2014 (1) TMI 437 - AT - Income Tax

Exemption u/s 10(23C) Held that - If donations are received compulsorily for the admission of students, by whatever name it may be called, i.e. donation, building fund, auditorium fund, etc. over and above the prescribed fee, from the students, the assessee would not be entitled for exemption either under S.10(23C) or under S.11 Following T.M.A. Pai Foundations and others Vs. State of Karnataka & Others 2002 (10) TMI 739 - SUPREME COURT - The institution which are collecting capitation fees for admission of students over and above the fees prescribed cannot be construed as charitable/education institution Since the Revenue authorities have not examined the collection of capitation fees in this case for both the years The matter was restored for re-examination of the fact whether the assessee is collecting the capitation fees from students or not.

Summary

Issues:
- Eligibility for claim of exemption under section 11 without approval under sub-clause (vi) to Section 10(23C)
- Interpretation of approval under sub-clause (vi) to Section 10(23C) distinct from registration under Section 12A
- Rejection of assessee's claim for exemption under Section 11 for assessment year 2009-10
- Collection of capitation fees for admission of students affecting eligibility for exemption under Section 11 and 10(23C)

Analysis:
The appeal by the Revenue challenged the order of the Commissioner of Income-tax (Appeals) IV, Hyderabad, regarding the eligibility of the assessee for exemption under Section 11 for the assessment year 2009-10. The Revenue contended that the approval under sub-clause (vi) to Section 10(23C) was necessary for claiming exemption, distinct from registration under Section 12A. The assessing officer had denied the exemption based on the lack of approval under Section 10(23C)(iv) of the Act. However, the CIT(A) allowed the exemption under Section 11, citing Tribunal decisions in similar matters.

The key issue revolved around the denial of the assessee's claim for income exemption. The Tribunal referred to previous judgments, including the Hyderabad Bench 'A' decisions and the Supreme Court cases of T.M.A. Pai Foundations and Islamic Academy of Education, emphasizing that collection of capitation fees for student admission impacted charitable status. The Tribunal directed the assessing officer to reexamine whether the assessee collected capitation fees, emphasizing compliance with the Supreme Court judgments. It was clarified that any collection beyond prescribed fees for student admission would disqualify the assessee from exemptions under Section 11 or 10(23C).

In conclusion, the Tribunal allowed the Revenue's appeal for statistical purposes, highlighting the importance of assessing capitation fee collections for determining eligibility for tax exemptions. The decision underscored the need for adherence to legal provisions and Supreme Court precedents in evaluating claims for income exemptions under relevant sections of the Income Tax Act.