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2015 (4) TMI 342 - MADRAS HIGH COURT

2015 (4) TMI 342 - MADRAS HIGH COURT - [2015] 374 ITR 274 (Mad) - Capitation fee received by trust - Tribunal not considering that the capitation fee received by the assessee trust is a revenue receipt liable for taxation - Tribunal not considering that the trust was receiving capitation fee for admission of students under management quota, as it would clearly prove that it was not doing any charitable activities as per Section 2(15) of the Act - Held that:- The assessee/Trust is running about e .....

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le activities by way of education are bona fide. The department has not produced any evidence to rebut the said finding rendered by the Tribunal. Therefore, we do not find any reason to upset the said finding.

As rightly held by the Tribunal, if the Assessing Officer had any doubt about the receipt of capitation fee or the explanation given, he should have conducted enquiry either with the students or with their parents or with any other person interested in the activities carried on .....

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seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. No endeavour is made to sustain the allegation of involuntary donation. In any event, as rightly held by the Tribunal, it is not relevant in the present case as the allegation is violation of Section 13 r/w Section 11 of the Act. Having invoked Section 13, the mai .....

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able purpose, as defined under Section 2(15). There is not even an iota of material to come to a conclusion to a different conclusion than what has been held by the CIT (Appeals) and the Tribunal. We find that the department has not made out a case of collection of capitation fee under the guise of donation and it has not established a case of involuntary nature of donations. - Decided in favour of assessee.

Capitation fees received from students who were admitted in the management qu .....

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rein. In the present case, we find that the department had proceeded on a wrong premise without any basic materials to establish a case of violation of Section 13 of the Act. Therefore, in our considered opinion, the Tribunal was right in deleting the addition. - Decided in favour of assessee.

Non following the jurisdictional High Court judgment in the case of P.S.Govindasamy Naidu & Sons v. ACIT, [2007 (10) TMI 382 - MADRAS HIGH COURT] by ITAT but relied on by revenue, as distinguish .....

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case of violation of Section 13(1)(d) of the Act as against the respondent/assessee? - Held that:- The very basis of the plea of the Revenue regarding violation of Section 13(1)(d) of the Act is that a sum of ₹ 44 Lakhs was found and seized in the course of the search from the residence of the Chairman of the assessee Trust. With regard to the said seizure, the Assessing Officer has accepted the disclosure of the seized cash as the income of the individual and, therefore, in our considered .....

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vered by R.SUDHAKAR, J.) These appeals are filed by the Revenue under Section 260A of the Income Tax Act, 1961 challenging the order of the Income Tax Appellate Tribunal, A' Bench, Chennai, dated 5.4.2011 made in I.T.A.Nos.1476 to 1482/Mds/2010 for the assessment years 2002-2003 to 2008-2009 respectively, raising the following questions of law: (i)Whether on the facts and in the circumstances of the case, the Tribunal was right in not considering that the capitation fee received by the asse .....

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n of capitation fees received from students who were admitted in the management quota? (iv)Whether on the facts and in the circumstances of the case, the Tribunal was right in not following the jurisdictional High Court judgment in the case of P.S.Govindasamy Naidu & Sons v. ACIT, 324 ITR 44? 2.1. The facts in a nutshell are as under: The respondent/ assessee is a trust registered under Section 12AA of the Income Tax Act, 1961 (for brevity, the Act). The trust is running various educationa .....

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under Sections 132/133A of the Act was conducted at various premises of the educational institutions and also at the residence of the Chairman of the Trust on 13.8.2007. The department proceeded on the premise that huge amounts of capitation fee is collected for admission to professional courses conducted by various educational institutions run by the assessee/trust. 2.3. Thereafter, notice under Section 153A of the Act dated 4.9.2008 was issued to the assessee. In response, on 6.10.2008, the as .....

