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TMI Blog2022 (8) TMI 895X X X X Extracts X X X X X X X X Extracts X X X X ..... required for adjudication of the case are as under: * The institute was established in 1994 * The assessee is a trust registered u/s 12A of the Act * The development fund was claimed u/s 11(1)(d) * All assessments have been completed u/s 143(3) * A search & seizure action has been conducted on 31.10.2014 * The assessment has been completed on 30.12.2016 Treatment of Development Fund as Tuition Fees: 6. The assessee has been running various Educational Institutes in various fields such as medical, engineering, law, management etc. Annual fees, charges and Development funds are collected by the Institutions under the Trust. From the perusal of seized documents, it was observed by the AO that the appellant has received development fee in addition to tuition fee from all the students on compulsory basis. The AO held that Development fee was a part of fee structure which was to be paid by the students to the institutes. Thus, it was noted by the AO that such development fee was not voluntary in nature but was part of overall course fee to be paid by the students on compulsory basis along with tuition fee. The appellant has shown the tuition fee as a part of income and exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the students are made aware of the fact of payment of development fee through the prospectus, admission forms and fee slips, it cannot be said that it was compulsorily imposed on them. Further, such fees were utilized only for the specific purpose of the capital expenditure. Thus, the same were voluntary in the nature with the specific direction to treat the same as a part of the corpus and relied upon the provision of section 11 (1) (d) of the Act. 10. The ld. CIT(A) held that it is an undisputed fact that the assessee has received amount of Rs. XXXXX during the year from students who have taken admission in various institutes being run by the assessee as development fee, part of overall course fee. Such development fees have been taken directly to the balance sheet and have been treated by the assessee as voluntary funds received with the specific directions to treat the same as part of corpus as covered u/s 11 (1)(d) of the Act. The ld. CIT(A) held that these amounts are obligatory for each new admission to be paid to the assessee while taking the new admission, thus are not discretionary/voluntary in nature. These amounts have not been received by the assessee as a voluntary c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contents while the ld. DR supported the order of the ld. CIT(A) who affirmed the Assessment Order. 13. Heard the arguments of both the parties and perused the material available on record. 14. On the issue of "Development Fee", we have gone through the resolution dated 18.03.1997 of the Government of India (MHRD) which as per Clause (8) deemed to be instructions issued by the Government to the University Grants Commission under Sub-section (1) of Section 20 of the UGC Act, 1956 and under sub-Section (1) of Section 20 of the AICTE Act, 1987. The Ministry vide its notification No. FZO-43/96 has laid down the "Policy For Fee Fixation in Private Educational Institutions'' which is applicable to the assessee trust. There is a drastic distinction between the two fees has been clarified by the Ministry itself. As per the resolution, the difference could be examined which is analyzed as under: "6.6 Fee Determination: (a) Fee will have two broad categories - Tuition Fee and Development Fee. Besides, the management of the institutions may realize the actual cost of boarding & messing from the above students subject to the relevant Committee being satisfied about the reasonabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of capital assets. On the issue, whether the development fee is revenue in nature or capital in nature. Reliance is being placed on the orders of Coordinate Bench of Tribunal in the case of Global Institute of Technology vs. DCIT (Exemption) in ITA No. 1066/Jp/2018 dated 05.11.2018 wherein it was held as under: "Addition of development receipt/fee treating the same as revenue receipt - Held that:- The development fee received by the assessee from the students as per the guidelines fixing the fee structure by the State Government for the technical institutions and applying the other conditions as specified in the orders of the State Govt., is capital in nature and not revenue. Accordingly, we delete the addition made by the Assessing Officer on this account." 17. The Co-ordinate Bench of ITAT in the case of ACIT vs. JSS Mahavidyapeetha in ITA No. 735/Bang/2012 held the view that litmus test of charitable institution is the application of funds and not the colour of the contributions. It was held, "The AO based his conclusion on the presumption that the contribution to development fee was not a voluntary contribution the question whether the donations were voluntary or not beco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as corpus fund allowed to be taken as capital receipt. 24. With regard to issue of computation of 15% u/s 11(1)(a) of net surplus in place of gross receipt, we have gone through the provisions of the Act which are as under: "Section 11(1)(a) Income from property held for charitable or religious purposes. 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property;" 25. On going through the bare provisions of the Act, we hold that 15% accumulation is allowed on the income from property held under trust. 26. These provisions have been further clarified by the Hon'ble Supreme Court in the case of Addl. CIT Vs. A.L.N. Rao Charitable Trust 216 ITR 697 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (MP) : TC 23R.1341, CIT vs. C.M. Kothari Charitable Trust (1984) 149 ITR 573 (Mad) : TC 23R.1350 and CIT vs. Trustees of Bhat Family Research Foundation (1989) 75 CTR (Bom) 88 : (1990) 185 ITR 532 (Bom) : TC 23R. 1355 approved." 28. Similarly, the Hon'ble Supreme Court in the case of CIT vs. Programme for Community Organisation,248 ITR 1 held that gross receipts were Rs. 2,57,376/- and the assessee had applied Rs. 1,70,369/- for charitable purposes, thereby leaving balance of Rs. 87,010/-. The Court held under para 3 that Trust was eligible to accumulate 25% (now 15%) of Rs. 2,57,376/- u/s 11 (1)(a). 29. For brevity and ready reference, the entire order of the Hon'ble Apex court is reproduced hereunder: "The questions that were referred to the High Court for consideration, at the instance of the Revenue, read thus: "(1) Whether, on the facts and in the circumstances of the case and on an interpretation of the relevant provisions of the IT Act, the assessee is entitled to exemption at 25 per cent on Rs. 2,57,376 or only on Rs.87,010 ? (2) Whether, on the facts and in the circumstances of the case, should not the Tribunal have accepted the view of the Revenue expressed in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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