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TMI Blog2014 (4) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.2,88,51,943 as deposit account, credited to the Capital Found Account of Chaitanya Bharati Institute of Technology (CBIT) for the assessment year 2002-03. Similarly, an amount of Rs.62,49,000 was shown as Development Fees credited to the Capital Fund in Mahatma Gandhi Institute of Technology. Likewise, donations of Rs.17,000 were credited to the Capital Fund in Chaitanya Bharati Public School. It was explained by the assessee before the Assessing Officer that the said amounts represented donations received for infrastructure and other developmental activities. It was also claimed that though the said amounts were not shown on the Income-side of the Income and Expenditure side of the CBIT for the financial year 2002-03, the same was taken into consideration and added in the computation of total income filed with the return. The assessee also filed a list of donations received for the financial year 2002-03 with the names of various persons, against receipt Nos., totaling to Rs.2,88,51,943. It was submitted hat similar donations were received in MGIT also as development fees. A list of various members in respect of such donations was furnished, wherein the amounts ranged from Rs.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iia)(d) of S.10 (23C)(vi) of the Act. The Assessing Officer also held the view that the assessee was not entitled to exemption under S.10(23C)(vi), as it has not obtained the mandatory approval from the prescribed authority, even though its gross receipts exceeded Rs.1 core., The Assessing Officer therefore, proceeded to tax the income of the engineering college, as per their income and expenditure statement, together with the amount of Rs.3,51,17,943 collected from or on behalf of the engineering students/other students as additional fee/donation. 3. It was also submitted before the Assessing Officer that in the project of development of education, lot of funds were required and the Government, being not in a position to establish engineering colleges with proper facilities, permitted the engineering colleges to collect fees for providing infrastructure facilities to students. It was claimed that the parents of the students were willing to pay Development Fee not only for their own children, but for other students also. It was submitted that the sums collected were not contrary to rules and regulations, and the huge capital incurred for providing good infrastructure was solely fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the government, had been collected in the form of deposits/donation /development fee and therefore, the assessee could not be considered as following the law. The Assessing Officer further noted that the said orders specifically prohibit collecting the amounts other than those fixed under the head 'tuition fee' and 'development fee' and therefore, the institutions charging fees, by whatever name called, higher than those fixed or institution falling to maintain accounts in the manner laid down or otherwise found to contravene the provisions, are liable to have their permission cancelled. Then referring to the decisions of the Apex Court in the case of TMA Pai Foundation and others V/s. State of Karnataka and others, the Assessing Officer felt that the activities of such trusts/institutions remain no more charitable but in fact support the beneficiaries, who represent an affluent section of the society, for profit and engage in such activities for profit. The Assessing Officer accordingly proceeded to deny exemption under S.11 to the assessee and brought the excess income over expenditure of all the institutions of the society amounting to Rs.4,58,040, besides t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted remand report dated 20.9.2006, which, in turn, was forwarded to the assessee. Assessee thereupon vide submissions dated 6.12.2006 submitted that the persons concerned had mentioned that the amounts had been paid by them as donations to the society and no one has compelled for the payment of the amount and therefore the amounts were paid voluntarily. 8. The CIT(A) further wrote a letter dated 22.4.2007 directed the Addl. Director of Income-tax(Exemption), Hyderabad to enquiry from the Secretary to Government of A.P., Higher Education(EC-II) Dept., to ascertain whether the collection of fee against the prescribed norms fixed by the Government of AP had been taken into cognizance in view of the GO Nos.950 and GOMS No.33 and whether any action had been taken against the assessee-society for any year. In response, a report was submitted by the Assessing Officer on 18.2.2008, wherein after discussion of the earlier reports, it was submitted that the donations made to the society were voluntary, and therefore, there is merit in the contention. 9. On due consideration of the elaborate submissions of the assessee, in the light of the remand reports of the Assessing Officer, the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 138/Hyd/2006 for assessment year 2003-04, on the point at issue and observed that any amounts collected over and above the prescribed feds ha to be classified as capitation fee and would prove that the institution exists for the purpose of profit and not solely for educational purpose. He accordingly concluded that the assessee by collection donations, as evidenced by confirmations form donors, has failed to comply with the basic condition of exemption under S.10(23C), as it has been found to exist for the purpose of profit. He also referred to that very decision of the Tribunal in the case of Vodithala Educational Society (supra), among others, wherein it was held that if an educational institution is used as a tool and an apparatus for collecting money over and above the fee prescribed, it would not be entitled for exemption under S.11 also. Since it has been established in the present case that the assessee has taken donations, which are found to be linked to the admission of students to the college, the CIT(A) held that the assessee is not entitled for exemption either under S.10(23C) or under S.11 of the Act, and accordingly confirmed the assessment made by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en applied to charitable purpose in India during the year of account. 