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2(1) of the Act, wherein after referring to the statement of the Chairman of the Trust, in query (viii), the Assistant Commissioner of Income Tax records that in the return of income filed by the assessee certain amount has been admitted as donation collected, whereas on the basis of the statement of the Chairman and the inference drawn by the Assessing Officer, a higher amount should be shown as donation. A specific query has been posed in query (x) as follows: (x) In your audited accounts file .....

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and solely based on the statement recorded from the Chairman of the Trust, which he had retracted later. It was pointed out that voluntary contributions were received only from philanthropists; family friends; corporate bodies; patients and relatives of patients treated in the hospital; parents and relatives of students. It was also stated that there is no evidence to come to the conclusion that such contributions received are involuntary. Along with the reply, the assessee also enclosed the det .....

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the department, the statement recorded from the Chairman of the Trust at the time of search is relied upon, more particularly, the reply given to Question No.8. The said statement of the Chairman contains two components one is in relation to the fees charged for the courses and other relates to donation. In the said statement, it is averred that they charge regular fees for government quota students and it is not denied that there were donations taken in respect of NRI quota. It was clarified by .....

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fee. Taking note of the number of students admitted under the management quota in various colleges and by making computation on the basis of an estimate, for which he falls back on the statement of the Chairman, the Assessing Officer determined receipt of a higher amount as capitation fee, in the guise of donation, as against the admitted figure of donation as claimed by the assessee in respect of each assessment year. 2.9. To arrive at such conclusion, the Assessing Officer relied upon two othe .....

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lance. The following amounts are appearing in the above seized document: I Batch Received Rs.378.25 Lacs Refund Rs.283.45 Lacs Balance ₹ 94.80 Lacs II Batch Received Rs.206 Lacs Refund Rs.35 Lacs Balance Rs.171 Lacs Shri Rajagopalan, in his statement dated 12.11.2007 has stated that the above amount was refund of fees to students who have not joined the institution during the year 2005-06. From this, it is ascertained that the donation collected from the students have been returned to them .....

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o.5, it was stated by Shri M.K.Rajagopalan that the cash book of the Trust was not maintained on day to day basis and that the aforesaid cash, found at his residence during the search, was not recorded in the books of account. In view of these facts, there is no doubt that the Trust did not fulfill the conditions laid down in Clause (iv) of section 80G(5) of the Act. 2.10. The Assessing Officer, after considering the response of the Chairman of the assessee-trust retracting his earlier statemen .....

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missions of students and rejected the assessee's contention. Thus, the Assessing Officer worked out the income of the trust by multiplying the amount of donation with the number of students admitted under management quota in various courses. The total amount of donation calculated was treated as the income of the trust not being exempt as per Section 13 read with Section 11 of the Act for all the assessment years. 2.11. The Assessing Officer further held that the assessee is not carrying on .....

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ed capitation fees being not exempt as per section 13 r.w.s. 11 of the I.T.Act. 2.12. Similar orders have been passed for all the assessment years by the Assessing Officer. These facts are not disputed by the learned counsel for the appellant department. 3.1. The assessee, aggrieved by such assessment, pursued the matter before the Commissioner of Income Tax (Appeals), inter alia, contending that the finding with regard to violation of Section 13 read with Section 11 of the Act is perverse and .....

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ears 2002-2003 and 2003-2004, the Chief Commissioner of Income Tax-VI, Chennai, having jurisdiction over the case, has notified in terms of Section 10(23C)(vi) of the Act that there is no applicability of Section 11 or 13 in those years and, therefore, there is no applicability of Sections 11 or 13 in those years as the income of the trust is exempted under Section 10(23C)(vi) of the Act. The relevant portion of the said observation reads as follows: For two asst. years i.e., 02-03 and 03-04 as .....

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benefit of exemption contained therein. 3.3. With regard to the finding of the Assessing Officer that the amount stated in the loose sheets 5 to 22 seized during the search is donation received and returned to the students and this donation is capitation fee which is unaccounted, it is the specific case of the assessee that the amount reflected in the loose sheets is relatable to refund of fees to students who have not joined the institution during the year 2005-2006. The stand of the assessee i .....

