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TMI Blog2015 (1) TMI 1293X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Trust. The said loan is also raised to carry out the objects of the Trust. As pointed out by the Tribunal, there is not even an iota of evidence in regard to mal application of the funds. Merely because the assessee has collected huge amounts by way of developmental charges, the Trust does not cease to be a charitable Trust and the activities carried on by the Trust would not transform itself into a commercial activity. Therefore the Tribunal was justified in upholding the order of the First Appellate Authority and dismissing the appeal preferred by the Revenue. In that view of the matter, the substantial questions of law which are framed in these appeals, are answered in favour of the assessee and against the Revenue. - I.T.A. NO. 73 OF 2009 & I.T.A. NO. 74 OF 2009 - - - Dated:- 20-1-2015 - MR. N. KUMAR AND MR. B. VEERAPPA, JJ APPELLANT BY SRI. K.V.ARAVIND, ADV. RESPONDENT BY SRI. S.PARTHASARATHI, V.K.GURUNATHAN AND JEVITHA CHATARJEE, ADVS. JUDGMENT N. KUMAR J. The Revenue has preferred these appeals against the order passed by the Tribunal, holding, though the assessee is receiving amounts in excess of the amount prescribed by the government by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he running of a charitable institute as per objects and did not involve in any commercial activity for making profits and therefore he held that the assessee-Trust is a charitable one and eligible to claim exemption under Section 11 of the Act. Therefore he directed the Assessing Authority to grant exemption under Section 11 of the Act. 3. Aggrieved by the said order, the Revenue preferred an appeal to the Tribunal. The Tribunal, on re-appreciation of the evidence on record, held the fact that the assessee was collecting developmental fee during the year under consideration, is not in dispute, but this factum alone, is not enough to deny the exemption claimed by the assessee under Section 11 of the Act. The claim of the assessee that the entire funds have been applied and all have been properly accounted for in the books of account, is not denied by the Revenue. From the balance sheet, it is seen that all the moneys collected, have been applied for acquiring assets in the hands of the Trust and there is loan to the extent of ₹ 3,01,75,330/- as on 31/3/2001. This is indicative of the fact that the assessee-Trust had not only applied all the moneys collected, for the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ines can be termed as charitable institution contrary to judgment of Apex Court in AIR 1992 SC 1456? 5. The learned counsel for the Revenue, assailing the impugned order contended, it is not in dispute from the material on record that the assessee has collected from the students, amounts in excess of what is prescribed by the government under the notification. Such collection of excess amount is prohibited under the provisions of the Karnataka Educational Institutions (Prohibition of Capitation Fees) Act, 1984. Having regard to the quantum of amount collected, it only shows the assessee is running the institution as a commercial venture and is making huge profits. Therefore it ceases to be a charitable institution. As such, the assessee is not entitled to the benefit of Section 11 of the Act. 6. Per contra, learned counsel appearing for the assessee submitted, whatever amount is collected by the assessee, is accounted for in their books of accounts and is spent for the purpose of the Trust. In fact the entire amount is spent towards the purpose of the Trust and therefore he submits, the Appellate Authorities were justified in granting the benefit under Section 11 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rivate gain by the setting up of the institution. If the gain derived by running the institution continues to be impressed with the trust which is a charitable trust, then it is immaterial whether the institution is run as a commercial institution or not, but if in the running of the institution profits are made and the profit goes to any private individual or if the institution is intended for any private gain, then undoubtedly the running of the institution could not be considered as being run for a charitable object. This was the judgment rendered under the earlier Act under Section 4(3)(i)/(ia) of the Income Tax Act, 1922. In the present Act, under Section 11, the word used is the extent to which said income is applied to such purposes in India, then the assessee would be entitled to the benefit of exemption . Therefore the test is, the application of the income of the Trust, is it for a personal gain or is it for the purpose of the Trust, that is the determining factor. The only essential factor to determine whether it is charity or not, would be, whether there is any private gain by the setting up of the institution. Therefore what is to be seen in such circumstances is, fir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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