A) shall not apply in relation to any income, being profits and gains of business, unless- (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in ....
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....a and which is approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36; (ix) deposits with or investment in any bonds issued by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes and which is approved by the Central Government for the purposes of clause (viii) of sub-section (1) of section 36; (x) investment in immovable property. Explanation: "Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;] [(xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);] [(xii) any other form or mode of investment or deposit as may be prescribed ]" 23. It is pertinent to mention here that since the old provision of Section 2 (24) (iia) was being widely used for tax avoidance by givin....
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....luntary contribution with a specific direction that it shall form part of the corpus, was to be excluded from the income of the Trust under Section 11 (1) (d). Subsequent Amendments to Section 11 26. By Finance (No 2) Act, 1991, Section 4A was substituted for the existing section with effect from 01-04-1992, which reads as under: (4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. 27. By 36th Finance Act, 2000, the following words were substituted in Section 11 (5) (viii) and in section 11 (5) (ix) with the then existing provision: "which is eligible for deduction under clause (viii) of sub-section (1) of section 36];" 28. By Finance Act, 2000, the following provisions were inserted: Proviso to Section 11 (5) (vii) "Provided that where an investment or deposit in any public sector company ha....
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....use (2), for the words seventy-five per cent , the words eighty-five per cent shall be substituted; (b) in sub-section (2), (i) for the words seventy-five per cent , the words eighty-five per cent shall be substituted; (ii) after the second proviso, the following Explanation shall be inserted, namely: Explanation. Any amount credited or paid, out of income referred to in clause (a) or clause (b) of sub-section (1), read with the Explanation to that subsection, which is not applied, but is accumulated or set apart, to any trust or institution registered under Section 12-AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or subclause (vi) or sub-clause (vi-a) of clause (23-C) of Section 10, shall not be treated as application of income for charitable or religious purposes, either during the period of accumulation or thereafter. ; (c) in sub-section (3), (i) after clause (c), the following clause shall be inserted, namely: (d) is credited or paid to any trust or instituti....
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....ere made to Section 11: "In section 11 of the Income-tax Act, with effect from the 1st day of April, 2016,- (I) in sub-section (1),in Explanation,in clause(2),after sub-clause (b), inthelong line, for the brackets, words and figures "(such option to be exercised in writing before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income)", the brackets, words and figures "(such option to be exercised before the expiry of the time allowed under sub-section (1) of section 139 for furnishing the return of income, in such form and manner as may be prescribed)" shall be substituted; (II) in sub-section (2), for clauses (a) and (b) and the first and second provisos, the following shall be substituted, namely:- "(a) such person furnishes a statement in the prescribed form and in the prescribed manner to the Assessing Officer, stating the purpose for which the income is being accumulated or set apart and the period for which the income is to be accumulated or set apart, which shall in no case exceed five years; (b) the money so accumulated or set apart is invested or deposited in the forms or modes s....
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....sub-section (5C) of that section, in the manner specified in that clause, or] which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax." 35. The following provisions explain the conditions for applicability of sections 11 and 12 and the procedure for registration: Section 12A. (1) The provisions of section 11 and section 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely:- (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the [Principal Commissioner or] Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution, whichever is later and such tru....
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....espect of any income derived from property held under trust of any assessment year preceding the aforesaid assessment year, for which assessment proceedings are pending before the Assessing Officer as on the date of such registration and the objects and activities of such trust or institution remain the same for such preceding assessment year: (Inserted by the Finance (No. 2) Act, 2014, w.e.f. 1-10-2014.) Provided further that no action under section 147 shall be taken by the Assessing Officer in case of such trust or institution for any assessment year preceding the aforesaid assessment year only for non-registration of such trust or institution for the said assessment year: Provided also that provisions contained in the first and second proviso shall not apply in case of any trust or institution which was refused registration or the registration granted to it was cancelled at any time under section 12AA.] The words "Principal Commissioner or" were inserted with retrospective effect from 1-4-2013 by Finance (No 2) Act, 2014. Procedure for registration. Section 12AA. (1) The [Principal Commissioner or] Commissioner, on receipt of an appl....