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d as donation from the students and the same is unaccounted. This factual mistake was agitated before the Commissioner of Income Tax (Appeals) and accepted by the said authority. The relevant portion of the said order reads as under: The content of this seized document as mentioned by the AO shows that some amount was received and part of it is refunded and balance of the amount is mentioned in the seized document. These papers were confronted to Sri MKR, Managing Trustee of the Trust who had st .....

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d from the students as they could not give admission to those students. There is no further enquiry contrary to the statement of Sri MKR done either by the Investigation wing or by the AO. However, AO has mentioned that the above figure is the donation received and returned to the students and this donation is capitation fee and the same is unaccounted. To arrive at this conclusion, the AO has not mentioned any reason in the asst. order. In the light of specific statement of Sri MKR on this pape .....

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for taking admission of the students in the management quota. Hence receipt of capitation fee is not proved by any seized document mentioned in the asst. order. (emphasis supplied) 3.4. The next issue is relating to seizure of cash of ₹ 44 Lakhs from the residence of the Chairman. It is the specific case of the assessee that the said amount was not recorded in the books of account, but the Chairman had offered this amount as income in his own hands and paid tax thereon. It was pleaded tha .....

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07. During the statement on 13.8.07, Sri M.K.R has stated that the cash belongs to the trust. However, subsequently on 31.8.07, statement of M.K.R. was recorded by the ADIT and offered ₹ 2 crores as additional income and has specifically mentioned that this disclosure of unaccounted income is on account of various assets. His statement has been reproduced in this order earlier. Further employee of the appellant trust Sri Bhaskar on the date of search has stated that he has not sent any cas .....

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rust also. When the copy of sworn statement recorded on 13.8.07 was given to Sri MKR he has retracted the said statement that the cash belongs to the trust. He has produced the medical certificate in support of 50% hearing disability. Furtherance to the statement of disclosure of unaccounted income, Sri MKR, having turnover of more than ₹ 30 crores in his petrol pump business has declared unaccounted income of ₹ 3 crores, the AO has accepted the disclosure in the asst. order and has .....

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.De hors the above two relevant issues, the other issue that was decided by the Commissioner of Income Tax (Appeals) is whether donations received by the Trust would partake the character of capitation fee or involuntary donation. To refute the plea of the department that donations are not voluntary, the assessee relied upon the order passed by the Commissioner of Income Tax, Puducherry, having jurisdiction over the assessee at that time, who passed an order under Section 264 of the Act for the .....

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capitation fee. The assessee also relied upon a response dated 14.7.2014 received from the Public Information Officer for a query raised under the Right to Information Act, wherein it is stated that There is no any complaint received from any student/parent regarding capitation fee charged by the above institutions so far. 3.6. On the above said issue, the Commissioner of Income Tax (Appeals) observed that there is no investigation done either by the Investigation Wing or the Assessing Office .....

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relevant is the application of income for providing exemption under Section 11 of the Act. It is for the department to prove that there is mis-utilization of the income of the trust as stated in Section 13 of the Act. He, therefore, holds that denying exemption under Section 11 of the Act without there being a case made out for violation of Section 13 of the Act is totally incorrect. He further held that receipt of donation at uniform rate for admission in management quota is not supported by a .....

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cessary to cite the specific sub section and clause to allege that the assessee has violated the law stated in sec. 13. In the present case, the Assessing Officer has not referred to any such sub-Section or clause of sec.13. He has made a bald reference to section 13 and proceeded to deny the benefits of exemption available to the assessee u/s 11. (emphasis supplied) 4.2. The Tribunal held that the Revenue had made a belated attempt to allege violation of Section 13(1)(d) of the Act. In fact, t .....

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included in the income offered by the Chairman of the assessee trust for taxation. (emphasis supplied) 4.3. The Tribunal rejected the case of the Assessing Officer that what is exempted from taxation under Sections 11 and 12 of the Act is voluntary contribution and not contribution granted against allotment of seats. It further held that the finding of the Assessing Officer that capitation fee collected by the trust should be treated as undisclosed is erroneous. 4.4. We shall now consider the .....

