TMI Blog2013 (5) TMI 305X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Rajasthani Siksha Samithi (2008 (3) TMI 501 - ITAT HYDERABAD) wherein held that institutions falling u/s. 10(23C)(vi) are eligible for exemption u/s. 11 also. Merely because section 10(23C)(vi) provides for exemption of the income of an educational institution it does not follow that such institution cannot avail exemption u/s. 11 subject to fulfilment of the conditions laid down. Being so, when the reasons recorded do not survive reopening of assessment is bad in law as decided in Ganga Saran and Sons (P) Ltd. vs. ITO & Ors. (1981 (4) TMI 5 - SUPREME Court), CIT v. Jet Airways (2010 (4) TMI 431 - HIGH COURT OF BOMBAY), Ranbaxy Laboratories vs. CIT (2011 (6) TMI 4 - DELHI HIGH COURT ) and CIT vs. ICICI Bank Ltd., Bombay (2012 (7) TMI 521 - BOMBAY HIGH COURT) . Accordingly the reopening of assessment quashed. Assessment of income by treating the development fee receipt as capitation fee thereby denying exemption u/s. 11 - Held that:- As decided in Vasavi Academy of Education case [2010 (2) TMI 970 - ITAT HYDERABAD] the assessee is not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it is called i.e., donation, building fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atory approval u/s. 10(23C)(vi), has escaped assessment as its gross receipts exceeded Rs. 1 crore. On reopening of the assessment, the Assessing Officer brought to tax development fee collected by the assessee by denying exemption u/s. 10(23C)(vi). 4. Before us, the learned AR submitted that firstly there was a notice u/s. 148 of the Act issued by the ACIT, Kurnool for A.Y. 1998-99 to 2002-03 on 9.12.2004. Assessments were terminated on 31.3.2006 and the DDIT (Exemptions)-II, Hyderabad has no jurisdiction to issue further notice u/s. 148 of the Act. Further he submitted that there was penalty proceedings against the assessee by JCIT, Kurnool u/s. 272A(2)(e) of the Act for A.Ys. 1997-98, 1998-99, 1999-2000, 2000-01 and 2001-02. Against this penalty order the assessee went in appeal before the Tribunal in ITA Nos. 1 to 5/Hyd/2007. The Tribunal vide its order dated 11th February, 2010 confirmed levy of penalty by Joint CIT, Kurnool for filing belated returns and given categorical finding that the Addl. CIT, Kurnool has the jurisdiction over the assessee. Being so, jurisdiction of Kurnool Range is upheld by the Tribunal. 5. The learned DR submitted that registered office of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.1.2005. 6.3. After the filing of returns on 15.10.2004, the following proceedings were initiated by the department during which no objection was raised by assessee up to 6.1.2005. a) Penalty proceedings u/s 272(A) initiated on 28.10.2004 b) 148 issued on 9.12.2004 c) 143(2) issued on 13.12.2004 for assessment years 2003-04 d) Summons issued on 13.12.2004 to appear on 20.12.2004. e) On 20.12.2004, the AR appeared but did not raise the issue of jurisdiction. 6.4. The assessee voluntarily filed return of Income in Form 3A at Kurnool and the assessing officer had the jurisdiction over the assessee as per section 124(5) which reads as follows: "Notwithstanding anything contained in this section or in any direction or order issued u/s 120 every assessing officer shall have all the powers conferred by or under this act on an assessing officer in respect of the income accruing or arising or received within the area, if any, over which he has been vested with jurisdiction by virtue of the directions or orders issued under sub section (1) or sub section (2) of section 120." 6.5. The main trustee resides at Kurnool, there is an engineering college at Kurnool run by the Tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause (a) regular return. In case the assessee does not file regular return, the assessee's case is covered by notice u/s 142(1) or 148. The clause clearly states that the time limit is expiry of time allowed u/s 142(1) or 148 for making return or under first proviso to section 144 whichever is earlier. 7. In the instant case, the assessee did not file regular return if u/s 139(1) of IT Act or 139(4A) applicable for trusts. He filed returns on various dates from 6.10.2004 to 11.10.2004 for the years under consideration. Notice u/s 148 was issued on 9.12.2004 for assessment years under appeal. The assessee replied vide letter 17.12.2004 to treat the return of income already filed as filed in response to notice u/s 148. The assessee did not file regular return in time and no such return as envisaged in clause (a) are filed. As per clause (b) he should have raised objection within the time allowed by notice dated 9.12.2004 u/s 148 i.e. before 19.12.2004 which the assessee did not do. 7.1 Section 124(3) is clear in its emphasis on time allowed as per notice u/s 148 or 142(1) are under first proviso to section 144 whichever is earlier. 