TaxTMI 
TaxTMI 
2017 (4) TMI 1605
X X X X Extracts X X X X
X X X X Extracts X X X X
....tated herein below for adjudication. 2.1 M/s. United Educational Foundation in ITA No. 2890/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the crux of the issue is that, the Revenue is aggrieved by the order of the Ld. CIT(A), who has held that the substantive addition made by the Ld. AO for Rs.22,03,77,500/- by withdrawing the benefit of Section 11 of the Act due to receipt of non-voluntary contribution / capitation fees, is not tenable and the assessee would be entitled for the benefit of the Section 11 of the Act. 2.2 M/s. MAC Public Charitable Trust in ITA No. 2885/Mds/2014 for the assessment year 2011-12: The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT(A) who had deleted the addition made by the Ld. AO protectively for Rs.3,60,00,000/- on account of non-voluntary contribution / capitation fees by holding that there is no violation of the Act. 2.3 M/s. MAC Charities in ITA No.2887/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the crux of the issue is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... his sworn statement dated 17.02.2014 had replied stating that he had donated a sum of Rs.6 lakhs to the assessee trust to secure admission of his uncle's son Master M. Karthikeyan in Sri Venkateswara College to pursue Bachelor of Engineering (Mechanical) course. He further stated that the amount paid as donation by him was received from his uncle. Similarly Shri Ravi Anantha Padmanaban vide his sworn statement dated 17.02.2014 had stated that he had donated Rs.5,50,375/- to the assessee trust for securing the admission of his sister's son Master M. Viswesh in Sri Venkateswara College to pursue Bachelor of Engineering (Computer Science) course. He further stated that the amount paid as donation by him was received from his sister. Further Shi K. Krishnan in his sworn statement dated 06.02.2014 had replied stating that he had paid Rs.7 lakhs to the assessee trust for securing the admission of his cousin's son Master S. Deivanayagam in Sri Venkateswara College to pursue Bachelor of Engineering (Mechanical) course. He further stated that the amount paid as donation by him was received from his cousin. 3.2 Drawing inference from the above, the Ld. AO opined that persons who desire t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usts is a permissible application of funds. c) There is no intention to evade tax as these are genuine transactions properly accounted for and duly confirmed by all the concerned parties. d) Merely because there are some issues with regards to the donor trust, the donations received by the assessee trust does not become involuntary. The assessee trust has been regularly receiving donations and has been applying the same for charitable purpose." 3.5 The assessee Sri Venkateswara Educational & Health Trust also responded to the show-cause notice of the Ld.AO vide its letter dated 19.03.2014 as under:- "....a. The assessee trust is running the SVCE College which is one of the most reputed colleges in the country. b. The college collects fees from the students in accordance with the AICTE norms as may be applicable to a minority institution. c. Apart from the fees collected from the students on account of tuition fees, campus recruitment, college transport etc the trust receives some donations from trusts with specific direction that these donations shall form part of the corpus. No donations have been collected from any student directly ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... nexus. The trusts have been regular donors to the assessee trust for several years...." 3.6 The assessee M/s. MAC Charities responded to the show cause notice issued by the Ld.AO on 07.03.2014 as follows: "Therefore your proposal to treat the donation of Rs.10.65Cr as a not voluntary contribution may be dropped in view of the following:- a) As far as the assessee trust is concerned the donations are voluntary only. The trust has not in any way secured admission in SVCE College of the donors who happen to be trusts only. b) The assessee has also shown these donations as income only and applied the same for charitable purposes in accordance with law. Donations to other trusts is a permissible application of funds. c) There is no intention to evade tax as these are genuine transactions properly accounted for and duly confirmed by all the concerned parties. d) Merely because there are some issues with regards to the donor trust, the donations received by the assessee trust does not become involuntary. The assessee trust has been regularly receiving donations and has been applying the same for charitable purposes. In view o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... had extended donation to the following trusts for the relevant assessment year :- MAC Public Charitable Trust Rs. 3,60,00,000.00 MAC Charities Rs.10,65,00,000.00 Maruti Educational Trust Rs. 75,00,000.00 Madhuritai Deshmukh Sewa Pratishthan Rs. 25,00,000.00 Arvindbabu Deshmukh Pratishthan Rs. 25,00,000.00 Rohikhand Educational & Charitable Trust Rs. 75,00,000.00 Mitra Parishad Rs. 50,00,000.00 Gyan Sagar Foundation Rs. 25,00,000.00 Talkara Charitable Trust Rs. 75,00,000.00 AR L. Family Charitable Trust Rs. 5,00,000.00 Child Health Congress, Delhi Rs. 25,00,000.00 Tyagi Education Foundation Rs. 36,00,000.00 Tamil Isai Sangam Rs. 23,67,000.00 MAC (Educational) Foundation Rs. 10,00,000.00 Rs.18,74,67,000.00 5.2 The Ld. CIT(A) further observed as follows:- i. Perusal of the letters from the donors indicated that the amount received by the assessee trust were voluntary donations. ii. Only in some of the sworn statements the donors had stated that the amount paid was for securing admission of their wards/relatives in Sri Venkateswara College of Engineering. