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The ACIT (E) , Circle, Jaipur Versus M/s Scholars Education Trust of India

2017 (12) TMI 354 - ITAT JAIPUR

Benefit u/s 11 - Exempted capital receipt u/s 12 - whether the receipt on account of development fund/development fee from the students of the assessee is in the category of capital receipts/ corpus fund to be used by the assessee for specific purpose or not? - Held that:- In the case of the assessee the development fee is part of the total fee charged by the assessee from the students and it is apparent that the quantum of amount and specific purpose on account of which this fee is received fro .....

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as the option of making payment or not. - Thus in the facts and circumstances of the case when the development fee received by the assessee is not voluntary but it is a compulsory charge on the students then the same cannot be classified as capital in nature for specific purpose or part of the corpus fund of the assessee trust. The decision relied by the ld. AR are on the point that when a particular contribution or donation is given by the donor as per his free will and for specific purpo .....

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ture was already given in the year under consideration allowed. See CIT vs. Krishi Upaj Mandi Samiti, Jaisalmer [2015 (3) TMI 11 - RAJASTHAN HIGH COURT ] - ITA No. 1087/JP/2016 - Dated:- 15-11-2017 - SHRI VIJAY PAL RAO, JM AND SHRI BHAGCHAND, AM For The Assessee : Shri P.C. Parwal (C.A.) For The Revenue : Shri Varindera Mehta (CIT) ORDER PER: VIJAY PAL RAO, J.M. This appeal by the Revenue is directed against the order dated 28.09.2016 of CIT (A) for the A.Y. 2012-13. 2. The assessee is society r .....

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the assessment year 2011-12 onwards. The assessee filed its return of income declaring nil income after claiming the exemption u/s 11 of the Act. The Assessing Officer on examination of the record and particular of the balance sheet noticed that the assessee has shown development fund of ₹ 47,90,56,305/- as on 31.03.2011 and ₹ 59,23,06,694/- on 31.03.2012 showing an increase of ₹ 11,32,50,389/- in the year under consideration. The AO asked to the assessee to explain as to why t .....

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s to be rendered by the school to student and therefore, these contributions were in the nature of capital receipt and was used in creating fixed assets, like purchase of school land, construction of school building etc. Thus the assessee contended before the AO that the contribution received by the assessee from the parents/students was not current income but capital receipt exempt u/s 12 of the Act. Then the assessee tried to explain the different between the tuition fee and development fund a .....

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on of services to be rendered by the school to student and as such it is fee against the services and not voluntary offered from any person but a compulsion of students to pay development fund. Accordingly, the AO treated the development receipt of ₹ 11,32,50,389/- as revenue receipt and after considering excess of receipt over the application of income and 15% of the receipt allowed as set apart u/s 11 assessed the balance of ₹ 1,44,06,790/- treated as income chargeable to tax. The .....

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velopment fund by the assessee himself whereas the students or persons depositing the fee paid it as fee only, and nowhere has indicated it to be a voluntary contribution. 2) On the facts and in the circumstances of the case and in law the CIT(A) has erred in allowing claim of depreciation on fixed assets in spite of the facts that the same was allowed as application of income u/s 11 at the time of purchase. 3) On the facts and in the circumstances of the case and in law the CIT(A) has erred in .....

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As there was no business activities the claim of depreciation was not allowable, the depreciation is allowable only in the case of business or profession or in the case of income from other sources. 5) Any other question of law as deemed fit in the facts and circumstances of the case may also be framed before the Hon ble Tribunal in the interest of justice. 3. Before us, the ld. DR has submitted that the development fund is received from the students as a part of other fees on account of tuitio .....

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re is no option with the students or parents to pay or not to pay the development fund but it is mandatory to pay this fee along with other fees then this receipt cannot be treated as the voluntary contribution. Further when this fee received against the student services then it cannot be treated as capital in nature but it is the current receipt of the assessee. The ld. DR has thus contended that the received in question cannot be classified as donation or contribution for specific projects and .....

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(23C)(vi). He has reiterated the contention has raised before the authorities below and submitted that though the voluntary contribution is included in the term income as per section 11(1)(a) in respect of charitable or religious trust however, the said amount shall not be included in the total income of the trust or institutions being the corpus fund of the trust as per provisions of section 11(1)(a) r.w.s. 12 of the Income Tax Act which excludes the contribution made with a specific direction .....

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rived from the property for the purpose of section 11 of the Income Tax Act. He has also relied upon the decision of Rajasthan High Court in case of Sukhdeo Charity Estate Vs. ITO 192 ITR 615 and submitted that when the amount was contributed to the corpus of the institution and are kept as capital then it cannot be treated as income or revenue receipt for the purpose of section 11 of the Income Tax Act. The ld. AO has relied upon the decision of Hon ble Delhi High Court in case of DIT(E) Vs. Na .....

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ing the object of the assessee society. Therefore, the development fees of ₹ 11,32,50,389/- received during the year is directly credited to the development fund account and not routed through the income & expenditure account. The ld. AR has further contended that the development fund fees received by the assessee is utilized only for acquiring the fixed asset and thus the fund utilized in creation of capital asset cannot be treated as revenue receipt. He has also relied upon the vario .....

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ipso facto exempt all the receipts from tax. For the purpose of availing the benefit u/s 11 of the Act. The conditions as stipulated under the said provision along with the condition as provided u/s 12 and 13 of the Act are to be satisfied. The dispute before us is on the limited point whether the receipt on account of development fund/development fee from the students of the assessee is in the category of capital receipts/ corpus fund to be used by the assessee for specific purpose or not. So .....

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ng in the educational institutions of the assessee. We find that the said payment is received by the assessee along with the tuition fee, term fee and other charges in a single receipt of fees which the students are making periodical payments. It is imperative to ascertain whether such payment received from the students along with the tuition fee, term fee and other charges is a voluntary payment/ contribution/donation for specific purpose of development or it is a compulsory payment by the stud .....

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tudents but it is compulsory for the students without any discretion or fee will to decide whether to pay or not to pay the development fund fees. Hence, it is a charge by the assessee on the students without having any element of any discretion on the part of the students or parents either to the quantum of fee or the specific purpose as well as the option of making payment or not. Therefore, when this payment is not optional or voluntary on the part of the students but it is compulsory charge .....

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t voluntary but it is a compulsory charge on the students then the same cannot be classified as capital in nature for specific purpose or part of the corpus fund of the assessee trust. The decision relied by the ld. AR are on the point that when a particular contribution or donation is given by the donor as per his free will and for specific purpose then the same cannot be treated as revenue receipt. Having regard to the peculiar facts and circumstances we are of the considered opinion that the .....

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elevant part of the ld. CIT(A) finding on this issue in para 6.3 is as under:- 6.3 I have carefully considered the facts of the case, findings of the AO and submission of the appellant. Since I have already allowed ground No. 1 and 2 supra, there does not remain any grievance of assessee. This ground therefore requires no adjudication. Therefore, the issue of benefit u/s 10(23C) has not been adjudicated by the ld. CIT(A) or by the AO and hence the same is required to be considered and adjudicate .....

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adjudication. Needless to say the assessee be given opportunity of hearing. 7. The Revenue has raised another issue in ground no. 2 and 3 regarding disallowance of depreciation by the AO which was allowed by the ld. CIT(A). 8. We have heard the ld. DR as well as ld. AR and considered the relevant material on record. At the outset we note that this issue of allowing depreciation on fixed asset is covered by a series of decisions of Hon ble High Courts as well as Tribunal. The AO disallowed the cl .....

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