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the Revenue have been considered and rejected, as admission of students is done as per the procedure prescribed by the Director of Health and Family Welfare Services, Government of Puducherry. For clarity, we set out paragraph (33) of the order passed by the Tribunal: 33.1. The first such conclusion is that there is no basis for the Assessing Officer to allege that the activities carried on by the assessee trust are not genuine. The assessing authority himself has noted down the names of about .....

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and state laws. The letter of Dy. Director of Public Health, Govt. of Puducherry, at page 326 of the paper book permits the assessee's medical college to utilize the facilities of the Govt. hospitals for the clinical practice of medical students. Page 327 is a copy of the letter issued by the Puducherry Health Secretariat regarding the constitution of Permanent Admission Committee under the Chairmanship of Hon'ble Justice A.Ramamurthy (Retd.,) Madras High Court. A copy of the procedure o .....

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Govt. of India in the Ministry of Human Resource Development is available in pages 342 and 343 granting the status of deemed-tobe-university u/s 3 of the UGC Act 1956. Pages 344 to 360 contain copies of various Memorandum of Association entered into between the medical college run by the assessee trust and various public sector undertaking including BSNL to provide for in-house medical facilities to the employees of those public sector enterprises. All these materials go to prove that the asse .....

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2. Another allegation made out by the Revenue is that the assessee trust is not maintaining regular books of accounts. This is without any basis. The Commissioner, Pondicherry in his order passed u/s 264 for the assessment years 1998-99 to 2001-02 has examined a similar allegation made out by the Revenue that the assessee was not maintaining proper books of account. After detailed examination of the materials and evidences placed before him, the CIT came to the conclusion that the assessee was m .....

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benefit u/s. 10(22) and 10(23C)(vi) and thereafter u/s 11 and 13. The assessee is registered u/s 12AA of the Income Tax Act 1961. The assessee is filing regular returns before the assessing authority. The assessing authority himself has stated in his order that he has examined the returns of income in the light of the books of accounts, financial statements and balance sheets of the assessee trust. Even in the course of search operations, the assessing authority has no case that proper accounts .....

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prompted the Assessing Officer to deny the benefit of Section 11 of the Act to the assessee. The Tribunal, as in the case of Commissioner of Income Tax (Appeals), was inclined to discard the two findings rendered by the Assessing Officer based on: (i) loose sheets relating to return of fees; and (ii) seizure of cash from the residence of the Chairman. The relevant portion of the finding of the Tribunal in this regard is as under: 33.3. The next grievance of the Revenue is that the assessee tru .....

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tion in the return of income filed by the Chairman in the regular course. Apart from that, the most interesting aspect is that there is no case that a sum of ₹ 44 lakhs was applied by the Chairman for any of his personal requirements. The only complaint is that the said sum was found in his possession at his residence. There is nothing unnatural in the Chairman of the assessee trust keeping the money in his custody, even if it is belonged to the assessee trust. Money cannot be kept in the .....

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ially different from spending the money belonging to the assessee trust. The assessing authority has equated safe keeping of money to spending of the money. 33.4. The basis of allegation of the Assessing Officer regarding accepting capitation fee is that certain entries found in the seized materials relating to the refund of amounts collected from certain students, who were not ultimately admitted in the colleges run by the trust. The assessee has explained that during that particular financial .....

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nducted proper enquiries before coming to a conclusion against the assessee trust. The assessing authority has not conducted any such enquiries either with the students or with the parents of the students or with any other person interested in the activities carried on by the assessee trust. (emphasis supplied) 4.7. The question, as has been posed by the Tribunal, is whether the contributions or donations are voluntary or involuntary and what is the effect of such donation. The Tribunal was of .....