7.2. It can be seen that clause (a) lays em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice itself is bad in law by the Hyderabad Range of the Department, consequent framing of assessment is bad in law. Being so, we quash the reopening of assessment for all the above four assessment years. Even otherwise, the notice u/s. 148 was issued on the reason recorded that approval under provisions of section 10(23C)(vi) was mandatory and it was not obtained by the assessee though the gross receipts exceeded Rs. 1 crore and, therefore, income escaped assessment. However, we are of the opinion that the assessee could claim alternate deduction/exemption u/s. 11 of the Act and non-obtaining of approval u/s. 10(23C)(vi) is not fatal in view of the decision of co-ordinate Bench in the case of St. Theresa Convent Society in ITA No. 844/Hyd/2008 and also in the case of ADIT (Exemptions) vs. Rajasthani Siksha Samithi (23 SOT 124) (Hyd) wherein held that institutions falling u/s. 10(23C)(vi) are eligible for exemption u/s. 11 also. Merely because section 10(23C)(vi) of the Act provides for exemption of the income of an educational institution it does not follow that such institution cannot avail exemption u/s. 11 subject to fulfilment of the conditions laid down. Being so, when the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund fee. Only management quota seats are left to the assessee's trust to get them filled and majority seats are going to the government allottees. Whatever the development fund fee is collected, it was used for the object of the assessee's trust, i.e., for imparting education and the Rs. 4 lakhs is kept with the founder trustee is not with the intention of diversion for the benefit of the founder trustee. It was kept in safe custody. 13. According to the AR, the assessee is subject to inspection by state Government authorities. There is no adverse remark against the assessee and the sole object of the assessee is to impart education. The voluntary contribution went for achievement of the object of the assessee's trust. He relied on the following judgements:- (a) Shri Belimatha Mahasamsthana Socio Cultural Educational Trust (46 DTR 290) (Karn.) (b) DCIT vs. Vellore Institute of Technology (46 SOT 224) (c) CIT vs. Bijili Cotton Mills (P) Ltd. (116 ITR 60) (d) Chairman, AP Welfare Fund v. CIT (143 ITR 82) (e) Governing Body, Rangaraya Medical College vs. ITO (117 ITR 284) (AP) (f) CIT vs. Surat Art Silk Cloth Manufacturers' Association (121 ITR 1) (SC) (g) DIT vs. M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation Wing of the IT Department after the search and survey was that the trust was taking the donation and capitation fees for admission though prohibited under Maharashtra Educational Institutions (Prohibition of Capitation Fees) Act, 1987 (hereinafter referred as 'Prohibition of Capitation Fees Act)" Dealing on the said issue at 11.13 the Tribunal held as under:- 11.13 "The aspect of morality as touched by the learned CIT is applicable. Every vigilant and law abiding citizen has to be fair in his conduct and should refrain from immoral activities. But existing blue laws are derived from the numerous extremely rigorous laws designed to regulate morals and conduct. These laws are enacted in such a fashion that if implemented correctly and efficiently then there is no scapegoat for an offender. We are tempted to write an idiomatic language due to the sensitivity of the issue, that a CIT cannot be allowed to hold a baton of morality in his hand to hit an immoral; but the statute has given him a flexible stick for inflicting tax on defaulter, that includes a trust or educational institution. The gist is that if the CIT had an information of some wrongful means of earning fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the concerned university has to initiate steps to withdraw the approval/recognition for such educational institutions. The finding of the Tribunal in that case is erroneous. The various decisions relating to the educational institutions of the Apex Court have been summarized by the Hon'ble Supreme Court itself in a later decision in Action Committee Unaided Private Schools Others vs. Director of Education, Delhi Others reported In 2009 (11) SCALE Page 77). According to AR the said judgment run counter to the opinion expressed by the Tribunal. The appellant is a private unaided educational institution. It does not depend on any funds from the Government. The Hon'ble Supreme Court categorically held that the decision of the fees to be charged is left to the private educational institutions and there can always be reasonable surplus. The decision of the Tribunal in Vodithala Education Society case runs contrary to the judgment of the Hon'ble Supreme Court. While rendering the decision in Vodithala Education Society's case, the following cases have not been considered. a) Addl. CIT vs. Surat Art Silk Cloth Manufacturers' Association, 121 ITR 1 @ 27 (SC) b) Governing Body of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons. 