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TMI Blog2017 (4) TMI 1605X X X X Extracts X X X X X X X X Extracts X X X X ..... out examining the correct source of actual donation had come to the conclusion that there were quid-pro-quo arrangements for the payment of donation only based on certain presumptions and assumptions and not based on well ascertained facts. Though it may appear from the circumstance of the case that there may be quit-pro-quo arrangement for receipt of donation, unless it is established by cogent evidence drastic decision cannot be arrived at by withdrawing the benefit of Section 11 of the Act to all the charitable trusts which will jeopardize the functioning and the very existence of the charitable educational institutions. There is no finding with respect to any violation of Section 13 of the Act, because the donations received by the respective charitable trusts are spent according to the objects of the trusts. It is also apparent that this bench of the Tribunal [ 2014 (6) TMI 1068 - ITAT CHENNAI] for the assessment year 2010-11 and [ 2013 (8) TMI 1166 - ITAT CHENNAI] for the assessment year 2008-09 in the case of M/s. MAC Public Charitable Trust had held that the benefit of Section 11 12 of the Act cannot be denied to the assessee for extending loan to another connected/related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Ld. AO protectively for Rs.3,60,00,000/- on account of non-voluntary contribution / capitation fees by holding that there is no violation of the Act. 2.3 M/s. MAC Charities in ITA No.2887/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT(A) who had deleted the addition made by the Ld. AO protectively for Rs.10,65,00,000/- on account of nonvoluntary contribution / capitation fees by holding that there is no violation of the Act. 2.4 M/s. MAC (Educational) Foundation in ITA No. 2886/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Revenue is aggrieved by the order of the Ld. CIT(A) who had deleted the addition made by the Ld. AO protectively for Rs.10,00,000/- on account of nonvoluntary contribution / capitation fees by holding that there is no violation of the Act. 2.5 M/s. Sri Venkateswara Educational & Health Trust in ITA No. 2889/Mds/2014 for the assessment year 2011-12:- The Revenue has raised several grounds in its appeal, however the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curing the admission of his cousin's son Master S. Deivanayagam in Sri Venkateswara College to pursue Bachelor of Engineering (Mechanical) course. He further stated that the amount paid as donation by him was received from his cousin. 3.2 Drawing inference from the above, the Ld. AO opined that persons who desire to admit their wards in Sri Venkateswara Engineering College were forced to pay donation to the assessee trust which amounts to capitation fee. The Ld. AO further analyzed the fund flow of all the assessees trust in the following manner:- 3.3 The assessee rebutted to the findings of the Ld. AO vide its letter dated 18.03.2014 as under:- "….b. The assessee trust has indeed collected donations from several individuals. The fact that the donations have been given to the assessee trust is not denied by these individuals. The donors have given letters to assessee trust that the donations are voluntary. The assessee trust is an independent trust and is in no way connected to the Sri Venkateswara College, which we are given to understand is a Telugu minority institution. The assessee trust is therefore in no position to secure admissions for the donors as alleged. More ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of tuition fees, campus recruitment, college transport etc the trust receives some donations from trusts with specific direction that these donations shall form part of the corpus. No donations have been collected from any student directly or indirectly by the assessee trust. As stated earlier even the fees collected from the students are as per stipulated norms. d. As regards the donations received from the MAC trust etc these are voluntary only, as is evidenced by their letters which have already been produced to your goodselves during assessments. The donor trusts have not stated that these are not voluntary donations. The donors are separate trusts with no common trustees. The assessee trusts have issued valid receipts for these donations, properly accounted for the same and the donors trusts are identifiable and separately assessed to tax. Therefore, if there are some issues regarding the source of funds for the donor trusts the same cannot be a ground for the corpus donation receipt to be considered as income. Section 12(1) provides that any voluntary contribution received by a trust with a specific direction that shall form part of the corpus is not deemed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee trust does not become involuntary. The assessee trust has been regularly receiving donations and has been applying the same for charitable purposes. In view of the above, it is prayed that the issues raised in the show cause notice may be dropped." 3.7 In the case of M/s. MAC Education Foundation, the Ld.AR submitted before the Ld.CIT(A) vide written submission dated 12.07.2014 as follows: 1. "No donations have been collected by the appellant trust from any of the students/parents of the college. 2. The donors to United Education Foundation are also not students/parents of Sri Venkateswara College. 3. If the donors of United Education Foundation had submitted that the donations were for securing seats the learned assessing officer ought to have examined the relevant student/parent before concluding that the statements of the donors were true. 4. The fact that the donors to the appellant trust were not students/parents were not considered by the AO. 5. The donor to the appellant trust has confirmed the donations. Merely because there were some issues in the source of some of the donations if cannot be concluded that the donations are not voluntary." 