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hether contribution is voluntary or involuntary and its implication in relation to these provisions was considered by the Tribunal in the following manner: 35. To proceed further, we have to examine the scheme of law of charities provided under the Income-tax Act, 1961. There is no concept of involuntary contributions in that scheme. The only distinction recognized by law is the voluntary contributions to be treated as income under section 12 and the corpus donations to be treated as capital re .....

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-trust itself has treated the contributions as voluntary contribution in the nature of income, which is the best situation that the Revenue would always welcome, what is the relevance of arguing whether the contributions were voluntary or not? 36. Even if the contributions are treated as not voluntary what could be the legal consequence of that finding? Whether the Revenue will treat such involuntary contributions as capital and give exemption from taxation? No, it will not. The Revenue will sti .....

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ters of participating in charitable activities and to underline the gratuitous nature of donations and charitable activities. There is no compulsion in making contributions to charities. If the expression was "contributions" there could be a naunce of compulsion like contribution to provident fund and the like. 38. Therefore, we find that whether it is treated as voluntary or involuntary, the only course of action available before law is to see whether such contributions have been trea .....

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would not be entitled to exemption. But, on the contrary, without there being a finding of violation of Section 13 of the Act, an inference is drawn on an alleged receipt of donation and consequently, the allegation is made that there is a violation of Section 13(1)(d) of the Act. A hypothetical finding is given that because capitation fee is charged, it is not an income in terms of Section 11 of the Act and, therefore, there is a violation of Section 13(1)(d) of the Act. The Tribunal held that .....

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es of the assessee trust are genuine educational activities entitled to be treated as charitable activities and there is no evidence on record to show that the assessee has accepted capitation fee for allotment of seats. The Tribunal relied on the decisions of various courts to show that the activities of the trust alone are relevant for the purpose of allowing the benefit of exemption under Sections 11 and 12 of the Act. In fine, the Tribunal held as follows: 44. The above judicial pronouncemen .....

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ding Counsel for the revenue and Mr.S.Sridhar, learned counsel for the assessee and perused the orders passed by the Tribunal and the authorities below. 6. Before adverting to the merits of the case, it is apposite to refer to Sections 11, 12 and 13 of the Income Tax Act: Section 11. Income from property held for charitable or religious purposes.- (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person .....

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poses, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India ; and where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent. of the income from such property; (c) income derived from property held under trust- (i) created on or after the 1st day of April, 1952, for a charitable purpose which tends to .....

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rm of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. Explanation. - For the purposes of clauses (a) and (b),- (1)in computing the fifteen per cent of the income which may be accumulated or set apart, any such voluntary contributions as are referred to in section 12 shall be deemed to be part of the income; (2) if, in the previous year, the income applied to charitable or religious purposes in India falls short of eighty .....

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oes not exceed the said amount ; and (b) in the case referred to in sub-clause (ii), so much of the income applied to such purposes in India during the previous year immediately following the previous year in which the income was derived as does not exceed the said amount, may, at the option of the person in receipt of the income such option to be exercised in writing before the expiry of the time allowed under sub-section (1) of section 139, for furnishing the return of income, be deemed to be .....

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the previous year in which the income was derived. Section 12. Income of trusts or institutions from contributions.- (1)Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of section 11 be deemed to be income derived from property held under trus .....

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tion derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income-tax notwithstanding the provisions of sub-section (1) of section 11. For the purposes of this sub-section, the expression ''value'' shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person referred to in clause (a) or clause (b) or clause .....

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relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on 4or before the 31st day of March, 52001, shall be deemed to be the income of the previous year and shall accordingly be charged to tax. Section.13. Section 11 not to apply in certain cases.- (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previou .....

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itable or religious purposes or a charitable or religious institution, any income thereof- (i) if such trust or institution has been created or established after the commencement of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any .....

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governing the institution : Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred t .....

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any funds of the trust or institution invested or deposited before the 1st day of March, 1983, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or (iii) any shares in a company (not being a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act) are held by the .....

