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2016 (6) TMI 95 - ITAT MUMBAI

2016 (6) TMI 95 - ITAT MUMBAI - TMI - Addition of capitation fees/donation made on protective basis in the hands of the assessee - CIT(A) deleted the addition - Held that:- We find that the learned CIT(A) on examination of the composition of the Managing Council of SPM, Pune and the Admission Committee for the period relevant to assessment years 2005-06 to 2011-12 found that the name of the assessee in the case on hand does not appear in any of these two lists of Managing Council and Admission C .....

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y the AO to indicate that the assessee was solely authorized or responsible for finally deciding the admissions for management quota seats and for receiving the cash as capitation fees and donations thereof.

No additions on account of cash receipts as capitation fees/donations for management quota seats for MMS/PGDM courses at 'Welingkar' are to be made in the hands of the assessee in the case on hand for assessment years 2005-06 to 2011-12, since the substantive additions of the same .....

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of Shri Uday N. Salunkhe will issue a show cause notice and can make the substantive assessment in this case after considering the assessee’s submissions in this regard. It is accordingly ordered. - Decided against revenue - ITA Nos. 6188 to 6194/Mum/2014 - Dated:- 6-5-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Applicant : Shri G.M. Doss For the Respondent : Shri Farrokh V. Irani ORDER Per Jason P. Boaz, A. M. These appeals by the Revenue are d .....

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. Welingkar Institute of Management (in short Welingkar ), including that of the assessee in the case on hand, who is a Director at 'Welingkar'. 'Welingkar' is one of many institutions run by a Pune based trust, Shikshan Prasarak Mandal ( SPM ). Subsequently, in response to notices issued under section 153A of the Act, the assessee filed returns of income for assessment years 2005-06 to 2010-11 and for A.Y. 2011-12 in response to notice under section 142(1) of the Act. The assess .....

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s (Rs. ) Assessed income (Rs. ) 1 2005-06 2,55,09,000 2,92,49,420 2 2006-07 3,54,29,000 3,90,49,780 3 2007-08 3,93,66,000 4,38,58,150 4 2008-09 4,37,40,000 5,54,28,500 5 2009-10 4,86,00,000 5,26,44,700 6 2010-11 5,40,00,000 5,84,80,030 7 2011-12 4,00,00,000 6,43,92,890 2.2 In coming to his decision in making the aforesaid additions in respect of alleged capitation fees received by the assessee on account of management quota seats given to the various candidates, on a protective basis, the Assess .....

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ements that capitation fees/donations in cash was being accepted for admission against management quota seats. When confronted with the statements given by the aforesaid six persons (supra) the assessee pointed out that these six persons had retracted the statements given by them by way of affidavits on 16.12.2010 and that therefore these averments made in the said statements given by the aforesaid six persons cannot be relied on. It was also submitted that these persons whose statements were re .....

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nough to establish that the assessee was accepting capitations fees from students seeking admission to management courses at 'Welingkar' in the management quota seat category. The AO, after concluding that cash had been received in respect of 50% of the institutional level quota seats/management seats for MMS and PGDMS courses at 'Welingkar', held that on an average ₹ 20,00,000/- can be considered as capitation/donation in cash per seat/per management seat for financial yea .....

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d that the additions in respect of cash received in respect of management seats was to be made substantively in the case of SPM Trust and only on protective basis in the hands of the assessee. The assessment orders for assessment years 2005-06 to 2011-12 were accordingly completed vide orders dated 28.03.2013, inter alia, by making the aforesaid additions on account of cash received as donation/capitation fees for management quota seats for MMS/PGDM courses at 'Welingkar' as laid out in .....

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that since the additions made by the AO are made only on protective basis, tax demands cannot be recovered from the assessee. The learned CIT(A) then held that should the concerned CIT(A) at Pune hold that the income is not to be assessed in the hands of SPM Trust at Pune and that the same additions are to be made and assessed substantively in the hands of the assessee or if at any stage of proceedings, SPM, Pune should challenge this findings, then the AO of the assessee could issue a show cau .....

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additions made of the same income in the hands of SPM, Pune is not challenged on the technical issue of, in which hands these amounts are to be taxed/ assessed, and the challenge is on merits. In this view of the matter, the learned CIT(A) deleted the additions of capitation fees/donations made on protective basis in the assessee s hands for assessment years 2005-6 to 20110-12. 4.1 Aggrieved by the aforesaid orders of the CIT(A)-37, Mumbai dated 31.07.2014 for assessment years 2005-06 to 2011-12 .....

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dition made in the hands of M/s. S.P. Mandali Trust, Pune, has not been accepted by it and such protective addition was necessary to protect the interest of revenue? 2. The Appellant craves leave to add, to amend and/or to alter any of the grounds of appeal, if need be. 3. The appellant, therefore, prays that on the grounds stated above, the order of the CIT(A)-37, Mumbai may be set aside and that of the Assessing Officer restored. 4.2 The learned D.R. for Revenue was heard in support of the gro .....

