2024 (7) TMI 789 - HC - Income Tax

Benefit of exemption u/s 11 (1) (d) - trust received donation collected from students as corpus donation - AO treated donation as capitation fee - HELD THAT - The amount paid by the parents of the students admitted to the education institution run by the appellant is required to be held as a payment towards corpus donation and same was not collected by way of capitation fee. As observed by this Court while considering such issue 2018 (10) TMI 377 - GUJARAT HIGH COURT , the Assessing Authority has not taken any inquiry with regard to examination of parents who admitted the students in School as to whether the payment is made towards corpus fund or capitation fee. It is true that the donation is bound to have been given for material gain in securing admission, the same cannot be characterised as donation towards charitable purpose and the appellant would not be entitled to have the benefit but in the facts of the case, in absence of any material on record, such view cannot be taken in the circumstances, the Tribunal has committed an error by treating the admission fee charged from the students as not forming part of the corpus of the Trust. Therefore, this appeal is also allowed. Decided in favour of the assessee and against the revenue.

Issues Involved:
1. Whether the Tribunal was justified in confirming the addition of Rs. 5,00,60,184/- to the income of the assessee by holding that it cannot be treated as a corpus donation and is not eligible for exemption under Section 11(1)(d) of the Income Tax Act, 1961.
2. Whether the Tribunal was right in reversing the order passed by the CIT(A) without specially adverting to the findings of the said first appellate authority.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal's Decision on Corpus Donation:
The primary issue revolves around whether the sum of Rs. 5,00,60,184/- received by the assessee, a charitable trust, can be treated as a corpus donation eligible for exemption under Section 11(1)(d) of the Income Tax Act, 1961. The assessee argued that this amount was collected as corpus donations from students and should be exempt. However, the Assessing Officer (AO) and subsequently the Tribunal held that the amount was not a voluntary contribution with a specific direction to be treated as corpus donation. The AO observed that the receipts issued to students for the payment of one-time admission fees indicated that the amount was for admission and not a voluntary donation. Consequently, the AO added the amount to the total income of the assessee.

The CIT(A), however, deleted the addition, relying on previous Tribunal decisions in favor of the assessee for similar issues in earlier assessment years. The CIT(A) observed that the contributions towards different corpus funds were in the nature of corpus funds and exempt under Section 12 of the Act. The Tribunal, on appeal by the Revenue, reversed this decision, stating that the admission fee did not qualify as a voluntary donation nor was there a specific direction for it to be used solely for the corpus of the Trust.

2. Tribunal's Reversal of CIT(A)'s Order:
The Tribunal's reversal of the CIT(A)'s order was contested by the assessee on the grounds that the Tribunal did not provide specific reasons for disagreeing with the CIT(A)'s findings. The CIT(A) had followed the Tribunal's own decisions in earlier years, which had become final and were upheld by the High Court. The assessee argued that the Tribunal failed to differentiate the facts of the current assessment year from those of the earlier years and did not consider the unchanged accounting system. Additionally, the Tribunal did not conduct a detailed inquiry or peruse the necessary documents to determine the nature of the contributions.

High Court's Analysis and Judgment:
The High Court, after hearing the arguments and reviewing the materials on record, concluded that the issue was no longer res-integra in light of its earlier decision in Tax Appeal No. 356 of 2012. In that case, the Court had held that the amounts paid by parents were towards the corpus donation account and not capitation fees. The Court emphasized that if the Revenue believed the amounts were capitation fees, a detailed inquiry should have been conducted, including oral examinations of parents. The absence of such material led the Court to uphold the CIT(A)'s decision.

The High Court noted that the Tribunal did not consider the decision of the Co-ordinate Bench in similar facts and failed to provide a meaningful inquiry. The Court reiterated that education should remain a charitable activity and collecting fees beyond the prescribed amount would amount to capitation fees, which are not exempt. However, in this case, there was no evidence to suggest that the donations were for material gain in securing admission.

Therefore, the High Court allowed the appeal, holding that the amount paid by parents was towards the corpus donation and not capitation fees. The substantial questions of law were answered in favor of the assessee and against the Revenue. The Tribunal's order was set aside, and the CIT(A)'s order was restored.

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