2011 (6) TMI 391 - AT - Income Tax

Charitable Trust - Exemption u/s 11 - Activity of education as a business - cancellation of registration u/s 12AA(3) - delayed furnishing of list of donors - collection of capitation fee for admission or voluntary donation - Held that:- charging of higher fees from affluent students or raising funds for the laudable object of education, which is traditionally a State function, through donations, by an unaided self financing educational institutions cannot deter the "charitable" nature of the activity and in any view make such activity "Commercial" in nature.

Regarding cancellation of registration - held that:- contents of the show cause notice under section 12AA(3) proposing to cancel registration from assessment year 2004-05; the retracted statements of V. Sankar and R. Vijayakumar who were neither employed nor had any position in the assessee trust during the relevant year and therefore, could not have had knowledge of the assessee's affairs during the year relevant to assessment year 2001-02; or the letters from parents in 2004 and later, requesting for refund of money, can be relied upon by the revenue to deny the exemption under section 11 for assessment year 2001-02.

Exemption u/s 11 - Held that:- while section 10(22) had an express condition that the institution should exist "not for purposes of profit" section 11 does not impose any such condition. - the incidence of surplus during the course of activity of running the educational institution would not be a ground to state that the assessee is carrying on a business activity so as to forfeit exemption under section 11.

Education versus Charitable - section 2(15) - Held that:- 'education' per se is a 'charitable purpose' under section 2(15). - the revenue's attempt to categorize the educational institution as a business has to be rejected.

Regarding donation - Held that:- the donations received by the assessee towards 'corpus fund' cannot be treated as 'capitation fees'. - Further, even if the corpus donations received are in deed capitation fees, as more than 75 per cent of that amount has also been applied for charitable purposes, the said donations would still be exempt under section 11 (1)(a).

Power of AO to decide the nature of trust in assessment proceedings - Held that:- once the trust is registered under section 12A, the Assessing Officer has no locus standi to decide as to whether it is 'charitable' or otherwise.