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M/s. Marimallappa’s Charities Versus Asst. Commissioner of Income-tax And Deputy Commissioner of Income-tax Versus M/s. Marimallappa’s Charities

2016 (7) TMI 170 - ITAT BANGALORE

Exemption u/s 11 - Assessee society (registered u/s 12A) was running several educational institutions - During survey proceedings AO found that capitation fee/donation was collected by the assessee society from the students and such amount was disclosed in the return as voluntary donations and claimed exempt u/s 11. - AO relied upon Apex Court ruling in the case of Islamic Academy of Education vs. State of Karnataka [2003 (8) TMI 469 - SUPREME COURT] wherein the Hon’ble Supreme Court heavily .....

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pitation fees or voluntary contribution. It is undisputed fact that the assessee has been collecting amounts over and above the fee prescribed by the Government. - Assessee-society had not led any evidence on record in support of the proposition that contributions are voluntary and made forming part of corpus of the society. Even before us, the assessee-society made no efforts to prove that the contributions are voluntary in nature. Therefore, the said capitation fees is not exempt u/s 11 - .....

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r of the ld.CIT(A), Mysore, dated 25/10/2010 for the assessment year 2006-07 and 2007-08. Appeal bearing ITA No.675/Bang/2014 is filed by the revenue directed against the order of the ld.CIT(A), Mysore, dated 12/08/2013 for the assessment year 2010-11. 2. Since in all these appeals, common issues are involved, we proceed to dispose of the same vide this common order for the sake of convenience. 3. Briefly facts of the case are as under: The assessee is a society registered under the provisions o .....

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were conducted on 17/05/2007. It was found by the Assessing Officer (AO) during the course of survey proceedings that certain books and documents relating to receipt of money alleged to be capitation fee/donation collected by the assesseesociety from the students who got admission into school and colleges. Such amount was disclosed in the return of income as voluntary donations and claimed exempt u/s 11 of the Act. The AO had examined on oath the honorary secretary of the trust on this issue who .....

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y this amount cannot be brought to tax under the head income from other sources . The assessee-society stated that the donations are exempt u/s 11 & 12 of the Act. The said submission of the assessee-society was rejected by the AO holding that the fees received by the assessee-society are not voluntary contributions. The AO also relied upon the decision of the Apex Court in the case of Islamic Academy of Education vs. State of Karnataka (2003)(6 SCC 697) wherein the Hon ble Supreme Court had .....

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o tax the amount collected over and above fees prescribed by the Government as capitation fee under the head income from other sources . Accordingly, for the assessment year 2006-07 an amount of ₹ 83,73,000/-, for the assessment year 2007-08, an amount ₹ 1,18,10,485/- and for the assessment year 2010-11 an amount of ₹ 87,03,560/- was brought to tax. 4. Being aggrieved, the assessee-society filed an appeal before the CIT(A). The assessee-society contended that donations collecte .....

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in ITA No.1138/H/2006 dated 31/10/2007 and held that the said income is not exempt from tax u/s 11(1) of the Act. He accordingly, upheld the assessment done by the AO for the assessment years 2006-07 and 2007-08. However, for the assessment year 2010-11, the CIT(A) relied on the decision of the jurisdictional High Court in the case of DIT(Exemptions) vs. Sri Bellimatha Mahasamsthana Socio Cultural and Educational Trust (336 ITR 694) held that even though the amount was collected as donation, si .....

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he case of Islamic Academy of Education (supra) and TMA Pai Foundation vs. State of Karnataka (8 SCC 481) are not applicable to the facts of the case. He further submitted that the assessee-trust neither demanded any donations from parents of the students, nor there any direct nexus can be established with the amount of donation received with the admission. The entire amount has been offered to income-tax as voluntary contribution and therefore, is clearly exempt from tax and in support of this .....