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in Sri Venkateswara Educational and Health Trust to contribute donation to connected trusts. Reliance was placed in the case CIT v. Vellore Institute of Technology decided by the Chennai bench of the Tribunal, in ITA No.1332/Mds/2010 dated 09.06.2011. xx. The donations contributed to the assessee trust by individuals are voluntary and directed to be held as corpus funds by such individuals. Hence it cannot be treated as the income of the trust. Moreover the entire donations were expended by the assessee trust for the purpose of meeting the objectives of the trust. Reliance was placed in the case ACIT v. Balaji Educational and Charitable Public Trust decided by the Chennai bench of the Tribunal reported in 15 taxman.com 53. Based on the above observations, the Ld.CIT(A) held in the case of the M/s. United Educational Foundation that, the donation extended by the donors cannot be treated as nonvoluntary contribution. Further the assessee trust had not violated any of the objects of the trust and the genuineness of the trust is also established. Therefore exemption U/s. 11 of the Act cannot be denied to the assessee trust. 6. In the case of M/s. MAC Public Charitable T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase CIT v. Sri Ram Memorial Foundation Limited 269 ITR 35 which concurred with the decision of the Hon'ble Gujarat High Court in the case CIT v Sarladevi Sarabhai Trust reported in 172 ITR 698 wherein it was held that when the donor charitable trust donates its income to another charitable trust provisions of Sec 11(1)(a) can be said to have been met. ix. Reliance was also placed in the decision of the Hon'ble Bombay High Court in the case CIT v Trustees of the Jadi Trust reported in 133 ITR 494 wherein it was held that "the trust to which sec.11 applies can make a voluntary contribution to another trust to which also sec.11 is made applicable subject, of course to the satisfaction of the conditions in sec.11." x. Reliance was also placed in the decision of Hon'ble Allahabad High Court in the case CIT v. JK Charitable Trust reported in 196 ITR 31 wherein it was held as follows: "A charitable purpose may be served in more than one way. One is to directly contribute money to another charitable organization, which advances that cause. In the absence of allegations of device and/or malafides, the amount contributed to other charitable institutions out of the income ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ders of the Ld.CIT(A). 10. We have heard the rival submissions and carefully perused the materials available on record. From the facts of the case, it is apparent that the Revenue had denied the benefit of Section 11 of the Act to all the above assessees who are registered charitable trusts U/s.12AA of the Act predominantly due to the following reasons:- 1) The donation received by the assessee trusts was mostly diverted to their connected /related charitable Trust viz., M/s. Sri Venkateswara Educational & Health Trust in order to secure admission for the relatives/wards of the donors in the educational institutions run by M/s. Sri Venkateswara Educational & Health Trust. 2) To arrive at the above conclusion the Revenue had obtained sworn statements from few donors. However, the facts also reveals that initially all the donors who had submitted sworn statements before the Ld.AO against the assessee had earlier replied to the Ld.AO stating that the donations were voluntarily made by them to the charitable institutions. In this situation we fail to understand the reason for the change of stand by the donors before the Ld.AO on the subsequent proceedings. In al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Rs.10 lakhs from M/s. United Education Foundation. Though the Ld.AO state that the assessee Trust has received the donation for granting admission to students in M/s. Sri Venkateswara College, Sriperumbudur, he has not brought out any evidence to prove the same. Therefore there is no merit in the case of M/s. MAC Educational Foundation for treating the amount of Rs.10 lakhs as non-voluntary contribution. In the case of M/s. Sri Venkateswara Educational and Health Trust, the Ld. AO had simply stated that the assessee trust has received capitation fees without any evidence to establish the same. It is also not clear whether this amount is received from other connected/related trusts or directly received from the donors. The Ld. AO instead of clarifying these issues has made substantive addition in the hands of the assessee, which is erroneous. Further it is apparent that the Ld.AO without examining the correct source of actual donati....