AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (4) TMI 1605
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..... 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 that the Revenue is aggrieved by the order of the Ld. CI....
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.... 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 to admit their wards in Sri Venkateswara Engineering College were forced....
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....actions 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 or indirectly by the assessee trust. As stated earlier even the fees collected from the students are as per stipulated norms. d. As regards the d....
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.....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 of the above, it is prayed that the issues raised in the show cause notice may be dropped." 3.7 In the case of M/s. MAC Education Foundation, the Ld.AR submitted before the Ld.CIT(A) vide written submission dated 12.07.2014 as follow....
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....vindbabu 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. iii. However, the same donors had responded earlier by stating that they had advanced voluntary donations. iv. Thus there were conflicting statements. v. The Ld. AO did not examine the source of the huge donation paid by the individual donors which shows that the Revenue was lenient on the donors for detecting undisclosed income if any. vi. Some of ....
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.... 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 Trust, the Ld. CIT(A) arrived at the following conclusion: a. There is no prohibition in law for a charitable institution to receive donation from another charitable institution. b. There is also no prohibition in law for a charitable institution to give donation to another charitable institution. c. The donation given by the assessee trust is application of income and hence exempt u/s. 11 of the Act. d. The donation received and given by the assessee trust are voluntary....
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....oluntary 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 accumulated under sub-section (2) is outside the mischief of sub-section(3) of section 11. In other words such contribution does not amount to application of the income for purposes other than charitable or religious". xi. Similar directions was also made in the instructions issued by the Ld. CBDT No.1132 dated 04.01.1978 clause XXIII/1/128. Based on the above observations and the conclusions, the Ld. CIT(A) held that the allegations of the Ld. AO such as "donation of Rs.3,60,00,000/- received by the assessee trust is nonvoluntary/capitation fees contribution by the donors" is devo....
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....teswara 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 all the instances the donors have donated huge sum often extending to more than five lakhs to the charitable institutions. It is pertinent to mention at this juncture that the Ld.AO has not examined the source of investment made by the donors. Further according to the findings of the Ld.AO, in most of the cases the relatives/parents of the students studying in M/s. Sri Venkateswara Educational & Health Trust have paid donations to connected/related charitable Trusts. From these facts and circumstances of the case it appears that the Ld.AO might have coerced to obtain the sworn statements from the donors in the manner convenient to the Revenue so as to drop fur....
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....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 donation had come to the conclusion that there were quid-pro-quo arrangements for the payment of donation only based on certain presumptions and assumptions and not based on well ascertained facts. Though it may appear from the circumstance of the case that there may be quit-pro-quo arrangement for receipt of donation, unless it is established by cogent evidence drastic decision cannot be arrived at by withdrawing the benefit of Section 11 of the Act to all the charitable trusts which will jeopardize the functioning and the very existence of the charitable educational institutions. Moreover there is no finding with respect to any violation of Section 13 of the Act....