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2022 (8) TMI 895 - AT - Income TaxExemption u/s 11 - Treatment of Development Fund as Tuition Fees - whether the development funds given and collected by the institution are akin to the tuition fees collected or not? - Whether the development fund collected partakes the character of revenue receipt or corpus donation u/s 11(1)(d) and capital receipt in nature? - HELD THAT:- Development Fee relates to rates to be determined by the UGC and AICTE. Different rates may prescribe for payment, fee, seats and foreign NRI seat holders. As the fee chargeable will be notified by the relevant committee it shall be the duty of the statutory body concern to communicate the rate of development fee to such bodies well in advance to enable the appropriate committee to suitable incorporate such rates. In the case of an educational institution which collected fees on account of building fund and treated as corpus, the Hon’ble Karnataka High Court in Bharatiya Samskriti Vidyapith Trust [2013 (11) TMI 1594 - KARNATAKA HIGH COURT] held that, “since the assessee had specifically mentioned building fund on fee receipts and had later applied for the purpose of building, it could be said that there was a specific direction under 11(1)(d). Similar view has been taken in the case of Sri Ramakrishna Seva Ashrama [2011 (10) TMI 369 - KARNATAKA HIGH COURT] wherein Court held that if the amounts received are held as capital and only applied for specific purposes then it can be said that there was a specific direction to treat it as corpus funds. Court further held that the requirement is that the voluntary contributions have to be made with a specific direction. The law does not require that the said direction should be in writing. In the absence of the direction in writing, the only way that one can find out whether there was a specific direction is to find out how the money so paid it is utilized. In the instant case, the Development Fee has been directly taken to corpus account as capital receipt u/s 11(1)(d) and has also invested in the fixed asset in the year. Ergo, we hold that the Development Fee is to be treated as corpus fund allowed to be taken as capital receipt. Computation of 15% u/s 11(1)(a) of net surplus in place of gross receipt - We hold that 15% accumulation is allowed on the income from property held under trust. These provisions have been further clarified in the case of Addl. CIT Vs. A.L.N. Rao Charitable Trust [1975 (9) TMI 44 - KARNATAKA HIGH COURT] wherein lordships has explained the law with an example of Rs. 1,00,000/- gross income and assuming an expenditure of Rs. 20,000/-, Court has held that Rs. 25,000/- being 25% (now 15%) of gross receipts will be allowed as accumulation u/s 11 (1)(a). Hence, keeping in view the provisions of Section 11(1)(a) and the judgments of Hon’ble Supreme Court, we hold that the amount eligible u/s 11(1)(a) be determined taking into consideration, the income derived from the property held under trust to the extent to which the income so accumulated is not in excess of 15% of income from such property.
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