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....ing heard.] (4) Without prejudice to the provisions of sub-section (3), where a trust or an institution has been granted registration under clause (b) of sub-section (1) or has obtained registration at any time under section 12A [as it stood before its amendment by the Finance (No. 2) Act, 1996 (33 of 1996)] and subsequently it is noticed that the activities of the trust or the institution are being carried out in a manner that the provisions of sections 11 and 12 do not apply to exclude either whole or any part of the income of such trust or institution due to operation of sub-section (1) of section 13, then, the Principal Commissioner or the Commissioner may by an order in writing cancel the registration of such trust or institution: (Inserted by the Finance (No. 2) Act, 2014, w.e.f. 1-10-2014.) Provided that the registration shall not be cancelled under this sub-section, if the trust or institution proves that there was a reasonable cause for the activities to be carried out in the said manner. The words "Principal Commissioner or" were inserted with retrospective effect from 1-4-2013 by Finance (No 2) Act, 2014. 36. The following provisions, which ....
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.... application relates to any period before the 1st day of June, 1970; (d) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof, if for any period during the previous year- (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983; or (iii) any shares in a company, other than- (A) shares in a public sector company; (B) shares prescribed as a form or mode of investment under clause (xii) of sub-section (5) of section 11, are held by the trust or institution after the 30th day of November, 1983: Provided that nothing in this clause shall apply in relation to- (i) any assets held by the trust or institution where such a....
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.... period during the previous year without either adequate security or adequate interest or both; (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in subsection (3), for any period during the previous year without charging adequate rent or other compensation; (c) if any amount is paid by way of salary, allowance or otherwise during the previous year to any person referred to in sub-section (3) out of the resources of the trust or institution for services rendered by that person to such trust or institution and the amount so paid is in excess of what may be reasonably paid for such services; (d) if the services of the trust or institution are made available to any person referred to in sub-section (3) during the previous year without adequate remuneration or other compensation; (e) if any share, security or other property is purchased by or on behalf of the trust or institution from any person referred to in sub-section (3) during the previous year for consideration which is more than adequate; (f) if any share, security or other property is ....
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....st. (5) Notwithstanding anything contained in clause (d) of sub-section (1), where any assets (being debentures issued by, or on behalf of, any company or corporation) are acquired by the trust or institution after the 28th day of February, 1983 but before the 25th day of July, 1991, the exemption under section 11 or section 12 shall not be denied in relation to any income other than the income arising to the trust or the institution from such assets, by reason only that the funds of the trust or the institution have been invested in such assets if such funds do not continue to remain so invested in such assets after the 31st day of March, 1992. (6) Notwithstanding anything contained in sub-section (1) or sub-section (2), but without prejudice to the provisions contained in sub-section (2) of section 12, in the case of a charitable or religious trust running an educational institution or a medical institution or a hospital, the exemption under section 11 or section 12 shall not be denied in relation to any income, other than the income referred to in sub-section (2) of section 12, by reason only that such trust has provided educational or medical facilities to per....
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....rd classes, Scheduled Tribes or women and children shall not be deemed to be a trust or institution created or established for the benefit of a religious community or caste within the meaning of clause (b) of sub-section (1). Explanation 3.-For the purposes of this section, a person shall be deemed to have a substantial interest in a concern,- (i) in a case where the concern is a company, if its shares (not being shares entitled to a fixed rate of dividend whether with or without a further right to participate in profits) carrying not less than twenty per cent of the voting power are, at any time during the previous year, owned beneficially by such person or partly by such person and partly by one or more of the other persons referred to in sub-section (3); (ii) in the case of any other concern, if such person is entitled, or such person and one or more of the other persons referred to in sub-section (3) are entitled in the aggregate, at any time during the previous year, to not less than twenty per cent of the profits of such concern." 38. Upon a conjoint reading of the above legal provisions, it is manifest that charitable purpose, as contemplated un....
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.... of the trust and the genuineness of its activities. However, the commissioner is vested with the power under 12AA (3) to cancel the registration if the activities are not genuine. The objects are irrelevant, when the activities are not genuine. The application of the funds is also subject to scrutiny by the commissioner. Further, similar to Section 10 (23C), the requirement under Section 12 is that the trust must be "wholly" for charitable purpose. If it turns out that the activities are not genuine or not being carried out in accordance with the objects of the trust, not only is the registration liable to be cancelled, the claim of exemption under Section 11 is also liable to be rejected. The word "genuine" must be read as in compliance with all the laws of the land. If the institution or trust is used as a cloak to violate law, irrespective of whether any benefit is achieved or not, the benefit of registration cannot be permitted to accrue to the assessee. Section 12AA (3) is an independent provision as the right to cancel the registration is not restricted just towards the fulfilment or not of the objects of the trust or association. 39. The object and the relevant provision....
