TMI Blog2012 (10) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... capitation fee, the investments of the trust must come out of current year’s 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee. The relevant assessment years are 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. 2. The appeals and cross objections are directed against the orders of the Commissioner of Income-tax(Appeals)- II, Chennai, all dated 11-7-2011. 3. Out of the seven appeals, six appeals filed by the Revenue arise out of the assessments completed under section 143(3), read with section 153A of the Income-tax Act, 1961. Six appeals relate to the first six assessment years from 2002-03 to 2007-08. The corresponding cross objections filed by the assessee, six in numbers, also relate to the same six assessment years from 2002-03 to 2007-08 and arise out of the same assessment orders passed under section 143(3), read with section 153A of the Act. 4. The appeal filed by the Revenue for the assessment year 2008-09 in ITA No.1772(Mds)/2011 arises out of the assessment completed under section 143(3) of the Income-tax Act, 1961. No cross objection is filed by the assessee for this assessment year. 5. The assessee is a public charitable trust registered for the purpose of carrying on educational activities. The assessee is running medical, dental and nursing colleges. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2008-09 was also completed following the footsteps of the assessments made for the earlier six assessment years 2002-03 to 2007-08. 10. In all these appeals filed by the Revenue, it is admitted that the issues have been decided by the Commissioner of Income-tax(Appeals) mainly relying on the earlier mentioned order of the Tribunal dated 24-12-2010 passed in ITA No.444(Mds)/2010. But the Revenue is agitating the issues on the ground that the decision of the Tribunal in the said order has not been accepted by the department and the issues have been raised before the Hon ble jurisdictional High Court in appeal filed under section 260A of the Income-tax Act, 1961. 11. As the Commissioner of Income-tax(Appeals) has passed orders in these cases, following the order of the Tribunal mentioned earlier, it is not necessary for us to consider the issues in detail and it would be sufficient to make a useful reference to the findings recorded in the earlier order of the Tribunal mentioned above. In the above background, we are proceeding to dispose of the appeals and cross objections in the following paragraphs. 12. The facts and circumstances being similar and the issues are identi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The assessee has nothing to do with the legality or illegality of the sources in the hands of those donors. The capitation fee could be explained only in the hands of the persons making the donations. The Tribunal held that even if the assessee had accepted the capitation fees, it has violated the provision s of Anti Capitation Fees Act, which does not amount to violation of law stated in the Income-tax Act, 1961. The assessee might be liable for proceedings permissible under Tamilnadu Prohibition of Capitation Fees Act. But the same does not make the status of the assessee vulnerable for the purpose of income-tax law. The Tribunal held that there is no apparent distinction between legal and illegal income under the provisions of the Income-tax Act. If the income is taxable, it should be taxed. If the assessee has not applied the capitation fees collected even in violation of the Prohibition Act for the purposes for which the trust was established, there is a case for Revenue. If the assessee has applied its entire income including capitation fees exclusively for the purposes for which it is established, the Revenue has no case. 15. While discussing the above crucial issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building fund as well. In fact the case of the Revenue is that the receipts in the hands of the assessee are capitation fees, whereas the contention of the assessee is that the receipts are donation towards building fund. Therefore, as rightly held by the Tribunal in its earlier order and as followed by the Commissioner of Income-tax(Appeals) in the impugned first appellate orders, there is complete overlapping between the question of capitation fees and the question of building fund. The Tribunal has made a definite finding in its earlier order that the entire amount received by the assessee including capitation fees was applied only for the purpose of building infrastructural facilities to run the educational institutions of the assessee. 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. It is also a fact that the assessee trust has spent much more than the funds collected for the purpose of buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue for all the seven assessment years from 2002-03 to 2008-09. The issue is decided in favour of the assessee. 23. The fourth issue raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in deleting the additions made by the assessing authority against lease deposits. In paragraph 23 of their order, the Tribunal has considered this issue in a very detailed manner and has held that those lease deposits are made in the nature of application of funds for the purpose of educational activities and they were made in fact to improve the infrastructural facilities of the institutions run by the trust. It is relying on the above finding of the Tribunal that the Commissioner of Income-tax(Appeals) has deleted the additions. We uphold the finding of the Commissioner of Income-tax(Appeals) on this point. 24. The Revenue has raised this issue for three assessment years 2002-03, 2003-04 and 2004-05. This issue is decided in favour of the assessee. 25. The fifth issue raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in deleting the disallowance of expenses made by the assessing authority. It is the case of the Revenue that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax(Appeals) has erred in holding that the assessee is a charitable institution entitled for the benefit of section 11 on the ground that the assessee trust is carrying on a number of educational institutions. This issue is also decided by the earlier order of the Tribunal, which has been rightfully followed by the Commissioner of Income-tax(Appeals) 30. This issue is raised by the Revenue for all the assessment years in general, but more particularly for the assessment years 2002-03, 2004-05, 2005-06, 2006-07, 2007-08 and 2008-09. This issue is decided against the Revenue. 31. The eighth common issue is that the Commissioner of Income-tax(Appeals) has erred in granting relief towards the fine collected by the assessee from its students merely on the basis of the submission made by the assessee before him. The assessee has clearly explained before the Commissioner of Income-tax(Appeals) that the fine collected by the assessee from the students has already been included in the total fee collection accounted by it. The above position has been explained by the assessee before the Commissioner of Income-tax(Appeals) on the basis of the books of account maintained by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is in these circumstances that the Commissioner of Income-tax(Appeals) has held that 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. We find that the Commissioner of Income-tax(Appeals) has deleted the addition on the basis of a valid reason. Accordingly, the order of the Commissioner of Income-tax(Appeals) on this point is upheld. This issue is decided against the Revenue. 36. The tenth and last issue raised by the Revenue is that the Commissioner of Income-tax(Appeals) has erred in deleting the addition made against cash found in the course of search at Rs. 18,84,730/-. This issue is raised only for the assessment year 2008-09. This issue was considered by the Tribunal in the order mentioned above. The total cash balance available on the date of search was more than Rs. 90 lakhs. An amount of Rs. 10 lakhs alone was found in the registered office of the trust. The registered office of the trust is the residence of the trustee. In one way or the other way, the entire cash has been kept in the same premises identified as the residence of the trustee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch was made in his own case and, therefore, there cannot be a notice under section 153A in the case of the assessee trust. 41. Shri Shaji P Jacob, the learned Commissioner of Income-tax, appearing for the Revenue, contended that the office of the assessee trust and the residence of trustee both are the same building and the place of search was clearly mentioned in the warrant as that of the building itself and the name was given as Dr. C.K.Velayuthan Nair, Padanilam Welfare Trust at Kulasekaram. The names of both the assessee trust as well as its trustee are very much mentioned in the search warrant and, therefore, there is no reason to argue that there was no warrant issued against the assessee. 42. In support of his arguments, the learned Commissioner of Income-tax relied on the decision of the Hon ble Madras High Court rendered in the case of CIT vs. K.M.Ganesan, 333 ITR 562. 43. We considered the matter in detail. The search was conducted in the residential premises of the trustee, which is also the registered office of the assessee trust. The said building was squarely covered by the warrant issued for the search. The warrant also reflected the name of Dr. Velayuthan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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