TMI Blog2022 (3) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 12A and except for the compliant of the AO that the assessee received voluntary contribution, there has been no other charge in so far as allowing exemption under section 11 is concerned. The receipt of so called capitation fees has been interpreted by the AO as an act which will go against the definition of charitable purpose under section 2(15) - CIT(A) has rightly observed that the conclusions of the AO are without any material and that the receipt of capitation fees has not been established nor were there any proceedings against the assessee under the Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984. In the given circumstances of the case, we are of the view that the conclusions drawn by the CIT(A) that the assessee cannot be denied the benefit under section 11 of the Act cannot be said to be erroneous and we concur with the said findings. Hon ble Karnataka High Court in the case of Children s Educational Society [ 2013 (7) TMI 519 - KARNATAKA HIGH COURT ] has held that application of surplus for educational purpose is sufficient to conclude that an educational institution is just solely for educational purpose. In the given fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitableand exemption u/s 11 is not permissible. Though the above ratio has been laid down by the Hon'ble High Court while dealing with the provisions of Sec.10(23C)(iiiad) but such ratio is squarely applicable even in this case as the assessee is involved in collection of capitation fee in the guise of `Voluntary Contributions . 5. The appellant craves leave to add, alter or amend all or any of the grounds of Appeal before or at the time of the hearing of the appeal. 3. The sum and substance of the aforesaid grounds of appeal is that the CIT(A) erred in holding that the assessee is eligible for exemption under section 11 and 12 of the Income Tax Act, 1961 (hereinafter called the Act ). 4. The facts and circumstances giving rise to these appeals are that the assessee is a society registered under the Karnataka Societies Registration Act. The assessee runs educational institutions and hospitals. The assessee maintains separate books of accounts for educational institutions like KS Institute of Technology, KS Polytechnic, KS Group of Institutions, KS Hospitals. The Head Office Kammavari Sangham also maintains separate books of accounts. The income of each of the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Sangha. g) To implement any other decisions of the General Body of the Sangha aimed at the general welfare of the community. 7. In the course of assessment proceedings, the AO noticed in Assessment Year 2012-13 that a sum of ₹ 77,20,060/- was shown by the assessee as voluntary contribution. The assessee explained that voluntary contributions are received from some community persons and also at times from others without any compulsion or pressure. These contributions are made from persons with philanthropic ideology and donate voluntarily till the progress achieved by the institution. The AO however came to the conclusion that the voluntary contribution has a nexus with the admission of candidates in a particular year. The AO was of the view that in each succeeding years, there has been similar contributions and these are nothing but contributions in connection with the admission of the ward on being demanded by the assessee. The AO has observed in the Order of Assessment that the donations were not voluntary and the one given out of free will and there was a quid-pro-quo. He held that there was a suggestion and unwritten direction from the assessee and the vol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate or free of cost to be called a charitable activity. It was pointed out that there was no allegation that the assessee did not pursue the objects of the trust or it did not apply the surplus towards objects of the trust. It was pointed out that the Hon'ble High Court of Karnataka in the case of Children s Education Society for the assessment year 2006-07 reported in 358 ITR 373 has taken the view that the application of surplus for educational purposes would be sufficient to conclude that the educational institution exist solely for educational, purposes. Thus, the ratio of the said decision in the case of the Hon'ble Uttarkhand High Court in the case of Queens Educational Society [supra] is no longer a binding precedent applicable in deciding the issue in the case of the assessee. 11. It was also pointed out that on the allegation of assessee having received capitation fees and violated the Karnataka Education Prohibition of Capitation Act, 1984, the assessee pointed out that the competent authority under the said Act has not found that the assessee is collecting capitation fee from the students and consequently has not derecognized the assessee from running educati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whatsoever for this conclusion drawn by the AO. On the other hand, the AO has proceeded purely on the basis that there was a suggestion and unwritten direction from the assessee for contributions to be made mandatorily for the purpose of securing admission in the assessee s educational institutions. The AO, thereafter, concluded that voluntary contributions are nothing but a capitation fee. It is seen that the assessee enjoys registration under section 12A of the Act and except for the compliant of the AO that the assessee received voluntary contribution, there has been no other charge in so far as allowing exemption under section 11 is concerned. The receipt of so called capitation fees has been interpreted by the AO as an act which will go against the definition of charitable purpose under section 2(15) of the Act. In this regard, the CIT(A) has rightly observed that the conclusions of the AO are without any material and that the receipt of capitation fees has not been established nor were there any proceedings against the assessee under the Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984. In the given circumstances of the case, we are of the view th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