19. He submitted that in the said order, the learned Vice President (one of the members who decided the appeal) has himself held that Vodithala Education Society's case was decided against the assessee because the excess money collected was given to the Managing Committee contravening section 13(l)(c) of the IT Act and that it is not proper for the Tribunal to give its label of capitation fees to the excess money collected for denying the exemption. The relevant passage is extracted below:- " It is also not the case of the Assessing Officer that the excess money collected by the assessee is in the form of capitation fee. In the preceding paragraphs I have already discussed that any fee collected in excess of the fee prescribed by the government is not necessarily capitation fees. Therefore, it is not proper for the Tribunal to give its own label of capitation fee to the excess money collected. " 20. He submitted that In view of the clarification subsequently given by the very same members in the very same case who decided the appeal, the ratio of Vodithala Education Society's case should be confined to its facts only. It cannot be made applicable to the appellant's case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Now, Sri G. Pulla Reddy is very old person, aged about 80 years and he is not aware of the intricacies of the issue. He is not a person of using Rs. 4 lakhs for his personal benefit. He has thrived his whole life for the betterment of the institution and it cannot be by any stretch of imagination one can say that he is going to use Rs. 4 lakhs for his personal or for his family benefit. He submitted that Rs. 4 lakhs is less than 5% of total development fund collected which is at Rs. 1,18,75,135 for the assessment year under consideration. He relied on the judgement of Rajasthan High Court in the case of DCIT vs. Cosmopolitan Education Society (244 ITR 494) (Raj.) wherein held that if there are minor deviations exemption cannot be denied. He also drew our attention to section 164(2) of the Act which says only the relevant income will be taxed at maximum rate. According to the AR Rs. 4 lakhs has to be taxed at maximum rate. He also relied on the judgement of Bombay High Court in the case of Seth Mafatlal Gagalbhai Foundation Trust (249 ITR 533). Further he strongly objected the direction of the CIT(A) to look into the other educational institutions of the trust. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10 which applies squarely to the facts of the present case wherein the Tribunal in paras 3 and 4 observed as follows:- "3. After hearing both the parties, we are of the opinion that this issue has already been decided by the tribunal vide its order dated 29.1.2009 in assessee's own case for the assessment year 2005-06 in ITA No. 1120/Hyd/2009 by holding as follows: "We have heard both the parties and perused the material on record. The learned Authorized Representative for the assessee submitted that this issue covered in favour of the assessee by the order of the Hyderabad Bench 'A' of the Tribunal dated 15.4.2009 in assessee's own cases in ITA No. 1133/Hyd/2006 for the assessment years 2003-04 and order dated 17.4.2009 in ITA No. 1206/Hyd/2007 for the assessment year 2004-05. However, we find that the Constitutional Bench of Apex Court in the case of T.M.A. Pai Foundations and others Vs. State of Karnataka Others (2002) 8 SCC 481 examined the issue of collection of capitation fees for the admission of students over and above fees prescribed by the private institution and held that the institution which are collecting capitation fees for admission of students over and above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission of students. 4. Respectfully following the ratio laid down by the Tribunal in the above order, we set aside the issue in dispute to the file of Assessing Officer on similar directions for fresh consideration." 26. It is worthwhile to note that the order of the Tribunal dated 29.1.2009 in the case of Vasavi Academy of Education, Hyderabad for assessment year 2005-06 in ITA No. 1120/Hyd/ 2009, which has been relied upon by the Tribunal in its order dated 4.2.2010, in ITA No. 1794/Hyd/2008, has been recalled, while deciding upon on the Miscellaneous Applications of both the parties in ITA No. 1120/Hyd/2009 and 1794/Hyd/2008, vide consolidated order of this Tribunal dated 20.10.2011 in MA No. 130/Hyd/2011. However, as in its order dated 4.2.2010 in ITA No. 1794/Hyd/2008, since the Tribunal has not merely followed the reasoning given in its order dated 29.1.2009 in ITA No. 1120/Hyd/2009, but adopted the same, as may be seen from para 4 of the order dated 4.2.2010 extracted above, the said reasoning forms part and becomes the reasoning for the decision rendered in ITA No. 1794/Hyd/2008 in its order dated 4.2.2010. In that view of the matter recall of the order in ITA No. 1 ..... 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