ACIT, CHENNAI vs. MEENAKSHI AMMAL TRUST, CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – II, Chennai, dated 11.02.2013 and pertains to assessment year 2008-09.

Shri B. Koteswara Rao, the Ld. Departmental Representative, submitted that during the year under consideration, the assessee collected `9,95,70,000/- from the students at the time of admission over and above the fees fixed for tuition and other facilities offered by the institution. During the course of search operation, the Revenue authorities found that the assessee received capitation fee for admission in the educational institution from the respective students. Referring to order of the Assessing Officer, the Ld. D.R. pointed out that Shri K.R. Manohar, the Manager of the assessee-trust was examined during the course of search operation. He categorically admitted that they were collecting capital fee by cash and same was handed over to the managing trustees and other trustees. According to the Ld. D.R., the Assessing Officer, in fact, reproduced question and answer at page 6 of his order.

The Ld. Departmental Representative further submitted that on appeal by the assessee, the CIT(Appeals) found that what was collected by the assessee is also a fee for academic course and other amounts. The CIT(Appeals) found that `4,85,00,000/- was towards fees, advance and deposit and `2,62,00,000/- was voluntary donations from well-wishers of students. Since the assessee could not produce the details of the persons who voluntarily donated to the extent of `2,62,00,000/-, the CIT(Appeals) restricted the disallowance at `4,98,70,000/-. The CIT(Appeals) has also found that the assessee collected a lump sum fee for three years. Since the students demanded the refund, the assessee returned the money to the extent of `2,13,50,000/-. Accordingly, the disallowance was restricted to `4,98,70,000/-.

The Ld. Departmental Representative further submitted that the assessee collected fees, advance and other miscellaneous receipts for educational activities separately. What was found during the course of search operation to the extent of `9,95,70,000/- was capitation fee for admission of students in the educational institution over and above the fees fixed for academic activities. Hence, the entire sum of `9,95,70,000/- has to be treated as income of the assessee. The Ld. D.R. further pointed out that the approval granted under Section 10(23C) of the Income-tax Act, 1961 (in short 'the Act') by Director General of Income Tax was withdrawn.

On the contrary, Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the assessee is not claiming any exemption either under Section 11 or Section 12 of the Act. The assessee is also not claiming benefit under Section 10(23C) of the Act. According to the Ld. counsel, the CIT(Appeals) found that the assessee received `24,35,17,250/- towards donation from the financial year 2002-03 to 2008-09 including the amount of `9,95,70,000/- for the year under consideration. According to the Ld. counsel, the assessee itself disclosed `2,36,70,000/- and offered the same for taxation. The remaining `7,47,00,000/- was not the donation or capitation fee collected. It was a fee collected from the students. In fact, according to the Ld. counsel, the assessee collected tuition fee, laboratory, library boarding and other fees for three consecutive years. The Ld.counsel further submitted that the assessee-trust has to construct building for the purpose of establishing a dental college as required by Dental Council of India.

The Ld.counsel for the assessee further submitted that the assessee also appropriated a sum of `52,50,000/- towards expansion. The balance amount of `2,16,00,000/- was shown in the balance sheet as advance fees received. All these details were submitted before the Assessing Officer and the CIT(Appeals). The CIT(Appeals), after considering the material available on record, found that the total fees, advance and deposit collected were at `4,85,00,000/-. In addition to this, the assessee has also received donation from well-wishers and volunteers of respective students to the extent of `2,62,00,000/-. The CIT(Appeals) has also found that the assessee has returned `2,13,50,000/- to the respective students during the year under consideration. Therefore, according to the Ld. counsel, the CIT(Appeals) restricted the addition to the extent of `4,98,70,000/- including the donation of `2,62,00,000/- and the balance was deleted by the CIT(Appeals).

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, the Revenue authorities found that the assessee has collected capitation fee for admission of students in the educational institutions over and above the fees prescribed towards tuition fees and other fees. The assessee has also collected consolidated fees for three consecutive academic years. The assessee’s claim before this Tribunal is that well-wishers of the students have paid donations. However, the details were not available on record to the extent of `2,62,00,000/-. Therefore, the Assessing Officer has rightly treated it as anonymous donation and included in the total income of the assessee for taxation.

The registration granted under Section 12AA of the Act and approval granted under Section 10(23C) of the Act were withdrawn by the respective authorities. Therefore, the assessee is not eligible for exemption either under Section 11 or 10(23C) of the Act.

It is a well settled principle of law that the assessee can collect the tuition fees only for one academic year and not for any other years. Collection of capitation fees over and above the fees fixed by the educational institution is prohibited by the state legislation. Moreover, the Apex Court time and again pointing out that educational institution has no right or authority to collect capitation fee over and above the fees fixed for admission of students. Therefore, the fee collected by the assessee either in the name of building fund, donation or library fund, etc, over and above the fees fixed for admission of students, has to be treated as capitation fee. Therefore, this Tribunal is of the considered opinion that it has to be brought on record the fee structures of educational institutions run by the assessee-trust. The details of the fee structures for admission of students in the educations institutions are not available on record. Accordingly, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re- examine the matter and bring on record the fee structure of educational institutions as prescribed by the committee constituted by the State Government headed by a retired Judge of High Court.

It also needs to be brought on record the excess amount collected by the assessee over and above the fees fixed by the committee nominated by the State Government. This Tribunal is of the considered opinion that the amount collected over and above the fees prescribed by the committee nominated by the State Government is liable for taxation. Since details are not available on record, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter and thereafter decide in accordance with law as indicated above, after giving a reasonable opportunity to the assessee.

In the result, the appeal filed by the Revenue is allowed for statistical purposes.