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Income Tax Appellate Tribunal, DELHI BENCH: “A+SMC”, NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI O.P. KANT
Date of hearing 10.01.2019 Date of pronouncement 28.01.2019 ORDER PER O.P. KANT, A.M.: This appeal by the assessee is directed against order dated 16/03/2018 passed by the Ld. Commissioner of Income-tax (Appeals), Ghaziabad for assessment year 2014-15 raising following grounds:
1. That on the facts and circumstances of the case, the order passed by the Ld. CIT(A) under Section 250 of the Income- tax Act is bad in law.
2. The Ld. CIT(A) has erred in making the additions amounting to Rs.48,90,650/- under the provisions of section 11(4) of the Income-tax Act, 1961.
3. That the Ld. CIT(A) has erred in not allowing the expenses that had been incurred in earning the alleged income of Rs.48,90,650/- and further erred in confirming the applicability of provision of section 164(2) of the Income-tax Act, 1961.
4. That the appellant seeks leave to add, amend, alter, abandon or substitute any of the ground during the hearing of the appeal.
2. Briefly stated facts of the case are that the assessee society is registered with the registrar of society, Uttar Pradesh and also registered under section 12A of the Income-tax Act, 1961 (in short ‘the Act’) by the Ld. Commissioner of Income Tax, Ghaziabad, vide his order dated 08/12/2004. The society is running a dental colleges in the name and style of “Shri Ganapati Institute of Technology” at village parson, Ghaziabad. The assessee filed return of income on 29/09/2014, declaring nil income. The case was selected for the scrutiny and notice under section 143(2) of the Act was issued and complied with. In assessment proceeding, the Assessing Officers observed that the assessee collected fee from the student in excess of the fee mandated by the relevant authority, i.e., Fee Fixation Committee of Uttar Pradesh Technical University, Lucknow (UPTU). The fee was collected against personality development programme, examination, dress and security deposit etc. The Assessing Officer computed such excess fee charged at Rs.48,90,650/-. The contention of the Assessing Officer is that any amount received by the educational institution over and above the fee fixed by the committee has to be classified as capitation fee. According to the Assessing Officer motive behind charging of excess fee is running business and not charity and the surplus generated was held as business income in terms of section 164(2) of the Act. The Assessing Officer in the assessment order passed under section 143(3) of the Act on 06/12/2016, accordingly taxed the entire amount of excess fee of Rs.48,90,650/- as business income of the assessee without even considering the expenditure incurred against the same for allowance. 2.1 Aggrieved, the assessee filed appeal before the Ld. CIT(A), and submitted that the assessee has not carried out any business activity and was engaged in providing education, which is charitable activity. According to the Ld. CIT(A), the assessee has undertaken business activity by way of charging fee in excess of the prescribed by the relevant authority which being business activity incidental to the main object of education, and thus according to provisional section11(4) of the Act, was liable to taxed in absence of maintenance of separate books of account in respect of such an activity. The Ld. CIT(A) observed that no separate books of accounts were maintained by the assessee in respect of the incidental activity, which mandated charging of excess fee i.e. beyond the fee prescribed by the relevant authority, accordingly, she upheld the finding of the Ld. Assessing Officer. Aggrieved, the assessee is in appeal before the Tribunal raising the grounds as reproduced above.
3. Before us, supporting the grounds raised, the Ld. counsel of the assessee submitted that the so-called excess fee charged was towards personal development programme, exam fee, dress fee which has been incurred towards the intended purpose and no profit has been derived by the assessee in the fee charged. He further submitted that security deposit collected was refundable at the end of the course and, therefore, there is no violation of the any fee prescribed by the relevant authority. The Ld. counsel submitted that the above fee charged were not any illegal receipt and thus cannot be termed as capitation fee.
The Ld. counsel submitted that the coordinate bench of the Tribunal in the case of M/s Prayag Dant Vigyan Anusandhan Sansthan in & 266/LKW/2017 for assessment year 2012-13 and 2013-14 has deleted the similar addition made by the Assessing Officer for charging excess fee. He submitted that facts of the instant case are identical to the above case and thus accordingly following the same, the appeal of the assessee might also be allowed.
