MAHATMA GANDHI CHARITABLE MEDICAL TRUST,KOLHAPUR vs. THE INCOME TAX OFFICER, EXEMPTION WARD, KOLHAPUR

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ITA 819/PUN/2024Status: DisposedITAT Pune11 June 2024AY 2017-18Bench: SHRI INTURI RAMA RAO (Accountant Member)4 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the cash donations received for BDS course admissions constituted capitation fees, which is prohibited by law and contrary to public policy. Therefore, the trust was not eligible for exemption under Section 11.

What were the facts?

The appellant, a charitable trust registered under Section 12A, failed to file a regular return of income for AY 2017-18. The Assessing Officer made an addition of Rs. 19,50,000 under Section 68 for cash donations received from students for BDS course admissions.

What were the issues?

Whether cash donations received for student admissions, which are in the nature of capitation fees, are eligible for exemption under Section 11 of the Income-tax Act.

Which sections of the Income-tax Act were involved?

Section 12A,Section 11,Section 139(1),Section 142(1),Section 144,Section 68

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI INTURI RAMA RAO

For Respondent: Shri Abdesh Kumar Jha
Hearing: 11.06.2024Pronounced: 11.06.2024

आदेश / ORDER

PER INTURI RAMA RAO, AM:

1.

This is an appeal filed by the assessee directed against the order of National Faceless Appeal Centre (NFAC), Delhi dated 23.11.2023 for the assessment year 2017-18.

2.

Brief facts of the case are as under : The appellant is a Charitable Trust formed with the object of imparting education. The appellant trust was duly registered u/s.12A of the Income-tax Act, 1961 (hereinafter referred to as ‘The Act’). No regular return of income for the A.Y. 2017-18 under the provisions of section 139(1) was filed by the appellant trust. The Assessing Officer issued notice u/s.142(1) calling upon the appellant trust to file the return of income. In response to notice u/s.142(1), the appellant trust had filed the Return of Income claiming exemption u/s.11 of the Act. Against the said return of income, the assessment was completed by the AO vide order u/s.144 dated 27.12.2019 after making addition of Rs.19,50,000/- u/s.68, being cash donations received from the students in connection with admission for BDS course for the failure of the trust to prove the genuineness, creditworthiness and identity of the donors.

3.

Being aggrieved, an appeal was filed before the CIT(A) who vide impugned order confirmed the action of the AO for non-prosecution without going into the merits of the issue.

4.

Being aggrieved, the appellant is in appeal before the Tribunal in the present appeal

5.

When the appeal was called on, none appeared on behalf of the appellant despite due service of notice of hearing. After hearing the ld. DR and perusing the material on record, I proceed to dispose of the appeal ex parte qua the appellant trust.

6.

I heard the ld. Sr. DR and perused the relevant material on record. The issue in the present appeal relates to exemption of cash donations received from the donors for admission of students in BDS course. From the mere reading of the assessment order, it would reveal that the appellant trust had received cash donations in connection with the admission of students for BDS course. This is nothing but collection of capitation fee which is prohibited under the provisions of the Maharashtra Educational Institution (Prohibition of Capitation Fees) Act, 1987, therefore the appellant trust is not eligible for exemption u/s 11 as the practice of collection of capitation fees is also contrary to the law laid down by the Hon'ble Apex Court in the case of Islamic Academy of Education v. State of Karnataka [2003] 6 SCC 697. Thus, the act of collection of donations in connection with admission of students for BDS course is contrary to the public policy which does not quality for exemption u/s.11 of the Act.

The Coordinate Bench in the case of Sinhagad Technical 7. Education Society Vs. DCIT [2022] 139 taxmann.com 270 (Pune - Trib.) held that collection of fees from the students for admission in various courses under the management quota amounts to breach of trust and the objects cannot be said to be charitable in nature.Relevant paragraphs from the said decision are reproduced below :

32. It is settled position of law that the amount of capitation fees received over and above the prescribed under the provisions of the Maharashtra Educational Institution (Prohibition of Capitation Fees) Act, 1987 is not eligible for exemption u/s 11 as the practice of collection of capitation fees is contrary to the law laid down by the Hon'ble Apex Court in the case of Islamic Academy of Education v. State of Karnataka [2003] 6 SCC 697 and also against public policy and the contrary to the provisions Maharashtra Educational Institution(Prohibition of Capitation Fees) Act, 1987. Thus, the appellant is not eligible for exemption of income of capitation fees received outside books of accounts u/s 11 and the Assessing Officer had rightly brought to tax. Accordingly, the ground appeal no. 1 to 7 stands dismissed.

8.

In the light of above discussion, I do not find any merit in the appeal filed by the appellant trust, accordingly the appeal stands dismissed.

9.

In the result, the appeal filed by the assessee is dismissed.

Order pronounced on this 11th day of June, 2024.

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