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....gment, decree or order of any Court or other authority, no capitation fee shall be collected,- (a) by any person who is in charge of, or is responsible for, the management of any educational institution; or (b) by any other person either for himself or on behalf of any such educational institution or on behalf of any such management of any educational institution. 4. Regulation of fee, etc. - (1) Notwithstanding anything contained in any other law for the time being in force, the Government may, by notification, regulate the tuition fee or any other fee or deposit that may be received or collected by any educational institution or class or classes of such educational institutions in respect of any or all class or classes of students: Provided that before issuing a notification under this sub-section, the draft of which shall be published in the Tamil Nadu Government Gazette stating that any objection or suggestion which may be received by the Government, within such period as may be specified therein, shall be considered by them. (2) No educational institution shall receive or collect any fee or accept deposit in excess of the amount not....
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....he meaning of Article 19(1)(g), - perhaps, it is - we are certainly of the opinion that such activity can neither make a trade or business nor can it be a profession within the meaning of Article 19(1)(g). Trade or business normally connotes an activity carried on with a profit motive. Education has never (been) commerce in this country. Making it one is opposed to the ethos, tradition and eligibilities of this nation. The argument to the contrary has an unholy ring to it. Imparting education has never been treated as a trade or business in this country since times memorial. It has been treated as a religious duty. It has been treated as charitable activity. Jut never as trade or business. We agree with Gajendragadkar, J. that "education in its true Inspect is more a mission and as vocation rather than a profession or trade or business, however Wide may be the denotation of the two latter words..."(see University of Delhi 1961(1) SCR 03. The Parliament too has manifested its intention repeatedly (by enacting the U.G.C. Act, Act and A.I.C.T.E. Act that commercialisation of education is not permissible and that |no person shall be allowed to steal a march over a mor....
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....therefore, to be borne in mind that the occupation of education cannot be treated on a par with other economic activities. In this field, the State cannot remain a mute spectator and has to necessarily step in order to prevent exploitation, privatisation and commercialisation by the private sector. It would be pertinent to mention that even in respect of those economic activities which are undertaken by the private sector essentially with the objective of profit-making (and there is nothing bad about it), while throwing open such kind of business activities in the hands of private sector, the State has introduced regulatory regime as well by providing Regulations under the relevant statutes. (h)..... 38. In Unni Krishnan case, MANU/SC/0333/1993 : (1993) 1 SCC 645, this Court also rejected the argument that the said activity could be classified as a "profession". However, the right of professional institutions to establish and manage educational institutions was finally regarded as an "occupation" befitting the recognition of this right as a fundamental right Under Article 19(1)(g) in T.M.A. Pai Foundation, MANU/SC/0905/2002 : (2002) 8 SCC 481, in the following wor....
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....wing observations would lend support to this: "6. Before we proceed to deal with the suggestions made for effectively stopping the practice of charging capitation fee by medical colleges, it is necessary to refer to how this Court has previously dealt with the evil practice of charging capitation fee and the immediate need to stop the practice of collection of capitation fee by private medical colleges. In TMA Pai Foundation and Ors. v. State of Karnataka MANU/SC/0905/2002 : (2002) 8 SCC 481, this Court observed that a rational model 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 there is no profiteering, though a reasonable surplus for the furtherance of education is permissible. 7. While clarifying the judgment of this Court in TMA Pai Foundation1, this Court in Islamic Academy of Education and Anr. v. State of Karnataka and Ors. MANU/SC/0580/2003 : (2003) 6 SCC 697 observed that once fee is fixed by the Committee, the institute cannot charge either directly or indirectly any other amount over and above the....
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....n fee, after taking note of the suggestions and comments of learned Counsel appearing for the States, medical colleges and National Medical Council for the issuance of appropriate directions. 10. Pursuant to orders dated 6.08.2014 and 20.04.2022, Shri Hargurvarinder S. Jaggi, Officer on Special Duty in the Supreme Court of India, has been nominated for rendering assistance to learned Amicus Curiae in the matter of setting up a web portal which would serve as a platform for the aggrieved persons to provide information relating to any demand of capitation fee made by the private medical colleges. Though, we are informed that no complaint has been received by any State Government regarding charging of capitation fee, it was suggested that a web portal under the aegis of Supreme Court would provide confidence in the public to furnish any information relating to capitation fee being charged by private medical colleges. The Ld. Amicus Curiae further suggested that all candidates taking the National Eligibility-cum- Entrance Test (NEET) for undergraduate, postgraduate and super speciality courses should be informed about the web-portal wherein complaints with respect to charging ....
