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TMI Blog2021 (8) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 12AA of the Income-tax Act, 1961 (in short 'the Act') by the competent authority vide order dated 16/12/2005. During the scrutiny proceedings, the Assessing Officer observed that various fees charged to students by the medical colleges are fixed by the state level fixation committees, whereas the assessee has charged fees in excess, which was calculated by the Assessing Officer as under: Course Name Fees collected per student (a) No of students (b) Total Fees (a*b) Fees to be collected per student (c) Total Fees to be collected (c*b) Excess fees collected (a-c)*b MBBS 1 year 600000 99 59400000 407000 40293000 19107000 11 year 650000 100 65000000 407000 40700000 24300000 III year 715000 100 71500000 407000 40700000 30800000 BAMS 1 year 75000 50 3750000 15000 750000 3000000 II year 75000 50 3750000 15000 750000 ' 3000000 111 year 150000 50 7500000 15000 750000 6750000 IV year 150000 50 7500000 15000 750000 6750000 V year 200000 50 10000000 15000 750000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Utilised (E ) 28,59,66,154.00 Short Utilisation (1)- E) 0.00 (F) Total Taxable Under MMR (no set to be allowed)= (A)+(F) 10,32,13,500.00 2.4 The Ld. CIT(A) after considering detailed submission of the assessee, deleted the addition mainly on the ground that there was no violation of section 11, 12 and 13 of the Act and Assessing Officer is concerned with the application of the income only. The relevant finding of the leaned CIT(A) has reproduced as under: "In the assessment order, the AO has alleged that the appellant society has charged fees in excess of the fees fixed by the fixation committee. However, the appellant has explained that the order of the fee fixation committee dated 14.09.2011 is an interim order which is applicable only for the academic year 2011-12 and is irrelevant for the year under consideration. It has been contended that for the relevant year no fee fixation order was issued also it has been submitted that the fee fixation order referred by the AO for computing excess fee for BAMS course is applicable only to Government Colleges and is not relevant for the college being run by the appellant society. Further, it has been explained that the fee fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as fixed by the Fee fixation committee for the academic year relevant to the assessment year 2014-15. 4. Before us, the learned DR relied on the order of the Assessing Officer and submitted that in view of the capitation fee received, the assessee was engaged in the business and not charity. The learned DR also relied on the decisions cited by the Assessing Officer. 5. On the contrary, the learned counsel of the assessee relied on the order of the Ld. CIT(A) and decision of the Hon'ble Supreme Court in the case of Queens Education Society (2015) 55 taxmann.com 255. 6. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the society is registered under section 12AA of the Act by the Competent Authority for charitable activity of "education" and said registration is in operation during the financial year relevant to the assessment year under consideration. In terms of section 2(15) of the Act, the activity of "education" has been included in charitable activity. We find that the learned Assessing Officer has alleged the assessee of collecting capitation fee, however, no order or finding of any regulatory au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the state. It held that commercialization of eduction was not permissible, and "was opposed to public policy and Indian tradition and therefore charging capitation fee was illegal." With regard to private aided recognized/affiliated educational institutions, the Court upheld the power of the government to frame rules and regulations in matter of admission and fees, as well as in matters such a recruitment and conditions of service of teachers and staff. Though a question was raised as to whether the setting up of an educational institution could be regarded as a business, profession or vocation under Article 19(1)(g), this question was not answered. Jeevan Reddy, J., however, at page 751, para 197, observed as follows:- ".....While we do not wish to express any opinion on the question whether the right to establish an educational institution can be said to be carrying on any "occupation" within the meaning of Article 19(1)(g), - perhaps, it is -- we are certainly of the opinion that such activity can neither be a trade or business nor can it be a profession within the meaning of Article 19(1)(g). Trade or business normally connotes an activity carried on with a profit motive. Ed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay the fee prescribed therefore, and the allotment of students against payment seats should be done on the basis of inter se merit determined on the same basis as in the case of free seats (c) that there should be no quota reserved for the management or for any family, caste or community, which may have established such a college (d) that it should be open to the professional college to provide for reservation of sets for constitutionally permissible classes with the approval of the affiliating university (e) that the fee chargeable in each professional college should be subject to such a ceiling as may be prescribed by the appropriate authority or by a competent court (f) that every state government should constitute a committee to fix the ceiling on the fees chargeable by a professional college or class of professional colleges, as the case may be. This committee should, after hearing the professional colleges, fix the fee once every three years or at such longer intervals, as it may think appropriate(g) that it would be appropriate for the University Grants Commission to frame regulators under its Act regulating the fees that the affiliated colleges operating on a no grant-in-ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rference. 