TMI Blog2017 (4) TMI 1605X X X X Extracts X X X X X X X X Extracts X X X X ..... y based on certain presumptions and assumptions and not based on well ascertained facts. Though it may appear from the circumstance of the case that there may be quit-pro-quo arrangement for receipt of donation, unless it is established by cogent evidence drastic decision cannot be arrived at by withdrawing the benefit of Section 11 of the Act to all the charitable trusts which will jeopardize the functioning and the very existence of the charitable educational institutions. There is no finding with respect to any violation of Section 13 of the Act, because the donations received by the respective charitable trusts are spent according to the objects of the trusts. It is also apparent that this bench of the Tribunal [ 2014 (6) TMI 1068 - ITAT CHENNAI] for the assessment year 2010-11 and [ 2013 (8) TMI 1166 - ITAT CHENNAI] for the assessment year 2008-09 in the case of M/s. MAC Public Charitable Trust had held that the benefit of Section 11 12 of the Act cannot be denied to the assessee for extending loan to another connected/related charitable educational institution. Further the assessee trusts have issued valid receipts for the donations received and had maintained the name ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on made by the Ld. AO protectively for Rs.3,60,00,000/- on account of non-voluntary contribution / capitation fees by holding that there is no violation of the Act. 2.3 M/s. MAC Charities in ITA No.2887/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT(A) who had deleted the addition made by the Ld. AO protectively for Rs.10,65,00,000/- on account of nonvoluntary contribution / capitation fees by holding that there is no violation of the Act. 2.4 M/s. MAC (Educational) Foundation in ITA No. 2886/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT(A) who had deleted the addition made by the Ld. AO protectively for Rs.10,00,000/- on account of nonvoluntary contribution / capitation fees by holding that there is no violation of the Act. 2.5 M/s. Sri Venkateswara Educational Health Trust in ITA No. 2889/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee trust for securing the admission of his cousin s son Master S. Deivanayagam in Sri Venkateswara College to pursue Bachelor of Engineering (Mechanical) course. He further stated that the amount paid as donation by him was received from his cousin. 3.2 Drawing inference from the above, the Ld. AO opined that persons who desire to admit their wards in Sri Venkateswara Engineering College were forced to pay donation to the assessee trust which amounts to capitation fee. The Ld. AO further analyzed the fund flow of all the assessees trust in the following manner:- 3.3 The assessee rebutted to the findings of the Ld. AO vide its letter dated 18.03.2014 as under:- .b. The assessee trust has indeed collected donations from several individuals. The fact that the donations have been given to the assessee trust is not denied by these individuals. The donors have given letters to assessee trust that the donations are voluntary. The assessee trust is an independent trust and is in no way connected to the Sri Venkateswara College, which we are given to understand is a Telugu minority institution. The assessee trust is therefore in no position to secure admissions for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the students on account of tuition fees, campus recruitment, college transport etc the trust receives some donations from trusts with specific direction that these donations shall form part of the corpus. No donations have been collected from any student directly or indirectly by the assessee trust. As stated earlier even the fees collected from the students are as per stipulated norms. d. As regards the donations received from the MAC trust etc these are voluntary only, as is evidenced by their letters which have already been produced to your goodselves during assessments. The donor trusts have not stated that these are not voluntary donations. The donors are separate trusts with no common trustees. The assessee trusts have issued valid receipts for these donations, properly accounted for the same and the donors trusts are identifiable and separately assessed to tax. Therefore, if there are some issues regarding the source of funds for the donor trusts the same cannot be a ground for the corpus donation receipt to be considered as income. Section 12(1) provides that any voluntary contribution received by a trust with a specific direction that shall form part of the corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations received by the assessee trust does not become involuntary. The assessee trust has been regularly receiving donations and has been applying the same for charitable purposes. In view of the above, it is prayed that the issues raised in the show cause notice may be dropped. 3.7 In the case of M/s. MAC Education Foundation, the Ld.AR submitted before the Ld.CIT(A) vide written submission dated 12.07.2014 as follows: 1. No donations have been collected by the appellant trust from any of the students/parents of the college. 2. The donors to United Education Foundation are also not students/parents of Sri Venkateswara College. 