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.... to fix the fee without leaving any scope for the managements of private medical colleges to charge any additional fee which is not part of fee fixed by the Committees. We make it clear that the Fee Fixation Committees have to take into account all components of fee proposed to be charged by the Management while determining the fee to be paid by the students. For this purpose, assistance can be sought from the report of Hon'ble Mr. Justice B.N. Srikrishna dated 26.08.2021 for reviewing the existing fee structure and for fixing the norms and guidelines for charging tuition and other fees in which the Committee has prescribed the parameters and guidelines for the types of fees to be charged by the institutions recognized by the AICTE. The report also prescribes the minimum and maximum fees which includes the tuition fee, development fee, examination fee and other fees. 13. It was submitted that the managements of private medical colleges should be directed not to receive fee through cash payment and to prohibit certain private medical colleges from insisting on payment of fee for entire course in advance. The latter issue of payment of fee for the entire course in advanc....
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....basis of merit and in the event of any admission to the contrary, suitable action shall be taken against the private medical colleges; (e) While fixing fee, the Fee Fixation Committees of the States should take into account all the components of fee, leaving no scope for managements to charge any additional amounts apart from what has been prescribed by the fee fixation committee from time to time. In the event that the management intends to charge additional amounts over and above the price band fixed by the Fee Fixation Committee, or for any component not included in the structure fixed by the Fee Fixation Committee, the same can only be done with the concurrence of the Fee Fixation Committee; (f) The management of private medical colleges are strictly prohibited from accepting payment of fees in cash, in order to avoid charging of capitation fee. The students or any other aggrieved persons are at liberty to report on the web-portal regarding collection of fees in cash by any medical colleges; (g) The Director General of Health Services and other concerned authorities to the State Governments should ensure that the All-India Quota and State Quota rounds....
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....f the trust involves the carrying on of an activity for profit. The expression "business", as observed by Shah, J., speaking for the Court in the case of State of Gujarat v. Raipur Mfg. Co. [AIR 1967 SC 1066 : (1967) 1 SCR 618 : (1967) 19 STC 1] though extensively used in taxing statutes, is a word of indefinite import. In taxing statutes, it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression "profit motive" it is not intended that profit must in fact be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which per....
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.... 44. Coming now to the deed of trust before us, we find that the word "education" is mentioned by the maker of the trust in a rather ceremonial or ritualistic fashion as a label for what he considers to be charitable objects. The third set of objects, in clause 2 of the deed does not appear to be stated there merely as a means of serving the general purpose of "education" separable from these objects in clause (c). On the other hand, there are strong grounds for believing, in the light of other provisions and profitmaking activities and background of the trust, that education was mentioned as the object in the deed only as a convenient cloak to conceal and serve the real and dominant purpose of clause 2(c) which was to run a profitable newspaper and publishing business without paying the tax on it. Just as mere making of profit as a consequence or incident of altruistic activity is not decisive of the real purpose or object of the activity, so also the carrying on of a business for profit does not cease to be so merely because losses are actually incurred in certain years or because those who carry it or call it "education" It would be difficult to find any commercial acti....
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....o much as to make the charitable part or aspect, if any, purely illusory. Indeed, this was the law even before the qualifying words introduced by the 1961 Act. [See: East India Industries (Madras) Pvt. Ltd. v.CIT, Madras [(1967) 65 ITR 611 : (1967) 3 SCR 356 : AIR 1967 SC 1554] ; CIT, Madras v. Andhra Chamber of Commerce ; Md. Ibrahim Raza v. CIT, Nagpur [1930 LR 57 IA 260 : AIR 1930 PC 226 : 125 IC 879] . Such a "trust" would be of doubtful validity, but I refrain from further comment or any pronouncement upon the validity of such a trust as that was neither a question referred to the High Court in this case nor argued anywhere. 46.The amendment of the 1961 Act considered by us compels closer scrutiny of deeds of ostensibly charitable trusts with a view to discovering their real purposes by analysing the effects of their terms and what they permit. It narrows the scope of exemption from income tax granted at least under the last and widest category of charitable trusts mentioned in Section 2(15) of the Act as was held in CIT, v. Indian Chamber of Commerce [(1971) 81 ITR 147 (Cal)] ..." 47. In Commissioner of Income tax (Exemptions) Kolkatta v. Batanagar Educational and....
