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2012 (10) TMI 14 - AT - Income TaxAddition on account of capitation fee Assessee is a public charitable trust registered for the purpose of carrying on educational activities - Revenue argues that even assuming that capitation fee is booked under the building fund, the character of the receipt is business income and not that of donation or corpus donation Held that:- Even if the colour of certain receipts is characterized as capitation fees, if those receipts are applied for the purpose of the assessee trust, the colour attached to the receipts does not vitiate the status of the assessee as a trust eligible for exemption u/s 11. As the assessee has applied the entire such receipts characterized as capitation fees for the purposes of carrying on its educational activities, such receipts cannot be treated as income in the hands of the assessee. Therefore appeal decides in favour of assessee Application of income towards building fund AO disallow on the basis of that assessee failed to satisfying application of income by capitation fee, the investments of the trust must come out of current years income and that has not proved the nexus as per accounts by producing books of accounts, vouchers, etc. - Held that:- Building fund is used only for the purpose of constructing buildings. Therefore, there is no justification in treating the receipts towards building fund in a different way, as they are applied for educational purposes which is to be treated as application for charitable purposes and as such not taxable in the hands of the assessee. Appeal decides in favour of assessee Addition on account of sundry creditors AO holds that assessee has not proved the creditors before the assessing authority Held that:- Nothing was brought out in the course of search to show that the sundry creditors reflected in the accounts were not genuine. All the relevant details were submitted before the AO. Therefore, when no adverse materials are found against the assessee, there is no reason to disbelieve the closing credit balances and make corresponding additions. Appeal decides in favour of assessee Addition on account suppression in fee receipts by trust Assessment has been completed on the basis of receipt shown by assessee as fees from student Held that:- The fee collection admitted by the assessee in the return of income is more than the gross fee collection reflected in the seized material. Therefore there is no need of any separate addition towards suppression, as the situation has been covered by a higher amount of fee disclosed by the assessee in its return of income. Appeal decides in favour of assessee Addition made against cash found in the course of search Rs. 19 lakhs The total cash balance available on the date of search was more than Rs. 90 lakhs as per books - The registered office of the trust is the residence of the trustee where Rs. 10 lakhs were found out of Rs 19 lakhs - Held that:- As the assessee trust was only holding funds properly accounted and it was not an application or diversion of funds. The cash found and seized in the course of search is not a ground to make an allegation that the trustees have diverted the funds of the assessee-trust for activities other than its objectives. Appeal decides in favour of assessee Validity of notice u/s 153A on basis of AOs jurisdiction - Assessee contended that no search warrant against the assessee trust and as such no notice u/s 153A could be issued against the assessee Search warrant was issued in the name of assessee, who is one of the trustees, and there was no warrant against the name of the assessee trust itself - Office of the assessee trust and the residence of trustee both are the same building Held that:- As the warrant also reflected the name of assessee as well as the assessee trust. By reading the warrant and Panchanama that the search was meant to cover the assessee trust and its institutions. Therefore, the search carried out in the registered office of the trust itself takes care of the entire institutions. Merely non mentioning of section 158BD by itself would not invalidate the issue of notice. Appeal decides in favour of revenue
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