3. If the donors of United Education Foundation had submitted that the donations were for securing seats the learned assessing officer ought to have examined the relevant student/parent before concluding that the statements of the donors were true. 4. The fact that the donors to the appellant trust were not students/parents were not considered by the AO. 5. The donor to the appellant trust has confirmed the donations. Merely because there were some issues in the source of some of the donations if cannot be concluded that the donations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 36,00,000.00 Tamil Isai Sangam Rs. 23,67,000.00 MAC (Educational) Foundation Rs. 10,00,000.00 Rs.18,74,67,000.00 5.2 The Ld. CIT(A) further observed as follows:- i. Perusal of the letters from the donors indicated that the amount received by the assessee trust were voluntary donations. ii. Only in some of the sworn statements the donors had stated that the amount paid was for securing admission of their wards/relatives in Sri Venkateswara College of Engineering. iii. However, the same donors had responded earlier by stating that they had advanced voluntary donations. iv. Thus there were conflicting statements. v. The Ld. AO did not examine the source of the huge donation paid by the individual donors which shows that the Revenue was lenient on the donors for detecting undisclosed income if any. vi. Some of the donors who paid huge donations were not assessed to tax. vii. Some donors also stated that they were mear name lenders. viii. There were statements by the donors stating that the amount contributed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Chennai bench of the Tribunal reported in 15 taxman.com 53. Based on the above observations, the Ld.CIT(A) held in the case of the M/s. United Educational Foundation that, the donation extended by the donors cannot be treated as nonvoluntary contribution. Further the assessee trust had not violated any of the objects of the trust and the genuineness of the trust is also established. Therefore exemption U/s. 11 of the Act cannot be denied to the assessee trust. 6. In the case of M/s. MAC Public Charitable Trust, the Ld. CIT(A) arrived at the following conclusion: a. There is no prohibition in law for a charitable institution to receive donation from another charitable institution. b. There is also no prohibition in law for a charitable institution to give donation to another charitable institution. c. The donation given by the assessee trust is application of income and hence exempt u/s. 11 of the Act. d. The donation received and given by the assessee trust are voluntary in nature. e. The assessee trust is not connected with receipt of donation/capitation fee by any trust from anyone. f. The assessee trust is not connected with the admission of stud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the decision of Hon ble Allahabad High Court in the case CIT v. JK Charitable Trust reported in 196 ITR 31 wherein it was held as follows: A charitable purpose may be served in more than one way. One is to directly contribute money to another charitable organization, which advances that cause. In the absence of allegations of device and/or malafides, the amount contributed to other charitable institutions out of the income accumulated under sub-section (2) is outside the mischief of sub-section(3) of section 11. In other words such contribution does not amount to application of the income for purposes other than charitable or religious . xi. Similar directions was also made in the instructions issued by the Ld. CBDT No.1132 dated 04.01.1978 clause XXIII/1/128. Based on the above observations and the conclusions, the Ld. CIT(A) held that the allegations of the Ld. AO such as donation of Rs.3,60,00,000/- received by the assessee trust is nonvoluntary/capitation fees contribution by the donors is devoid of merits and not tenable in the eye of law. Accordingly, the Ld. CIT(A) directed the Ld. AO to delete the addition of Rs.3,60,00,000/- made in the hands of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also reveals that initially all the donors who had submitted sworn statements before the Ld.AO against the assessee had earlier replied to the Ld.AO stating that the donations were voluntarily made by them to the charitable institutions. In this situation we fail to understand the reason for the change of stand by the donors before the Ld.AO on the subsequent proceedings. In all the instances the donors have donated huge sum often extending to more than five lakhs to the charitable institutions. It is pertinent to mention at this juncture that the Ld.AO has not examined the source of investment made by the donors. Further according to the findings of the Ld.AO, in most of the cases the relatives/parents of the students studying in M/s. Sri Venkateswara Educational Health Trust have paid donations to connected/related charitable Trusts. From these facts and circumstances of the case it appears that the Ld.AO might have coerced to obtain the sworn statements from the donors in the manner convenient to the Revenue so as to drop further proceedings against the donors for examining their source of income with respect to the amount of donations made. Further it is not always possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t any evidence to establish the same. It is also not clear whether this amount is received from other connected/related trusts or directly received from the donors. The Ld. AO instead of clarifying these issues has made substantive addition in the hands of the assessee, which is erroneous. Further it is apparent that the Ld.AO without examining the correct source of actual donation had come to the conclusion that there were quid-pro-quo arrangements for the payment of donation only based on certain presumptions and assumptions and not based on well ascertained facts. Though it may appear from the circumstance of the case that there may be quit-pro-quo arrangement for receipt of donation, unless it is established by cogent evidence drastic decision cannot be arrived at by withdrawing the benefit of Section 11 of the Act to all the charitable trusts which will jeopardize the functioning and the very existence of the charitable educational institutions. Moreover there is no finding with respect to any violation of Section 13 of the Act, because the donations received by the respective charitable trusts are spent according to the objects of the trusts. It is also apparent that this ben ..... X X X X Extracts X X X X X X X X Extracts X X X X
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