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2023 (9) TMI 886 - AT - Income TaxExemption u/s. 11 & 12 - assessee has collected ‘corpus donations’ - violations noticed during the course of survey - as per DR assessee is collecting donations in lieu of admissions of students to schools run by the assessee in violation of said legislation which prohibits collection of ‘Capitation Fees’ - HELD THAT:- As going by the amount of donations received by the assessee from parents of students, it cannot be said that said donations are ‘Capitation Fees’ in violation of the provisions of the Tamil Nadu Education Institutions (Prohibition of Collection of Capitation Fee) Act, 1992. In any event, the Tamil Nadu Education Institutions (Prohibition of Collection of Capitation Fee) Act, 1992, is not applicable to schools run by the assessee, which is evident from the law itself, because, said enactment is applicable only to professional institutions offering degrees and diplomas. Therefore, the observation of the AO in light of above said Act that the assessee has violated the Tamil Nadu Education Institutions (Prohibition of Collection of Capitation Fee) Act, 1992, and not entitled for exemption u/s. 11 of the Act, is totally absurd and devoid of merits. Allegation of the AO that the assessee has collected excess fess over and above fees prescribed under the provisions of the Tamil Nadu Schools (Regulation of Collection of Fee) Act, 2009, is also negated by the assessee by filing relevant details. From the details furnished by the assessee, we find that the AO has computed excess fees by taking into number of students and fees fixed as per said Act without excluding certain Miscellaneous Fees collected by the assessee, which is not at all in nature of tuition fees prescribed under said Act. Therefore, we are of the considered view that the AO has made mere allegations of collecting excess fees in contravention of provisions of the Tamil Nadu Schools (Regulation of Collection of Fee) Act, 2009. Therefore, we are of the considered view that the AO is erred in rejecting exemption u/s. 11 of the Act, to the assessee society, on the basis of above observation. Generating income from incidental activities - assessee did not maintain separate books of accounts for incidental activities as required u/s. 11(4A) - We do not find any merit in the allegation of the AO for simple reason that the AO himself in his assessment order, has computed income and expenditure from various incidental activities and reproduced in tabular form of his assessment order. From the above, it is undoubtedly clear that there are books of accounts for incidental activities. In any event, maintenance of separate books of accounts for incidental activities gets fully diluted in the era of software accounting, where, segmental accounting entries are posted, which can be easily segregated to ascertain separate income and expenditure from each activity. Further, the AO himself has culled out data from books of accounts maintained by the assessee for each activity and computed income and expenditure separately. From the above, it is clear that there are books of accounts for incidental activities and from said books of accounts, income and expenditure from each activity can be computed. Therefore, we are of the considered view that the reasons given by the AO in light of incidental activities carried out by the assessee for rejection of exemption u/s. 11 of the Act, is devoid of merits. AO is erred in denying the benefit of exemption u/s. 11 of the Act, to the assessee Society on the ground that the assessee Society is collecting ‘Capitation Fees’ in lieu of admissions and also not maintaining separate books of accounts for incidental activities - Decided in favour of assessee.
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