2012 (12) TMI 627 - AT - Income Tax

Development fees and Corpus fund - Whether a part of the admission fees - Held that - It was part of the admission fee and needed no separate treatment. Hence it is added to the income expenditure statement as income. The development fees received later on was from students was to be identified by the assessee over and above the corpus funds when the students were made aware that they are contributing the amount apart from development fees, tuition fees, bus fees and other annual charges. The assessee has submitted that the development fees was received to contribute to the building when the committee seeking such funds made it voluntary was therefore directly held as a liability to identify with the general fund when the major portion was from the students and the remaining was contributed by the managing committee - in favour of assessee. Corpus fund whether Gift of land made by the Mg. trustee to the trust itself would not be assessable as unexplained investment - Corpus fund is the property of the Trust. The donors contributed the donations therefore could not form part of the income & expenditure account as prescribed by law. Assessing Officer misdirected himself to hold a view that Vidya Jyoti Trust was not the school which was seeking corpus funds or voluntary contribution in the form of building or general fund when all the property of the Trust has been created for the purpose it was registered u/s.12AA. Therefore, the contention of the CIT-DR is on the effort to identify the trust Vidya Jyoti Trust as different from the educational institution it runs for which purpose the CIT granted registration. The assessee has stated that the two donors corrected themselves to submit that it was school to which they applied for the corpus fund therefore negates the CIT(A) finding that the amounts be confirmed u/s.68, was declared as fund by the Trust who runs the School - Cross objection by the assessee-Respondent is bound to be allowed and appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Justification of development fees collected from students being part of admission fees.
2. Assessment of the gift of land made by the managing trustee to the trust as unexplained investment.
3. Justification of the disallowance of Rs. 37,000 out of Rs. 52,00,000 made towards addition of donation to the corpus fund under Section 68 of the I.T. Act.

Detailed Analysis:

1. Development Fees as Part of Admission Fees:
The Revenue questioned whether the development fees collected from students, amounting to Rs. 15,06,000, should be considered part of the admission fees. The Assessing Officer (AO) noted that this amount was not reflected in the income-expenditure statement. The assessee argued that the development fees were collected at the time of admission as part of the fee structure and did not require separate treatment. The CIT(A) found no evidence from the AO to support the addition of Rs. 15,06,000 and deleted this addition, referencing a similar case where such fees were not considered unexplained investment.

2. Gift of Land by Managing Trustee:
The AO added the value of the land gifted by the managing trustee, worth Rs. 3,38,400, to the income-expenditure account, arguing that the gift deed did not specify that the land was intended to be part of the corpus fund. The CIT(A) deleted this addition, citing a precedent where the value of land received as a gift by a trust registered under Section 12A was not assessed as unexplained investment.

3. Disallowance of Donation to Corpus Fund:
The AO questioned the genuineness of donations totaling Rs. 52,00,000 to the corpus fund, citing two donors who denied making contributions. The AO treated the entire amount as cash credit under Section 68 of the I.T. Act, arguing that it could not be exempted under Section 11. The CIT(A) restricted the addition to Rs. 37,000 based on affidavits from the two donors, which were not filed before the AO and contained bare assertions without supporting material. The CIT(A) directed the AO to restrict the addition to Rs. 37,000 contributed by the two donors.

Cross-Objection by Assessee:
The assessee filed a cross-objection disputing the confirmation of the disallowance of Rs. 37,000, arguing that affidavits endorsing the donations were furnished, and the addition should be deleted. The Tribunal found merit in the assessee's contention, noting that the corpus fund is the property of the trust and should not form part of the income-expenditure account. The development fees received from students were part of the general fund and were utilized for building purposes, falling within the parameters of Sections 11 and 13 of the I.T. Act.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to delete the additions of Rs. 15,06,000 and Rs. 3,38,400, and found no infirmity in the findings regarding the corpus fund. The cross-objection by the assessee was allowed, and the appeal by the Revenue was dismissed.