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TMI Blog2021 (10) TMI 297X X X X Extracts X X X X X X X X Extracts X X X X ..... ot only illegal but also violative of the trust's object of providing education and aid to the poor and deserving students. 2. "Whether, on the facts and in circumstances of the case and in law the Ld.CIT(A) was right in not acknowledging the fact that the assessee trust is prohibited in law by accepting donations from students, even in the name of building fund, because the provisions of Prohibition of Capitation Fee Act (Government of Maharashtra) 1987 expressly prohibit levying any fee except the heads specified under clause 4(3) of the said act, no matter however small or large the quantum of the said donation is, or the fact that the donation was voluntary. 3. "The appellant prays that the order of the Commissioner of Income Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Off icer be restored." 4. "The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2. The brief facts of the case are that the assessee is a trust and is engaged in imparting education and runs an educational institution and was established as a public charitable trust in the year 1985. The assessee trust has filed the return of income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions) Mumbai has cancelled the registration granted to the assessee trust u/s 12A of the Act observe that the assessee is not eligible for exemption on the objects of the trust and expenditure made on account of addition to assets. Accordingly, the A.O. has computed the total income of the trust of Rs. 3,81,98,600/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 30.11.2015. 5. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). In the appellate proceedings the CIT(A) considered the grounds of appeal, findings of the scrutiny assessment and the submissions before the lower authorities and in the course of hearing proceedings. On the issue of validity of assessment u/s 147 of the Act, the CIT(A) observed that the assessment is in line with information received from the Pr. CIT(Exemptions) in respect of the cancellation of exemption u/s 12AA(3) of the Act dated 17.12.2014 and upheld the validity of assessment. Whereas in respect of the other grounds of appeal, where the A.O. has denied the exemption u/s 11 of the Act and assessed the total income of Rs. 3,81,98,600/- The CIT(A) has dealt on the findings in respect of building fund and the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns that the registration of the assessee trust had been cancelled by the Pr. CIT(E) and that the assessee was taking donations in violation of the Provision of Capital Fee Act. 8.3 Subsequently, vide written submissions dated 19.02.2020, the assessee submitted that its registration has been restored by the ITAT, Mumbai in ITA No. 1778/M/2015 & 2612/M/2016 dated 31.07.2019. The order of the ITAT has been perused. The ITAT has held that the sole reason given by the CIT(E) for cancellation of registration is that the assessee had collected 'Building Fund' from parents/students and has violated the Prohibition of Capital Fee Act. The ITAT noted that except for this, there is no iota of any evidence in the order of the CJT(E) that either the assessee has violated any of the provisions of section 11 & 13 of the Act or the objects of the trust are not charitable and its activities are not carried out in accordance with its objects. The ITAT held that the assessee has collected donations and the same are accounted in its books of account and have been applied for the objects of the trust. The ITAT held that the donations collected from the parent/students in the form of building ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts are similar to those in AY 2011-12 and the AO has simply denied the benefit of section 11 due to the rejection of registration to the assessee trust. The AO has also mentioned that by collecting donations under 'building fund' the assessee has violated the Prohibition of Capital Fee Act and the assessee has not produced any documentary evidence to show that the amount collected for 'building fund' is permissible under the Prohibition of Capital Fee Act. 8.6 It is seen that the Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987 was introduced to prohibit collection of capitation fee for admission of students to, and their promotion to a higher standard or class in, the educational institutions in the State of Maharashtra and to provide for matters connected therewith. 8.6.1 The Prohibition of Capitation Fee Act defines 'capitation fee' as any amount, by whatever name called, whether in cash or kind, in excess of the prescribed or, as the case may be, approved, rates of Fee regulated under section 4 of the concerned Act. As per section 4 of the Prohibition of capitation fee Act, the State Govt is declared competent to regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such donations, the management is prohibited from reserving any seat in any educational institution run by it in consideration of such donations. The moneys collected by way of donation are required to be used for the purpose for which they are collected. In the case of the present assessee, there is no al legation that the money collected by way of donation has been used to reserve seats for admission to any student. There is not allegation that funds are being misued or diverted or that the assessee is not imparting education or that the activities of the trust cannot be considered as genuine. 8.7 It is noted that the AO has denied the benefit of exemption to the assessee because the Pr. CIT(E) had cancelled its registration. Since the order of the Pr. CIT(E) cancelling the registration has since been set aside by the ITAT, there is no reason for denying the benefit of exemption u/s 11 of the Act to the assessee. This is in line with the decision of the jurisdictional High Court in the case of CIT (Exemptions), Pune vs. Bharati Vidyapeeth [2017] 86 taxmann.com 199 (Bombay) also. Accordingly, the grounds of appeal no. 3 & 4 are allowed. The AO is directed to grant the necessary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collected for the year under consideration is at Rs. 70,60,700/-. In most of the cases, the donations collected from parents/students are ranging from Rs. 1000 to Rs. 2000/-. The assessee filed necessary evidences to prove that the donations collected are accounted in the books of accounts and also same has been applied for objects of the trust. The assessee has also filed evidences to prove that the amount of fee collected from students including donations being 'Building Fund' is within the prescribed limit fixed by the competent authority for collection of fees for particular courses. All these facts are not disputed by Ld. CIT(E). The Ld. CIT(E) is only on the point of violation of Prohibition of Capitation Fee Act (Government of Maharashtra), 1987. We have gone through provisions of the Maharashtra Educational Institution, Prohibition of Capitation Fee Act (Government of Maharashtra), 1987 and rules and regulation. As per section 5 of the Principle Act, any trust or institution is authorised to collect voluntary donations from any benevolent persons for the purpose of development of trust/institution, but such donations shall not be collected in pursuance of admission to a cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Karnataka High Court in the case of CIT vs. Garden City Education Trust 28 DTR 139 (Kar.) held that where there is no dispute in respect of the objects of the trust, that of imparting of education and also when there is no dispute regarding the fact that the trust is actually imparting education and not carrying on any other activities, the trust is eligible for getting registration under section12A, as a charitable institution and the question regarding application of funds and allowability of benefit of exemption under section 11 & 12 are matters which are to be examined by the Assessing Off icer at the time of assessment and not by registering authority. 8. Coming to the case laws relied upon by the Ld. D.R. The Ld. D.R. relied upon the decision of Hon'ble Bombay High Court in the case of Sinhagad Technical Education Society vs. CIT (Central) 249 CTR 45. We find that the issue before the Hon'ble Bombay High Court was that after amendment to section12AA of the IT Act, 1961, whether Commissioner was empowered to cancel registration of a trust which has been obtained at any time under section 12A of the Act. No doubt, after amendment to section 12AA(3) the Commissioner i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 987 by collecting building fund from parents/students in connection with admission in schools/colleges run by the trust. Except this, no other reasons have been brought on record to deny the benefit of exemption claimed under section 11 of the Income Tax Act, 1961. We find that the Tribunal has restored registration granted under section 12A to the assessee from the date of registration for the detailed reasons recorded in its order in ITA No.1778/M/2015. Therefore, once registration granted under section 12A is available to the assessee from the date of registration including for the impugned assessment year, then the AO was incorrect in denying the exemption under section 11 of the Income Tax Act, 1961. Therefore, we direct the AO to allow the benefit of exemption claimed under section 11, in respect of income derived from property held under trust subject to other provisions of the IT Act, which is applicable to the assessee. Hence, we set aside the issue to the file of the AO and direct him to assess the income of the assessee under the provisions of section 11 of the Income Tax Act, 1961. 11. In the result, the appeal filed by the assessee is allowed. 10. The Ld.DR could no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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