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the assessee s hands even on protective basis decision only after elaborate discussion of the factual matrix of the case at paras 5.1 to 5.7 of the impugned order wherein all the contentions of the AO has been addressed. This findings is only subject to the caveat that in the event the concerned CIT(A) at Pune holds that these additions are not to be assessed in the hands of SPM, Pune but in the hands of the assessee in the case on hand, then the AO of the assessee should issue a show cause not .....

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e issue in which hands the said additions of cash received on capitation fees/donations for management quota seats of MMS/PGDM in 'Welingkar' is to be then made. The learned A.R. submits that in these circumstances, Revenue s appeals ought to be dismissed. 4.4.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record in the context of the legal and factual matrix of the case. In the grounds raised, the Revenue assails the orders .....

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ored to protect the interests of Revenue. 4.4.2 At the outset, it would be appropriate to record here that the learned CIT(A) has, after elaborate deliberations, held that the additions made on account of capitation fees/donation received in respect of management quota seats for MMS/GPDM seats at 'Welingkar' were to be made substantively in the hands of the SPM Trust, Pune and not in the hands of the assessee in the case on hands. No findings has been rendered by the learned CIT(A) on th .....

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quota seats. The Managing Council nominates members to Local Management Committees who monitor the functioning of respective schools, colleges and institutes; whereas, Members of the Admissions Committee, who are also nominated by and out of the members of the Managing Council look after the admission under management quota seats for MMS/PGEM courses, headed by the Chairman of the Local Management Committee. 4.4.3 The learned CIT(A) has observed that in the statement of Shri Kanu Doshi, Dean - .....

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t at Pune. We find that apart from the assessee explaining the admission process in 'Welingkar' before the authorities below vide letter dated 20.03.2013, the learned CIT(A) has noted that SPM Trust, Pune has filed letter stating that they follow procedure as per norms of the regulatory authorities for admissions, but, however, if any additions are to be made on account of cash receipt of capitation fees/donation for management quota seats in 'Welingkar' they are to be made in th .....

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M Trust. In his statement recorded on 20.11.2010, Shri Dadhe stated that as Chairman he was not empowered to give admission to any student in his individual capacity and that management quotas are decided by the Management Council only. In his statement recorded on 03.12.2010 Shri Mate has stated that for management quota seats, the Director/Principal receives the list of aspiring/recommended students which is later shown to the office bearers of the Governing Council of which he is a part and t .....

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(2), Pune on 18.03.2014 in which the same additions, as have been made on a protective basis in case on hand, have been made in the case of SPM Trust, Pune on a substantive basis. 4.4.5 The learned CIT(A) has also called for and perused the grounds of appeal raised by SPM Trust, Pune in their appeals before the CIT(A) at Pune for the relevant assessment years and found that the additions on account of receipts of capitation fees on account of management quota seats in 'Welingkar' have be .....

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ubstantive or protective. In appellate proceedings before the CIT(A) also we find that this fact has been re-confirmed by a letter of SPM Trust, Pune dated 28.07.2014 and signed by Shri Abhay Dadhe, Chairman, Managing Council of SPM Trust. In this letter it is submitted that in the orders of assessment of SPM Trust, Pune dated 18.03.2014 for assessment years 2005-06 to 2011-12, the same additions as made in the hands of the assessee in the case on hand on a protective basis have been made on sub .....

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tion of the Managing Council of SPM, Pune and the Admission Committee for the period relevant to assessment years 2005-06 to 2011-12 found that the name of the assessee in the case on hand does not appear in any of these two lists of Managing Council and Admission Committee members for the said period. It is also a matter of record that neither was any unexplained/ unaccounted cash found in the personal custody of the assessee in the course of search nor were any unexplained assets found in his .....

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ering the facts and circumstances of the case, the learned CIT(A) at para 5.7 of his order held as under: - 5.7 ..... The present case before me is a peculiar case in as much as that the same addition has been made for the same assessment years in the case of Uday Salunkhe, the appellant and SPM, Pune, the Trust. The hands in which such income can be assessed is not disputed by any of the two tax payers. The appellate hierarchy is however different in the two cases. The matter will travel to the .....

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o Mumbai. I am aware that as per appellant, it is not the case that SPM, Pune is contending that the additions should be made in the case of Uday Salunkhe or any other person and not in its hands. The same income cannot be assessed as income in the hands of two different persons. In my view, since the additions have been merely made on protective basis, tax demands cannot be recovered from the appellant. Thus no real grievance has arisen at this stage. In case the Ld CIT(A) at Pune holds that th .....

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