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....student. Therefore, it is a clear case of sale of education by the assessee-society. In our opinions such, the assessee cannot be considered as a charitable institution under section 2(15) of the Income-tax Act. Therefore, the assessee is not eligible for exemption under section 11 of the Income-tax Act." 49. Even in terms of the judgment of the Hon'ble Supreme Court in Safdarjung Enclave Educational Society v. MCD [AIR 1992 SC 1456], any donation made in order to gain advantage or benefit cannot be called as voluntary contribution. The relevant passage of the same is usefully extracted below: "Where a person gives money to another without material returns, he donates that sum. An act by which the owner of a thing voluntarily transfers the title and possession of the same from himself to another, without any consideration, is a donation. A gift or gratuitous payment is in simple English a donation. We do not require lexicographic learning or precedential erudition to understand the meaning of what many people do every day, viz., giving donation to some fund or other, or to some person or other." 50. It is therefore beyond the pale of any doubt that education can neve....
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....one in a manner as to doubly benefit them by not only indulging in such statutory offences but also seeking the benefit of tax exemptions by adopting the modus operandi as stated above and elaborated by the counsel for Revenue. The insolent acts of the managements, despite the laws and dictums of the Apex Court on the nature of education as a noble occupation and on consistent deprecation against Capitation Fee in any form, has been incessant throughout. LIFTING THE CORPORATE VEIL 53. In this regard, useful reference is made to the following judgments on the doctrine of 'lifting the corporate veil'. (i) In Balwant Rai Saluja & Ors. v. Air India Ltd. & Ors. [(2013) 15 SCC 85], it was held by the Hon'ble Supreme Court as follows: "14. It is well settled that the court can lift the veil, look to the conspectus of factors governing employment, discern the naked truth though concealed intelligently. The court has to be astute in piercing the veil to avoid the mischief and achieve the purpose of law. It cannot be swayed by legal appearance. 68. The said principle has been followed by this Court in catena of cases namely, Kanpur Suraksha Karamchari Union and....
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....eddy speaking for this Court in LIC v. Escorts Ltd. had emphasised that the corporate veil should be lifted where the associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected. After referring to several English and Indian cases, this Court observed that ever since A. Salomon & Co. Ltd. case a company has a legal independent existence distinct from individual members. It has since been held that the corporate veil may be lifted and corporate personality may be looked in. Reference was made to Pennington and Palmer's Co. Laws. 66. It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to ....
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....rs are held to be the persons who actually work for the corporation. 27. In DHN Food Distributors Ltd. v. London Borough of Tower Hamlets the court of appeal dealt with a group of companies. Lord Denning quoted with approval the statement in Gower's Co. Law that "there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group". The learned Master of Rolls observed that "this group is virtually the same as a partnership in which all the three companies are partners". He called it a case of "three in one" - and, alternatively, as "one in three". 28. The concept of corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. Where, therefore, the corporate character is employed for the purpose of committing illegality or for defrauding others, the court would ignore the corporate character and will look at the reality behind the corporate veil so as to enable it to pass appropriate orders to do justice between the parties concerned. The fact that Tejwant Singh and members of his ....
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..../1988 : (1988) 4 SCC 59 this Court observed: 66. It is high time to reiterate that in the expanding horizon of modern jurisprudence, lifting of corporate veil is permissible. Its frontiers are unlimited. It must, however, depend primarily on the realities of the situation. The aim of the legislation is to do justice to all the parties. The horizon of the doctrine of lifting of corporate veil is expanding.... 67. In the aforesaid view of the matter we are of the opinion that the corporate veil should be lifted and Hindalco and Renusagar be treated as one concern and Renusagar's power plant must be treated as the own source of generation of Hindalco and should be liable to duty on that basis. In the premises the consumption of such energy by Hindalco will fall Under Section 3(1)(c) of the Act. The learned Additional Advocate-General for the State relied on several decisions, some of which have been noted. 68. The veil on corporate personality even though not lifted sometimes, is becoming more and more transparent in modern company jurisprudence. The ghost of Salomon case (1897 AC 22) still visits frequently the hounds of Company Law but the veil has bee....
