2011 (9) TMI 950 - AT - Income Tax

Summary

Issues Involved:
1. Exemption u/s 11
2. Profit Motive
3. Applicability of Case Laws
4. Charitable Activity
5. Capitation Fees
6. Capital Expenditure

Summary:

1. Exemption u/s 11:
The Revenue contested the CIT(A)'s decision to allow exemption u/s 11 to the assessee. The Tribunal upheld the CIT(A)'s order, confirming that the assessee, a public charitable trust running an educational institution, applied its income for charitable purposes and was entitled to exemption u/s 11.

2. Profit Motive:
The Revenue argued that the assessee had a profit motive, citing the Assessing Officer's findings. The Tribunal found that the CIT(A) correctly appreciated the facts and judicial pronouncements, concluding that the assessee's activities were charitable and not profit-driven.

3. Applicability of Case Laws:
The Revenue claimed that the CIT(A) erred in applying the cases of American Hotel and Lodging Association Educational Institution Vs. CBDT and Pinegrove International Charitable Trust Vs. UOI. The Tribunal agreed with the CIT(A) that these cases were relevant and applicable to the assessee's situation.

4. Charitable Activity:
The Revenue contended that the assessee's educational activities were not charitable. The Tribunal upheld the CIT(A)'s view that the assessee's activities, including running an educational institution and providing various student services, were indeed charitable.

5. Capitation Fees:
The Revenue argued that the assessee collected capitation fees, which should disqualify it from exemption u/s 11. The Tribunal found that the CIT(A) correctly held that the issue of capitation fees as defined by the Apex Court in T.M.A Pai Foundation and the OPEI Act, 2007, was not applicable to the assessee.

6. Capital Expenditure:
The Revenue challenged the CIT(A)'s decision to consider capital expenditure as application of income. The Tribunal agreed with the CIT(A) that capital expenditure for building infrastructure necessary for imparting education was a valid application of income for charitable purposes.

Conclusion:
The Tribunal dismissed the Revenue's appeal and upheld the CIT(A)'s order, confirming the assessee's entitlement to exemption u/s 11. The Cross Objection filed by the assessee in support of the CIT(A)'s order was allowed.