2010 (8) TMI 1043 - AT - Income Tax

Summary

Issues Involved:
1. Approval of prescribed authority u/s 10(23C)(vi).
2. Replacement of sections 10(22) and 10(22A).
3. Monitoring mechanism under sub clauses (iv) and (via).
4. Exemption of educational income under section 11.
5. Collection of capitation fees and its impact on exemption eligibility.

Summary:

1. Approval of Prescribed Authority u/s 10(23C)(vi):
The Revenue argued that obtaining approval from the prescribed authority is mandatory as per the plain meaning of the provisions of section 10(23C)(vi) of the IT Act and does not require interpretation. The Tribunal, referencing previous cases, emphasized the necessity of examining whether the assessee collected capitation fees, which would affect their exemption eligibility.

2. Replacement of Sections 10(22) and 10(22A):
The Revenue contended that section 10(23C) is not a replacement for sections 10(22) and 10(22A), except for sub clauses (iii)(ad) and (iii)(ac). The Tribunal did not specifically address this issue in detail but focused on the broader implications of section 10(23C).

3. Monitoring Mechanism under Sub Clauses (iv) and (via):
The Revenue highlighted that sub clauses (iv) and (via) introduced new provisions for monitoring, which were absent in earlier provisions. The Tribunal's decision to remand the case for further examination by the assessing officer implicitly supports the need for a robust monitoring mechanism.

4. Exemption of Educational Income under Section 11:
The CIT(A) had erred in observing that section 11 provides sufficient monitoring mechanisms. The Tribunal, referencing Supreme Court judgments, clarified that if donations were received compulsorily for admission, the assessee is not entitled to exemption either u/s 10(23C) or u/s 11.

5. Collection of Capitation Fees:
The Tribunal noted that the lower authorities had not examined the collection of capitation fees. It directed the assessing officer to investigate whether the assessee collected capitation fees, referencing Supreme Court judgments which state that institutions collecting capitation fees cannot be considered charitable/educational institutions. The Tribunal emphasized that the assessee is not entitled to exemptions if they collected any money over and above the prescribed fees.

Miscellaneous Petition:
The assessee filed a miscellaneous petition arguing that the Tribunal exceeded its jurisdiction by addressing the issue of capitation fees, which was not raised by the department. The Tribunal dismissed the petition, stating that its powers u/s 254(1) are of the widest amplitude and it can remand cases to ensure justice.

Conclusion:
The Tribunal set aside the orders of the lower authorities and remitted the matter back to the assessing officer for fresh consideration, emphasizing the need to examine the collection of capitation fees. The appeal of the Revenue was partly allowed for statistical purposes.