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....gnored and veil drawn aside have now been briefly reviewed. What general rule, if any, can be laid down ? The nearest approximation to generalization which the present state of the authorities would warrant is this: When the conception of corporate entity is employed to defraud creditors, to evade an existing obligation, to circumvent a statute, to achieve or perpetuate monopoly, or to protect knavery or crime, the courts will draw aside the web of entity, will regard the corporate company as an association of live, upand- doing, men and women shareholders, and will do justice between real persons. 25. In Palmer's Company Law, this topic is discussed in Part-II of Vol-I. Several situations where the court will disregard the corporate veil are set out. It would be sufficient for our purposes to quote the eighth exception. It runs: The courts have further shown themselves willing to 'lifting the veil' where the device of incorporation is used for some illegal or improper purpose.... Where a vendor of land sought to avoid the action for specific performance by transferring the land in breach of contract to a company he had formed for the purpose, the cour....
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....ntrolled by common trustees and are in indeed sister Trusts, this Court may be constrained to lift the veil to see the real beneficiaries and the object of the donations by relatives/friends of parents as quid pro quo for admissions into the Assessee educational institutions as well as the other Assessees who are not educational institutions. On lifting the veil, it is clear as daylight that the modus operandi adopted by the Assessee Institutions and Trusts are with the twin objectives of circumventing/violating the provisions of the Capitation Fee Act as well as evading tax while seeking tax exemption under the corporate veil of being different and distinct entities receiving funds from each other for purely charitable purposes. Suffice it to say, nothing can be farther from the naked truth that cannot hide itself sufficiently behind the fig leaf of the legal cover sought to be taken by the Assessees under the guise of being charitable trusts and seeking exemption thereof. 55. Further, an elaborate exercise was undertaken by the Assessing Officer by issuing summons to various persons and their sworn statements were recorded. These sworn statements point to the factum of payment....
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....ts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9.11.1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly sworn affidavit or statements supported by convincing evidence through which an assessee could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. In our view, retraction after a sufficient long gap or point of time, as in the instant case, loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under Section 132(4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an asses....
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....statement. Similarly, what has been held by the High Court of Bombay in Commissioner of Income- tax, Central- II, Mumbai v. Omprakash K. Jain [(2009) 178 Taxman 179 (Bombay)] was that the assessing officer, while considering whether retraction was under duress or coercion, had also to consider genuineness of documents produced before him. 57. The Punjab and Haryana High Court in Commissioner of Income-Tax v. Lekh Raj Dhunna, taking note of the fact that the assessee had made a statement under Section 132(4) of the IT Act, whereby a surrender of Rs.2 lakh was made and further that, the assessee had admitted that he had earned commission from a party, which was not disclosed in the return filed by him and certain documents were seized which bore the signature of the assessee, held in para 16 of the report as under: "16. Thus, in view of sub-sections (4) and (4A) of Section 132 of the Act, the Assessing Officer was justified in drawing presumption against the assessee and had made addition of Rs.9 lakhs in his income under Section 68 of the Act. The onus was upon the assessee to have produced cogent material to rebut the aforesaid presumption which he had failed to displac....
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....he question now to be considered is whether the sworn statement constitutes evidence of undisclosed income and if so whether it is evidence collected by the department. In our view the burden of proof is discharged by the department when they persuaded the assessee to state details of undisclosed income, which the assessee disclosed in his sworn statement, on being confronted with the title deeds seized in search. 9. Section 132 of the Income tax Act deals with search and seizure and sub- Section (4) of Section 132 empowers the authorised officer during the course of the search and seizure to examine on oath any person who is found to be in possession or control of any books of account, documents, money or valuable articles or things etc. and record a statement made by such person which can be used in evidence in any proceedings under the Income Tax Act. The explanation appended to Clause (4) also makes it clear that such examination can be in respect of any matters relevant for the purpose of any investigation and need not be confined to matters pertaining to the material found as a result of the search. A plain reading of Section 132(4) would clearly show that what was i....
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....s order is concluded by findings of fact and in our view no question of law arises. The applications are, accordingly, rejected." 60. All the aforementioned judgments were considered by this Court in M/s. Bannalal Jat Constructions Pvt. Ltd. (supra) wherein also, the assessee retracted from his statement initially given under Section 132(4) of the Act on 10.10.12014 followed by confirmation statement under Section 131 on 04.12.2014 and made the following observations: "Reverting back to the present case, the ITAT, on the basis of such statement of Shri Bannalal Jat, concluded that he was managing his business affairs of both his proprietary concern as well as appellant-company from his residence and that in the absence of individual cash-book of respective concerns and other details maintained by him, it is not possible to identify whether the cash so found belongs to the proprietary concern or to the assessee company. Subsequently, when the statement under Section 132(4) of the IT Act was recorded on 10.10.2014, which was concluded at his residence, Shri Bannalal Jat categorically admitted that the cash amount of Rs.1,21,43,210/- belonged to his company M/s. Bannalal J....