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corporation) ac?quired by the trust or institution before the 1st day of March, 1983; (iia) any asset, not being an investment or deposit in any of the forms or modes specified in sub-section (5) of section 11, where such asset is not held by the trust or institution, otherwise than in any of the forms or modes specified in sub-section (5) of section 11, after the expiry of one year from the end of the previous year in which such asset is acquired or the 31st day of March, 19932, whichever is l .....

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planation. - For the purposes of sub-clause (ii) of clause (c), in determining whether any part of the income or any property of any trust or institution is during the previous year used or applied, directly or indirectly, for the benefit of any person referred to in sub-section (3), in so far as such use or application relates to any period before the 1st day of July, 1972, no regard shall be had to the amendments made to this section by section 7 [other than sub-clause (ii) of clause (a) there .....

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such trust has provided educational or medical facilities to persons referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3).''. (emphasis supplied) Questions of Law (i) and (ii) 7.1. To answer these questions of law raised by the revenue, let us analyze activities carried on by the assessee trust. 7.2. The assessee/Trust is running about eight educational institutions. The Tribunal, based on the various documents filed by the assessee, (i.e. .....

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ut the said finding rendered by the Tribunal. Therefore, we do not find any reason to upset the said finding. 7.3. It is the plea of the Department that the assessee trust is not maintaining regular books of accounts. A similar allegation raised by the department was refuted even for the assessment years 1998-1999 to 2001-2002 by the Commissioner, Pondicherry in the order passed under Section 264 of the Act, by stating that the assessee was maintaining regular books of accounts in its ordinary c .....

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essee trust and therefore, there is an element of suspicion in the affairs of the assessee trust. 7.4. On this plea, it is the specific case of the assessee that during a particular financial year all the medical seats were taken over by the Government of Puducherry and no seats were available in the hands of the assessee trust for allotment under management quota and, therefore, the amounts collected earlier from the students had to be refunded. It is also not in dispute that these details have .....

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the activities carried on by the assessee trust. But, without doing so, the Assessing Officer estimated the collection of contributions on the basis of the number of seats available under management quota multiplied by the amount of contribution attributable to individual seats. Any determination for purpose of tax cannot be based on hypothetical facts or conjectures or surmises. The inference drawn by the Original Authority is based on probability. 7.6. With regard to the seizure of cash of ov .....

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had accepted contributions by way of capitation fee. The said issue cannot be used both ways. The assessment of the undisclosed income at the hand of the individual ends the issue there. It has no relevance to the affairs of the Trust and there is no meterial to hold so. 7.7. In our considered opinion, based on the loose sheets and cash seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for ad .....

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s allegation of involuntary collection of amounts. That apart, the order passed under Section 264 of the Act for the assessment years 1998-1999 to 2001-2002 clearly states that the donation received from students or the parents is not compulsory in nature and, therefore, the same is not capitation fee. There is no material to controvert this fact which is to the knowledge of the department. No endeavour is made to sustain the allegation of involuntary donation. In any event, as rightly held by t .....

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of donation. The department has failed to dispel the finding of fact. 7.9. In any event, the learned Standing Counsel for the department pleads that since the assessee had not submitted the list of students, the Assessing Officer had to make an estimate adopting his own methodology. This we cannot accept for the simple reason that the show cause notice proceeds on the basis that the assessee has to submit the list of donors alone. A reply was submitted by the assessee and in paragraph 6(iii), th .....

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tallied all the materials and came to the conclusion as stated above. If the Assessing Officer has tallied the figures then the assessees case of actual contribution to Trust has to be accepted. It has been shown in the return of income. A bald statement in paragraph (7) of the assessment order that the assessee is not carrying on charitable activities for the purpose of Section 13 read with Section 11 of the Act appears to be the mainstay of the department's case. 7.10. In effect, it is cle .....

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ection 13, the mainstay of the case of the department should be based on the activities of the trust to plead that the same are not in consonance with Section 13 of the Act and, therefore, exemption under Section 11 of the Act should be denied, which we find is abysmally silent in the show cause notice and the assessment order. 7.12. We do not find any reason to come to a different conclusion on facts, as has been addressed by the Commissioner of Income Tax (Appeals) as well as the Tribunal on t .....

