2010 (1) TMI 1094 - AT - Income Tax

Scope of Section 10(23C) Monitoring Mechanism Alternate Availability of Section 10(23C)(vi) and Section 11 - Approval of the Prescribed Authority - Held that - The assessee was not entitled for exemption either u/s 11 or u/s 10(23C) in case it collected any money by whatever name it was called i.e., donation, building fund, auditorium fund etc. etc., over and above the prescribed fee for admission of students - The order was set aside the orders of the lower authorities and remit back the matter to the file of assessing officer with a direction to assessing officer that he shall reconsider the entire issue - The matter required to be examined by the assessing officer whether the assessee was collecting the capitation fees from students or not and it was necessary for bringing the actual facts on record for deciding the issue effectively. T.M.A. Pai Foundations and others Vs. State of Karnataka & Others 2002 (10) TMI 739 - SUPREME COURT - the institution which were collecting capitation fees for admission of students over and above the fees prescribed cannot be construed as charitable/education institution - the fees collected over and above the prescribed fee for admission of the student had to be constructed as capitation fee - the concerned university and regulated body had to take action for withdrawal of the recognition in case it was found that the educational institution received any money over and above the fees prescribed for the courses - Decided in favour of Revenue.

Summary

Issues:
1. Failure to obtain approval of prescribed authority.
2. Interpretation of Sec.10(23C) in relation to Sec.10(22) and (22A).
3. Monitoring mechanism under sub clauses (vi) and (via) of Sec.10(23C).
4. Availability of Sec.10(23C) (vi) a and Sec.11 alternatively.
5. Collection of capitation fees by educational institutions for admission.

Analysis:
1. The first issue raised by the Revenue was the failure to obtain approval of the prescribed authority, which was deemed mandatory. The Tribunal referred to relevant case law and emphasized the necessity of complying with such provisions. The matter was remitted back to the assessing officer for a thorough examination in light of the Supreme Court judgments cited, directing a reconsideration of the issue to determine if capitation fees were being collected.

2. The interpretation of Sec.10(23C) in relation to Sec.10(22) and (22A) was a crucial point of contention. The Tribunal clarified that only sub clauses (iiiad) and (iiiae) were replacements of the erstwhile provisions, while sub clauses (vi) and (via) introduced new monitoring mechanisms. The availability of Sec.10(23C) (vi) a and Sec.11 alternatively was also addressed, with a directive for a fresh decision based on the actual facts regarding any money collected over and above prescribed fees.

3. The issue of monitoring mechanisms under sub clauses (vi) and (via) of Sec.10(23C) was highlighted as essential for effective regulation. The Tribunal underscored the significance of these provisions in providing a monitoring framework that was previously lacking, as stated in Circular No.772.

4. The Tribunal further discussed the collection of capitation fees by educational institutions for admission, citing relevant Supreme Court judgments that deemed such collections as non-charitable activities. The assessing officer was instructed to investigate whether the assessee had received any money beyond prescribed fees and to make a decision accordingly, emphasizing that exemptions under Sec.10(23C) or Sec.11 would not apply if such collections were made.

5. In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, indicating a decision in favor of the Revenue on the specific issues raised. The judgment emphasized the need for a thorough examination of the facts and compliance with legal provisions regarding the collection of fees by educational institutions.