On the contrary, Ld. DR relied on the order of the Ld. CIT(A).
We have heard the rival submissions and perused the relevant material on record. In the instant case, there is no dispute that the assessee was engaged in providing education, which is a charitable activity as per the provisions of Act, however, the Assessing Officer has held the charging of extra fee for following activity, which have held in the nature of business activity and made the assessee liable to tax: (i) Personal Development Programme Fee (Rs. 5000 per year) for programs like improving communication skills, presentation skills, languages, etc. by way of employing separate faculty , for helping the students appear before the higher management exams like IIM and also get better placement in industry. (ii) Exam fee (Rs. 3450) was collected on behalf of the University (iii) Dress Fee ( Rs. 5000/4000) was charged only in the 1st year and it was in the nature of the reimbursement of the cost of the dress and no profit was earned.
(iv) Security deposit(Rs.5000) was refundable deposit payable at the end of the course period.
The Ld. counsel before us has relied on the decision in the case of M/s The Prayag Dant Vigyan Anusandhan Sansthan (supra). In the said case also the Assessing Officer held the fee collected in excess of the fee prescribed by the UPTU, Lucknow as business income of the assessee. The Tribunal, affirming the order of the Ld. CIT(A), deleted the addition made. The relevant finding of the Tribunal is reproduced as under: “13. As regards ground No.1 in we find that the Assessing Officer had disallowed the benefit of section 11 by making addition of whole of excess of income over expenditure treating the same as business income as in his opinion assessee had charged fee which was beyond the prescribed amount of fees decided by the Government authorities. However, Id. CIT(A) allowed relief to assessee by holding as under:- "On perusal of the details filed and those available on records, it is seen that the assess.ee trust has been charging tuition fees as per the norms set by the UPTU. The assessee trust has also charged additional fees/charges for specific purposes, like examinations, lab fees etc. These are not illegal receipts nor has the UPTU barred the appellant form these additional charges, as the monetary cap is only on tuition fees. In any case, such additional receipts are de-minimis and are collected for specific purposes. The decision of the Hon'ble Supreme Court in the case of Unikrishnan, JP & Others which has been cited by the A.O. in his order, deals with the receipt of Capitation Fees. In this case, admittedly, there is no capitation fees, thus, the said decision of the Hon'ble Supreme Court is not at all applicable to the instant case. These fees/ charges, collected in addition to the tuition fees, were fully recorded and accounted funds and these have been spent for the purposes/ objects of the trust. Even assuming that the assessee trust had charged some additional fees/ charges which was in violation of the UPTU norms, it was for the UPTU to take appropriate action. The A.O. cannot step into the shoes of the UPTU to determine the excess amount, if any, charged. Further, it is now a settled law that "Education" per se is a charitable activity and even if some surplus is earned by the trust while imparting education, the same cannot be considered as a business activity as long as the funds of the trust are used for the purposes/ objects of the trust. In this view of the matter, the observations of the A.O.
that the assessee was indulging in a business activity is not in accordance with the settled law and, therefore, it has to be held that the surplus of the trust is not to be treated as business income. Accordingly, this addition of Rs. 3,65,41,344/- is hereby deleted.”
Finding no infirmity in the order of Ld. CIT(A) on this issue also, we decide this issue in favour of the assessee and against the Revenue.”
We note that in the instant case also the assessee has been alleged to be engaged in collecting fee in excess of the fee prescribed by the same authority i.e. UPTU, Lucknow. The facts and circumstances of the instant case being identical to the facts in the case of M/s Prayag Dant Vigyan Anusandhan Sansthan (supra), thus, respectfully following the same, addition made by the Assessing Officer and sustained by Ld. CIT(A) is deleted. All the grounds of the appeal are accordingly allowed. In the result, the appeal of the assessee is allowed. 9.
Order is pronounced in the open court on 28th January, 2019.