TMI Blog2022 (8) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... nd had later applied for the purpose of building, it could be said that there was a specific direction under 11(1)(d). Similar view has been taken in the case of Sri Ramakrishna Seva Ashrama [ 2011 (10) TMI 369 - KARNATAKA HIGH COURT ] wherein Court held that if the amounts received are held as capital and only applied for specific purposes then it can be said that there was a specific direction to treat it as corpus funds. Court further held that the requirement is that the voluntary contributions have to be made with a specific direction. The law does not require that the said direction should be in writing. In the absence of the direction in writing, the only way that one can find out whether there was a specific direction is to find out how the money so paid it is utilized. In the instant case, the Development Fee has been directly taken to corpus account as capital receipt u/s 11(1)(d) and has also invested in the fixed asset in the year. Ergo, we hold that the Development Fee is to be treated as corpus fund allowed to be taken as capital receipt. Computation of 15% u/s 11(1)(a) of net surplus in place of gross receipt - We hold that 15% accumulation is allowed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, management etc. Annual fees, charges and Development funds are collected by the Institutions under the Trust. From the perusal of seized documents, it was observed by the AO that the appellant has received development fee in addition to tuition fee from all the students on compulsory basis. The AO held that Development fee was a part of fee structure which was to be paid by the students to the institutes. Thus, it was noted by the AO that such development fee was not voluntary in nature but was part of overall course fee to be paid by the students on compulsory basis along with tuition fee. The appellant has shown the tuition fee as a part of income and expenditure statement as income whereas development fee has been taken directly to the balance sheet as corpus fund. The AO was of the opinion that such development fee was not on account of voluntary corpus fund and therefore the same should have been included in the revenue receipts in the income and expenditure statement. 7. The assessee stated before the AO that in view of provision of section 12 and 11(1)(d), such corpus donation were made with a specific direction that it would form part of the corpus of trust and thus h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has received amount of Rs. XXXXX during the year from students who have taken admission in various institutes being run by the assessee as development fee, part of overall course fee. Such development fees have been taken directly to the balance sheet and have been treated by the assessee as voluntary funds received with the specific directions to treat the same as part of corpus as covered u/s 11 (1)(d) of the Act. The ld. CIT(A) held that these amounts are obligatory for each new admission to be paid to the assessee while taking the new admission, thus are not discretionary/voluntary in nature. These amounts have not been received by the assessee as a voluntary contribution from the new admissions during the year. These amounts/have not been received by the assessee from the parents of the new admissions as a voluntary contribution made with a specific direction that these would form part of corpus of the trust or institution. Rather the parents did not have any such discretion of not paying such contributions towards development fees and they also did not have any discretion in deciding the quantum for such components while paying the admission fee. The amount to be paid has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 20 of the AICTE Act, 1987. The Ministry vide its notification No. FZO-43/96 has laid down the Policy For Fee Fixation in Private Educational Institutions' which is applicable to the assessee trust. There is a drastic distinction between the two fees has been clarified by the Ministry itself. As per the resolution, the difference could be examined which is analyzed as under: 6.6 Fee Determination: (a) Fee will have two broad categories Tuition Fee and Development Fee. Besides, the management of the institutions may realize the actual cost of boarding messing from the above students subject to the relevant Committee being satisfied about the reasonableness of such costs. (b) Tuition Fee will seek to recover the actual cost of imparting education. While assessing a fair tuition fee the Committee will take into account the following: (i) Salary and allowances including bonus, if admissible to teaching and non-teaching employees; (ii) Expenditure on administrative services; (iii) Cost of maintenance of laboratories including consumables; (iv) Contingent expenditure including statutory requirements like audit fee etc. (v) Cost of acquisit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ixing the fee structure by the State Government for the technical institutions and applying the other conditions as specified in the orders of the State Govt., is capital in nature and not revenue. Accordingly, we delete the addition made by the Assessing Officer on this account. 17. The Co-ordinate Bench of ITAT in the case of ACIT vs. JSS Mahavidyapeetha in ITA No. 735/Bang/2012 held the view that litmus test of charitable institution is the application of funds and not the colour of the contributions. It was held, The AO based his conclusion on the presumption that the contribution to development fee was not a voluntary contribution the question whether the donations were voluntary or not becomes irrelevant and what becomes relevant is the application of such contributions for the objections of the trust which are admittedly charitable. The application of such contributions for objects of the trust is not in dispute. 18. Further, the Co-ordinate Bench of ITAT Bangalore in the case of Sadvidya Educational Institution vs. ACIT in ITA No. 604/Bang/2011 held that Development Fees received from students as per Policy of Government for acquisition of Fixed Assets and utiliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; 25. On going through the bare provisions of the Act, we hold that 15% accumulation is allowed on the income from property held under trust. 26. These provisions have been further clarified by the Hon ble Supreme Court in the case of Addl. CIT Vs. A.L.N. Rao Charitable Trust 216 ITR 697 wherein lordships has explained the law with an example of Rs. 1,00,000/- gross income and assuming an expenditure of Rs. 20,000/-, Court has held that Rs. 25,000/- being 25% (now 15%) of gross receipts will be allowed as accumulation u/s 11 (1)(a). 27. For the sake of ready reference, the relevant part of the order of the Hon ble Supreme Court is also reproduced herewith: Thus, if the income derived from property held under trust wholly for c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes, thereby leaving balance of Rs. 87,010/-. The Court held under para 3 that Trust was eligible to accumulate 25% (now 15%) of Rs. 2,57,376/- u/s 11 (1)(a). 29. For brevity and ready reference, the entire order of the Hon ble Apex court is reproduced hereunder: The questions that were referred to the High Court for consideration, at the instance of the Revenue, read thus: (1) Whether, on the facts and in the circumstances of the case and on an interpretation of the relevant provisions of the IT Act, the assessee is entitled to exemption at 25 per cent on Rs. 2,57,376 or only on Rs.87,010 ? (2) Whether, on the facts and in the circumstances of the case, should not the Tribunal have accepted the view of the Revenue expressed in the circular, the same being consistent with the relevant provisions of the IT Act, 1961 ? (3) Whether, on the facts and in the circumstances of the case, and also considering the scope of the earlier order of the CIT(A), dt. 18th Nov., 1983, the Tribunal is right in law in holding that the CIT(A) has rightly interfered with the order of the ITO ? The answers being in favour of the assessee, the Revenue is in appeal by sp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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