14. The Ld. CIT(A)-IV Hyderabad ought to have appreciated that there is no violation of any provisions of the IT Act, 1961 and hence trust is entitled to exemption u/s. 11 of the IT Act, 1961. 15. The Ld. CIT(A)-IV ought to have appreciated that source of income is not relevant but what is relevant is application of the income in the case of the appellant trust for the purpose of section 11 of the IT Act. 16. The Ld. CIT(A)-IV ought to have confined his decision to the provisions of IT Act, 1961 and ought not to have passed his order on breach of some other statute. 17. The Ld. CIT(A)-IV ought to have appreciated that the AO is not empowered under the statute to deny the exemption u/s. 11 in the absence of withdrawal of registration under S.12A by the DIT(Exemption) in the appellant's case. 18. The Ld. CIT(A)-IV ought to have held that the appellant is entitled to exemption u/s. 11 of the Act 19. The Ld. CIT(A)-IV erred in relying on the decisions of "TMA Pai Foundation and others vs. State of Karnataka and others (8 SCC 481 2002)and Islamic Academy of Education and Another Vs. State of Karnataka and An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . whether the collection of fee against the prescribed norms fixed by the Government of Andhra Pradesh has been taken cognisance of, in view of the GO Nos. RT 950 and GOs No.33, and whether any action has been taken against the assessee society for any year. In reply, the Secretary has stated no action has been taken. In support of his contentions, the learned counsel has relied on a number of decisions/circulars, numbering to as many as 31, duly furnishing copies thereof in the paper-books. 13. The Learned Departmental Representative on the other hand, relied on the impugned orders of the Revenue authorities and specifically relied on the judgment of the Apex Court in the case of TMA Pai Foundation and Others V/s. State of Karnataka and Others (8 SCC 481) and Islamic Academy of Education and Others V/s. State of Karnataka and Anr.(6 SCC 697). He also relied on the decision of the coordinate bench of the Tribunal in the case of Voditala Educational Society (20 SOT 353)- Hyd. 14. We heard both the parties and perused the material available on record. It is an undisputed fact that the assessee is an educational society registered under S.12A of the Act, and its objects as appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is and it amounts to profiteering. The Assessing Officer had denied exemption u/s. 11 and taxed the excess of income over expenditure and also the capitalized amounts. He opted to deny the exemption u/s. 11 and also u/s. 10(23C) mainly on the reason of profit making. A doubt may arise as to whether the profit accrues to the assessee or any persons connected to the assessee. As claimed by the assessee in the submissions enclosed to the above reference, if profit accrues to the assessee and without establishing the accrual to any particular person as specified in sec.13, the exemption might not be denies. He made out a case for denial exemption us. 10(23C) as there was no exemption certificate for that purpose. But for denial of exemption u/s. 11 he did not make out any lapse on the part of the assessee. Section 11 speaks of gross receipts from property held under trust and exemption to the extent of its application for the purpose of trust including capital expenditure and amounts notified u/s. 11(2). Since the assessee was registered u/s. 12A, and the provisions of S.11(1a) are to be applied. 10. A over all study of the assessment order with reference to the provisions and case la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2002 whereas the academic year in the case of the assessee was 2002-03. The Court observed in that case as follows- "The committee had no jurisdiction under the order of honourable Supreme Court for fixing the differential fees for the academic year 20o03-04. In fact, the committee had come into existence only when those academic years were nearing completion." For almost similar reasons, the other decision of the Apex Court in the case of Islamic Academy of Education and Anr. V/s. State of Karnataka (supra), also relied upon by the Revenue authorities, is not applicable, as that decision was pronounced on 14.8.2003, which is after the closure of academic year under consideration, i.e. 2002-03 in the present case. 19. Further, the GOMs No.90 by the Government of Andhra Pradesh in respect of constitution of committee as per the judgment of Apex Court in TMA Pai foundation (supra) was issued on 22.12.2003, which is after the closure of the academic year under consideration i.e. 2002-03. Similarly, the GO Ms. No.33 by the Government of Andhra Pradesh in respect of formulation of rules for admission into the Under Graduate Professional Courses in Engineering in Unaided Non-Minority ..... X X X X Extracts X X X X X X X X Extracts X X X X
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