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2015 (6) TMI 3 - AT - Income TaxDenial of exemption u/s 11 - large amount of capital fee as collection of money for admission of students in the school - Held that - As can be seen from the content of the sworn affidavit, it is the contention of the assessee that neither there is a regulating authority/prescribed body in India, as far as the assessee is concerned, nor there is any fee prescribed for the assessee either by DARE/MEA or by any of the bodies to which it is affiliated to. It is further submission of the assessee that the one time admission/capital fee of ₹ 1.75 lakhs from each of the student is part of the fee structure approved by the school management, hence it cannot be said that the assessee has charged any fees over and above the prescribed fee for denying exemption u/s 11 of the I.T. Act to the assessee. As the aforesaid issue requires examination by the AO as it is not clear whether they have examined this aspect while coming to the conclusion that the assessee has charged fees over and above the prescribed fee.- Decided in favour of assesse for statistical purposes.
Issues Involved:
1. Denial of exemption under Section 11 of the Income Tax Act. 2. Collection of capitation fee and its impact on exemption eligibility. 3. Examination of prescribed fee structure and regulatory authority. Issue-wise Detailed Analysis: 1. Denial of Exemption under Section 11 of the Income Tax Act: The core issue in the appeal is the denial of exemption under Section 11 of the Income Tax Act. The assessee, a non-profit educational institution managed by ICRISAT, claimed exemption under Section 11 but was denied by the Assessing Officer (AO). The AO's primary reason for denial was the alleged violation of terms and conditions stipulated by the Ministry of External Affairs (MEA) and the Department of Agricultural Research & Education (DARE). The AO observed that the assessee admitted students beyond the stipulated limit and not exclusively from the internationally recruited staff of ICRISAT, which was a condition for exemption. 2. Collection of Capitation Fee and Its Impact on Exemption Eligibility: The AO noted that the assessee collected a capital fee of Rs. 1.75 lakhs per student, amounting to Rs. 1,56,87,500 for the financial year 2010-11. The AO opined that this collection indicated a profit motive, disqualifying the institution from exemption under Section 11. The AO relied on the Supreme Court's judgments in the cases of Islamic Academy of Education & Another vs. State of Karnataka and T.M.A. Pai Foundation & Others vs. State of Karnataka, which held that institutions collecting money over and above the prescribed fee are not entitled to exemption under Section 11. 3. Examination of Prescribed Fee Structure and Regulatory Authority: The assessee contended that no fee was prescribed by any competent authority for their institution. They argued that the capital fee collected was part of the approved fee structure and not capitation fee. The assessee referred to the Andhra Pradesh Educational Institution Regulation of Admission and Prohibition of Capitation Fee Act, 1983, which defines capitation fee as any amount collected in excess of the prescribed fee. The assessee submitted that since their institution is affiliated with international bodies and not bound by Indian educational authorities, no fee was prescribed by any regulatory authority. The CIT (A) upheld the AO's decision, relying on ITAT decisions that denied exemption if donations or fees were collected over the prescribed amount. The CIT (A) sustained the disallowance of exemption under Section 11 based on the collection of capitation fee. Further Proceedings and Conclusion: The ITAT noted that the AO and CIT (A) did not thoroughly examine whether any fee was prescribed for the assessee institution. The ITAT observed that the assessee's contention regarding the absence of a prescribed fee required further examination. The ITAT remitted the matter back to the AO for fresh examination, directing the AO to consider the assertions made in the affidavit submitted by the assessee and other materials on record. The AO was instructed to decide the issue in accordance with the law after providing due opportunity to the assessee. Order: The appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded to the AO for fresh consideration. The order was pronounced in the open court on 8th May 2015.
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