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2016 (6) TMI 1336 - AT - Income TaxAssessment u/s 153C - validity of notice under section 153A - denying exemption under section 11 - Held that:- Initiation of proceedings under section 153A of the Act by the learned Assessing Officer is in accordance with law because from the search proceedings various materials revealed that there is a possibility of the assessee having undisclosed / concealed income due to furnishing of incorrect particulars. Therefore, as pointed out by the learned Departmental Representative and the decisions relied upon by him, we find that issuance of notice under section 153A in the case of the assessee is valid in law for all the three assessment years. Accordingly, this ground raised by the assessee is devoid of merits. Denial of exemption under section 11 by treating the “donation received” as “capitation fees - proof of charitable activities - Held that:- Based on surmises and conjectures, it cannot be presumed that the donations received by the assessee are capitation fees or forced extortion of money from the students for granting admission. “Corpus donations” received by the assessee cannot be treated as “capitation fees” and the surplus earned cannot be treated as “income from business”. The employees of the assessee could not have knowledge on the assessee’s affairs. By earning surplus, it cannot be said that the assessee is carrying on business activity.The assessee is entitled to the benefit of section 11(4A) of the Act. Corpus donation received cannot be treated as capitation fee and therefore assessee cannot be denied benefit under section 11. Accordingly, we hereby direct the learned Assessing Officer to grant the benefit of section 11 to the assessee and delete the addition made by denying such benefits for all the relevant assessment years 2002-03, 2003-04 & 2004-05. - Decided in favour of the assessee. Maximum marginal rate of tax as per section 164(2) of the Act, interest under section 234A & 234B and change in method of accounting by Revenue from cash basis to mercantile basis - Held that:- Since we have held that the assessee is entitled to the benefit of section 11 of the Act, the issue with respect to levy of tax at maximum marginal rate under section 164(2) of the Act will not arise in the case of the assessee and accordingly interest under section 234A & 234B of the Act cannot be levied. Further since the assessee is a charitable institution having registration under section 12A of the Act, application of income has to be made on the basis of receipt of income as per section 11 & 12 of the Act and therefore books of accounts have to be necessarily maintained on cash basis. Therefore, we hereby direct the learned Assessing Officer not to change the method of accounting adopted by the assessee which is on cash basis - Decided in favour of the assessee
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