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2016 (7) TMI 272 - AT - Income TaxBenefit of exemption u/s. 11 - whether the assessee has received the capitation fees from the students for which the benefit of exemption u/s. 11 of the Act can be denied? - Held that:- Where the definition of “capitation fee” has been given in the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984, no other definition of “capitation fee” can be adopted, as the word “capitation fee” has not been defined in the Income- tax Act. The Revenue has also established that donation/voluntary contribution was collected from the parents of the students admitted during the year and more so the parents were not financially sound to part with substantial amount of donation in Lakhs to the educational institution. Therefore, we are of the view that the receipts of the assessee from the parents of students is nothing but capitation fees and once capitation fee is charged for admission of the students by the educational institution, the educational institution can be held that it is not engaged in charitable activities, but selling the education in the light of the judgment in the case of Ms. Mohini Jain v. State of Karnataka & Ors. (1992 (7) TMI 330 - SUPREME COURT) wherein held that capitation fees was nothing but price of selling education and such “teaching shops” were contrary to the Constitutional scheme and abhorrent to our Indian culture. We have also carefully examined the judgments referred to by the parties and in the case of P.S. Govindaswamy Naidu & Sons v. ACIT, (2007 (10) TMI 382 - MADRAS HIGH COURT) has held that where it was found that amount paid by parents of students admitted to assessee’s educational institution was not corpus donation amount, but it was collected only by way of capitation fees, such capitation fees was not exempt in the hands of assessee institution. Grant of registration u/s. 12AA by the Tribunal is concerned, we are of the view that the scope of grant of registration u/s. 12AA is entirely different than the scope of grant of exemption u/s. 11 of the Act. While granting registration u/s. 12AA of the Act, the authority was required to examine the objects of the society if the object of the society is of charitable nature, but no other contrary material is placed, the registration u/s. 12AA is to be granted. But while granting exemption u/s. 11 of the Act, the AO is required to examine the nature of activities of the assessee and if he noticed that the assessee is not engaged in charitable activities and is engaged in commercial activities, the benefit of exemption u/s. 11 can be denied. In the instant case, the AO has brought out enormous evidence on record especially to establish that the assessee is not engaged in charitable activities and all these evidence was overlooked by the CIT(Appeals) in the AYs 2009-10 & 2010-11. Therefore, we find no error in the order of the AO by denying the benefit of exemption u/s. 11 to the assessee. - Decided against assessee
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