3.8 However the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... College of Engineering. iii. However, the same donors had responded earlier by stating that they had advanced voluntary donations. iv. Thus there were conflicting statements. v. The Ld. AO did not examine the source of the huge donation paid by the individual donors which shows that the Revenue was lenient on the donors for detecting undisclosed income if any. vi. Some of the donors who paid huge donations were not assessed to tax. vii. Some donors also stated that they were mear name lenders. viii. There were statements by the donors stating that the amount contributed by them as donations where in fact amount received from the parents of the wards who had been admitted in Sri Venkateswara College of Engineering. ix. If that being the case the source of such donations were not examined in the case of the parents of the wards. x. The manner in which coercive influence were administered for obtaining donation was also not established. xi. Donations were received by Sri Venkateswara Engineering College from different entities. xii. The trustees of all the assessee trust were different and therefore there is no link between the institutions. xiii. The decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charitable institution to receive donation from another charitable institution. b. There is also no prohibition in law for a charitable institution to give donation to another charitable institution. c. The donation given by the assessee trust is application of income and hence exempt u/s. 11 of the Act. d. The donation received and given by the assessee trust are voluntary in nature. e. The assessee trust is not connected with receipt of donation/capitation fee by any trust from anyone. f. The assessee trust is not connected with the admission of students to any Engineering College. While doing so the Ld. CIT(A) made the following observations:- i. Though Dr. A.C. Muthiah was the founder trustee of Sri Venkateswara Educational and Health Trust, he is not a trustee of the trust during the relevant assessment year. ii. The donation given by M/s. United Education Foundation to the assessee trust is without any coercion on the part of the assessee trust. iii. The Ld. AO did not bring any evidence to prove that the donation given by M/s. United Education Foundation to the assessee trust is due to undue influence or intimidation. iv. The allege collection of capitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligious". xi. Similar directions was also made in the instructions issued by the Ld. CBDT No.1132 dated 04.01.1978 clause XXIII/1/128. Based on the above observations and the conclusions, the Ld. CIT(A) held that the allegations of the Ld. AO such as "donation of Rs.3,60,00,000/- received by the assessee trust is nonvoluntary/capitation fees contribution by the donors" is devoid of merits and not tenable in the eye of law. Accordingly, the Ld. CIT(A) directed the Ld. AO to delete the addition of Rs.3,60,00,000/- made in the hands of the assessee as receipt of non-voluntary donations. 7. In the case of M/s. MAC Charities and M/s. MAC Educational Foundation also the Ld. CIT(A) arrived at the same conclusions and made the same observations as in the case of M/s. MAC Public Charitable Trust and accordingly directed the Ld. AO to accept the income return by the assessee trusts. 8. In the case of M/s. Venkateswara Educational and Health Trust, the Ld.CIT(A) also arrived at the same conclusion as in the case of the other trusts and further observed as follows: i. The assessee trust had received corpus donations from the other trusts amounting to Rs.9,90,00,000/- which is not prohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.AO, in most of the cases the relatives/parents of the students studying in M/s. Sri Venkateswara Educational & Health Trust have paid donations to connected/related charitable Trusts. From these facts and circumstances of the case it appears that the Ld.AO might have coerced to obtain the sworn statements from the donors in the manner convenient to the Revenue so as to drop further proceedings against the donors for examining their source of income with respect to the amount of donations made. Further it is not always possible for the relationship between the parents and students to be cordial with the management of the educational institutions. We do not find any other reason as to why the donors have changed their mind while giving the sworn statements when they had already stated otherwise in the written submission submitted before the Ld.AO on the earlier occasion. Thus reliance cannot be placed on the sworn statement given by the donors which is subsequent to their confirmation letter given on the earlier occasion that they had extended voluntary contribution to the charitable institutions unless some other material evidence proves otherwise. It is also pertinent to mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement for receipt of donation, unless it is established by cogent evidence drastic decision cannot be arrived at by withdrawing the benefit of Section 11 of the Act to all the charitable trusts which will jeopardize the functioning and the very existence of the charitable educational institutions. Moreover there is no finding with respect to any violation of Section 13 of the Act, because the donations received by the respective charitable trusts are spent according to the objects of the trusts. It is also apparent that this bench of the Tribunal in ITA No.627/Mds/2014 vide order dated 27.06.2014 for the assessment year 2010-11 and ITA No.1799/Mds/2012 vide order dated 29.08.2013 for the assessment year 2008-09 in the case of M/s. MAC Public Charitable Trust had held that the benefit of Section 11 & 12 of the Act cannot be denied to the assessee for extending loan to another connected/related charitable educational institution. Further the assessee trusts have issued valid receipts for the donations received and had maintained the names, address of the donors as per the provisions of the Act. The Ld.CIT(A) had also made a categorical finding that the assessee trust had not only ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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