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....ction was made, assumes significance and in the present case, retraction has been made by the assessees after eight months to be precise, 237 days. 62. It is settled position of law that the admission though important is not conclusive. It is open to the assessee who made the admission to show that it is incorrect as held by the Hon'ble Supreme Court in Pullangode Rubber Produce Company Ltd. v. State of Kerala & Another [91 ITR 0018 (SC)]. The onus falls on the person who had earlier admitted to prove it wrong. Therefore, the statements could form the basis of assessment. 63. The statements given to the Assessing officer under Section 132 (4) have legal force. Unless the retractions are made within a short span of time, supported by affidavit swearing that the contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, the same cannot be treated as retracted. This position laid down in catena of decisions by the various High Courts in CIT vs. Lekh Raj Dhunna [344 ITR 352 (P&H)], Bachittar Singh v. CIT [328 ITR 400 (P&H)], Rameshchandra & Co. v. CIT [168 ITR 375 (Bom.)], Dr. S.C. Gupta v. CIT, [248 ITR 782 (All.)], CIT v. ....
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....at too after the device to route the capitation fee was discovered. Further, it is also settled law that illegality cannot be perpetuated. Similarly, any decision even in the assessees' own case cannot have any bearing on the adjudication of the issues before us, because each assessment is independent and has to rest on its own facts. As such, when the contributions cannot be treated as voluntary, the further question of their application to charitable purposes or otherwise, need not be gone into, meaning thereby that the assesses are not entitled to the benefits of Sections 11 and 12 of the Act. MEANING OF "VOLUNTARY CONTRIBUTION" 65. Reference may also be had to cases where the term "voluntary contributions" have been expounded for the purposes of Section 12 of the Act. In CIT v. Madhya Predate Anaj Tilhan Vyapari Mahasangh, [(1988) 171 ITR 677], the High Court of Madhya Pradesh interpreted the expression "voluntary contribution" under section 12 of the Act as "The contributions, in order to be voluntary, had to be made willingly and without compulsion and the money was to be gifted or given gratuitously without consideration and these tests were satisfied on the facts ....
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....lant has produced Annexures A5 and A6, affidavits filed before the Commissioner of Income Tax (Appeals) and before the Income Tax Appellate Tribunal, which show that the endeavor made therein is mainly to retract from the statements given by them. In so far as affidavit filed before the Commissioner of Income Tax Appeals is concerned, that appeal arising out of assessment order is still pending. The other affidavit filed before the Tribunal shows that for the first time before the Tribunal such an attempt was made. Having regard to the fact the affidavit only contained unsubstantiated claims made therein, we do not think that this affidavit would improve the case of the appellant. 6. The learned counsel for the appellant also placed reliance on the judgments in Fifth Generation Education Society v. Commissioner Income Tax [185 ITR 635], New Life In Christ Evangelistic Association v. Commissioner of Income Tax [246 ITR 532] to contend that when application is made under Section 12AA, the Commissioner is not required to examine the application of income of a trust. In our view, this principle has no application to the facts of the case. The rejection of the application made ....
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....the actual activity of the institution, especially main activity of the institution. In the absence of facts indicating that the activities carried on attracts definition of charitable purpose, one cannot find fault with rejection of registration. When the school is running on commercial lines under the clad of charitable purpose, the parties were justified making enquiries and rejecting the application. The above judgment of the Kerala High Court was confirmed by the Apex Court in CC No. 16157/2014 on 13.10.2014. 67. Insofar as the assessing officer, not enquiring about the source of the donors, it is an undisputed fact that the sums have been paid by the parents or acquaintances to the institutions/trusts for securing the seat. Such persons are the source for the assessees. As rightly contended by the learned Senior Standing Counsel for the Revenue, it is not necessary for the assessing officer to go into the source of the source to tax the assessees under assessment and the same cannot be a reason to allow the deduction, which the assessees are not otherwise entitled to. CONCLUSION 68. In view of our above findings that the amounts collected by the assessees are capi....