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d is in relation to application of income and the utilization thereon for charitable purpose, as defined under Section 2(15) of the Act, which reads as under: Section 2(15) 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. There is not even an iota of material to come to a conclusion to a different conclusion than what has been held by the CIT (Appeals) and the Tribunal. 7.15. We find that the .....

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ll be provided later. We find that query in Question No.(x) is not in relation to admission of students or capitation fee. In any event, we find from the assessment order itself that records were tallied and verified. Therefore, whatever income was offered by the assessee as contributions will be entitled to exemption under Section 11 of the Act. 8.2. The true intent of Sections 11, 12 and 13 of the Act is utilization of funds for charitable purpose and the same has been highlighted by the Supre .....

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ons subject to which approval has been given, such approval and exemption must forthwith be withdrawn. The relevant potion of the said decision reads as under: 19. It is clear, therefore, that the Uttarakhand High Court has erred by quoting a non existent passage from an applicable judgment, namely, Aditanar and quoting a portion of a property tax judgment which expressly stated that rulings arising out of the Income Tax Act would not be applicable. Quite apart from this, it also went on to furt .....

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Silk Cloth case, Aditanar case and the American Hotel and Lodging case. It is clear that when a surplus is ploughed back for educational purposes, the educational institution exists solely for educational purposes and not for purposes of profit. In fact, in S.RM.M.CT.M Tiruppani Trust v. Commissioner of Income Tax, (1998) 2 SCC 584, this Court in the context of benefit claimed under Section 11 of the Act held: '9. In the present case, the assessee is not claiming any benefit under Section 11 .....

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an accumulate 25% of its total income pertaining to the relevant assessment year and claim exemption in respect thereof. Section 11(1)(a) does not require investment of this limited accumulation in government securities. The balance income of ₹ 1,64,210.03 constitutes less than 25% of the income for Assessment Year 1970-71. Therefore, the assessee is entitled to accumulate this income and claim exemption from income tax under Section 11(1)(a).' We set aside the judgment of the Uttarakh .....

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has expressed a view in line with the Punjab and Haryana High Court view, following the judgments of this Court in the Surat Art Silk Manufacturers Association Case and Aditanar Educational Institution case as follows: '..The fact that the Petitioner has a surplus of income over expenditure for the three years in question, cannot by any stretch of logical reasoning lead to the conclusion that the Petitioner does not exist solely for educational purposes or, as that Chief Commissioner held t .....

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rchase of library books and the improvement of infrastructure. With the advancement of technology, no college or institution can afford to remain stagnant. The Income-tax Act 1961 does not condition the grant of an exemption under Section 10(23C) on the requirement that a college must maintain the status-quo, as it were, in regard to its knowledge based infrastructure. Nor for that matter is an educational institution prohibited from upgrading its infrastructure on educational facilities save on .....

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0(23C) cannot be interpreted regressively to deny exemptions. So long as the institution exists solely for educational purposes and not for profit, the test is met.' 25. We approve the judgments of the Punjab and Haryana, Delhi and Bombay High Courts. Since we have set aside the judgment of the Uttarakhand High Court and since the Chief CIT's orders cancelling exemption which were set aside by the Punjab and Haryana High Court were passed almost solely upon the law declared by the Uttara .....

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es and not for purposes of profit. In addition, we hasten to add that the 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great importance that the activities of such institutions be looked at carefully. If they are not genuine, or are not being carr .....

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tion in cases where an institution does not apply the income to further the cause of the trust. 8.4. That apart, for the assessment years 2002-2003 and 2003-2004 as Chief Commissioner of Income Tax-VI, Chennai, having jurisdiction over the case has notified this under Section 10(23C)(vi) of the Act that there is no applicability of section 11 or 13 in those two years. The department has not produced any evidence of breach of Section 10(23C)(vi) of the Act and, therefore, the respondent/Trust wil .....

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