32. It has been submitted by the learned counsel for the parties that the implementation of the scheme by the States, which have amended their rules and regulations, has shown a number of anomalies. As already noticed, 50% of the seats are to be given on the basis of merit determined after the conduct of a common entrance test, the rate of fee being minimal. The "payment seats" which represent the balance number, therefore, cross- subsidize the "free seats". The experience of the educational institutions has been that students who come from private schools, and who belong to more affluent families, are able to secure higher positions in the merit list of the common entrance test, and are thus able to seek admission to the "free seats". Paradoxically, it is the students who come from less affluent families, who are normally able to secure, on the basis of the merit list prepared after the common entrance test, only "payment seats". 33. It was contended by petitioned counsel that the implementation of the Unni Krishnan scheme has in fact (1) helped the privileged from richer urban families, even after they ceased to be comparatively meritorious, and (2) resulted in econ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised thorny issues. In its anxiety to check the commercialization of education, a scheme of "free" and "payment" seats was evolved on the assumption that the economic capacity of first 50% of admitted students would be greater than the remaining 50%, whereas the converse has proved to be the reality. In this scheme, the "payment seat" student would not only pay for his own seat, but also finance the cost of a "free seat" classmate. When one considers the Constitution Bench's earlier statement that higher education is not a fundamental right, it seems unreasonable to compel a citizen to pay for the education of another, more so in the unrealistic world of competitive examinations which assess the merit for the purpose of admission solely on the basis of the marks obtained, where the urban students always have an edge over the rural students. In practice, it has been the case of the marginally less merited rural or poor student bearing the burden of a rich and well-exposed urban student. 38. The scheme in Unni Krishnan's case has the effect of nationalizing education in respect of important features, viz., the right of a private unaided institution to give admission and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nan scheme. Apart from the decision in St. Stephen's College v. University of Delhi, which recognized and upheld the right of a minority aided institution to have a rational admission procedure of its own, earlier Constitution Bench decision of this Court have, in effect, upheld such a right of an institution devising a rational manner of selecting and admitting students. 42. In R. Chitralekha and Anr. v. State of Mysore and Ors., while considering the validity of a viva-voce test for admission to a government medical college, it was observed at page 380 that colleges run by the government, having regard to financial commitments and other relevant considerations, would only admit a specific number of students. It had devised a method for screening the applicants for admission. While upholding the order so issued, it was observed that "once it is conceded, and it is not disputed before us, that the State Government can run medical and engineering colleges, it cannot be denied the power to admit such qualified students as pass the reasonable tests laid down by it. This is a power which every private owner of a College will have, and the Government which runs its own Colleges ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fee structure but the same can be regulated in the interest of preventing profiteering. No capitation fee can be charged. Leverage was allowed to educational institutions to generate reasonable surplus to meet cost of expansion and augmentation of facilities which would not amount to profiteering. The Court upheld the two Committees for monitoring admission procedure and determining fee structure as held in Islamic Academy was permissible as regulatory measures aimed at protecting the interest of the student community as a whole as also the minorities 6.2 Before the learned CIT(A), the assessee has submitted that pursuant to Supreme Court decision's mentioned above, the State Government of Uttar Pradesh enacted the Uttar Pradesh Private Professional Educational Institution (Regulation of Admission and Fixation of Fees) Act, 2006 and fee fixation commit was constituted on 27.06.2008. As regard to fees, the assessee submitted before the ld. CIT(A) as under: "13. Pursuant to Supreme Court/Govt. of U.P. order, the committee fixed provisional fee for Academic Year 2011-12 at Rs. 4.07 lacs vide G.O. no. 3392/71-2-11-W- 64/2007 dated 14.09.2011. Committee also decided to fix final fee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1500/-. Thus the assessee has not charged any excess fee than fixed by the authorities. Ld. AO has taken the fee fixed at Rs. 28000/- as per own imagination. The copy of letter of U.P. State Medical Faculty is enclosed and Marked as ANNEXURE-G. In view of the discussion and facts stated above it is very clear that no fee has been fixed by the Govt, or and other Competent Authority for MBBS and BAMS courses run by the assessee, for the academic session 2013-14 (relevant to A.Y. 2014-15). 19. That with regards to question no 2 as to whether assessee has charged fee in excess of fee fixed by the Fee Fixation Authority, the question has no relevancy for MBBS and BAMS courses because, as discussed in para 18 above, no fee has been fixed by the Authority for F.Y. 2013-14 (relevant to A.Y. 2014-15) for these courses, hence there is no question of charging/collecting fee in excess of fee fixed. As regards paramedical courses the assessee has charged the fee as permitted by Uttar Pradesh State Medical Faculty and no excess fee has been charged." 6.3 On perusal of submission of the assessee, it is clear that only extra fee of Rs. 1,500/- was charged and that too was for examination ..... X X X X Extracts X X X X X X X X Extracts X X X X
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