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A No.735/Bang/2012 dated 19/04/2013. and Sree Adichunchanagiri Shikshana Trust vs. Add.CIT in ITA Nos.1258 & 1259/Bang/2008 dated 31/12/2008. 7. On the other hand, learned Departmental Representative vehemently argued that in terms of provisions of Karnataka Educational Institutions (Prohibition of Capitation Fee) Act, 1984 any amount collected over and above fees prescribed by the Government amounts to capitation fee. Collection of capitation fee has been held to be against public policy an .....

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bed fees charged by the Government is in the nature of capitation fees or voluntary contribution. It is undisputed fact that the assessee has been collecting amounts over and above the fee prescribed by the Government. The contention of the assessee is that such amount is nothing but voluntary contribution by the donors whereas the AO had categorically given a finding that there was clear nexus between funds collected and admission of students under management quota. This finding could not be co .....

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onstitutional scheme and prohibited by State enactment. Moreover, education was used as an apparatus/mode to collect capitation fee. In other words, exorbitant money was collected illegally in the guise of running the educational institution. When the assessee used the charitable activity/educational institution as an apparatus for selling the education, in our opinion, the element of charity no longer remains in the activity of the assessee. In other words, when the assessee sells the seat of t .....

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the material found during the course of survey operation clearly established the collection of money over and above the fee prescribed by Government for admission of a student. Therefore, it is a clear case of sale of education by the assessee-society. In our opinions such, the assessee cannot be considered as a charitable institution under section 2(15) of the Income-tax Act. Therefore, the assessee is not eligible for exemption under section 11 of the Income-tax Act. In terms of above law, am .....

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e owner of a thing voluntarily transfers the title and possession of the same from himself to another, without any consideration, is a donation. A gift or gratuitous payment is in simple English a donation. We do not require lexicographic learning or precedential erudition to understand the meaning of what many people do every day, viz., giving donation to some fund or other, or to some person or other. Furthermore, assessee-society had not led any evidence on record in support of the propositio .....

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y down that any voluntary contributions received by trust wholly for charitable purpose shall, for the purpose of section 11 shall be deemed to be income derived from property held under trust which is exempt from tax under the provisions of sec.11(1)(a) of the Act. For better appreciation of the provisions of law, the relevant provisions of sections 11(1)(a) and 12 are extracted below: Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections .....

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of the income from such property; .................................... Income of trusts or institutions from contributions. 12. (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 he .....

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re their Lordship was whether development fund collected and utilized for charitable purpose is exempt from tax or not u/s 11(1)(a) of the Act, whereas in the present case, the issue is whether capitation fee collected which is not a voluntary contribution as envisaged under the provisions of sub-section (1) of sec.12 is exempt u/s 11 of the Act. Therefore, the ratio laid down by the jurisdictional High Court in the cases of CMR Janadhara Trust (supra) Bharatiya Samskriti Vidyapith Trust (supra) .....

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n of allotment of seats in an educational institution, the donations are held to be voluntary contributions which ar exempt under sec.11(1)(a) of the Act whereas in the present case, as we have held that donations are not voluntary contributions, the ratio laid down in that case is also not applicable to the facts of the present case. The decision of the Hon ble jurisdictional High Court in the case of Director of Income-tax vs. Garden City Educational Trust (330 ITR 480) relied on by the CIT(A) .....

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f Sri Bellimatha Mahasamsthana Socio Cultural and Educational Trust (supra) and Garden City Educational Trust (supra). Further, the co-ordinate bench of Tribunal in ITA Nos.206 & 207/Bang/2014 dated 17/06/2016 in the case of Deputy Director of Income Tax (Exemptions), vs. M/s. Kammavari Sangham (to which one of us viz. Accountant Member is a party) held in identical facts as follows: 18. From a careful perusal of the orders of the lower authorities and details of receipt of donation/voluntar .....

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titutions (Prohibition of Capitation Fee) Act, 1984. Through this legislation, the Govt. of Karnataka has prohibited the receipt of capitation fees by defining that capitation fee means any amount by whatever name called, paid or collected directly or indirectly in excess of the fee prescribed u/s.5, but does not include the deposit specified under the proviso to Sec.3. Undisputedly, the assessee has received these voluntary contributions/donations over and above the tuition fees. Now the onus i .....

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