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TMI Blog2022 (11) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee shall be taxable subject to such exemption which may be claimed u/s 11 of the Act. In the instant case, it is not in dispute that the entire amount received as 'contribution' has been shown in the Income and Expenditure account. The denial of benefit u/s 11 of the Act is on the premise that the donations received are not voluntary in nature. AO under the Income Tax Act cannot deny the exemption u/s 11 on the assumption that there is violation of any other statutory provision. He also adverted to Section 12(AA) (4) (b) and contended that the said provision has been substituted with effect from 01.09.2019, giving power to the Principal Commissioner or the Commissioner of Income Tax to cancel the registration of a trust or institution. Thus, it is clear that should there be any violation with regard to receipt of capitation fee, the AO could not have denied the benefit under Section 11 of the Act so long as the certificate is in force. - Decided in favour of the assessee. - HON'BLE MR. JUSTICE P.S. DINESH KUMAR AND HON BLE MR. JUSTICE UMESH M. ADIGA APPELLANT (BY SRI. V. CHANDRASHEKAR, ADVOCATE FOR M. LAVA, ADVOCATE) RESPONDENT (BY SRI. E.I. SAN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Trust for charitable or religious purposes, (not being contributions made with a specific direction that they shall form part of the corpus of the Trust or institution) shall, for the purpose of Section 11 of the Act must be construed as income. He further submitted that if contributions are received with a specific direction for a particular purpose, the same shall be treated as capital receipt and the other income shall be shown in the Income and Expenditure account; and that the question whether the contributions were made voluntary or involuntary was considered by the Madras High Court in the case of Commissioner Of Income-Tax, Central-III, Chennai -Vs- Balaji Educational Charitable Public Trust [2015] 56 TAXMANN.COM 182 (PARA 4.8 AND 4.9) and the Madras High Court has held that so long as the contribution received are brought to tax, it makes no difference as to whether it is voluntary or involuntary. 6. He further submitted that the reasons recorded by the tribunal is that the money received by the trust are in the form of capitation fees and on this premise, exemption under Section 11 of the Act has been denied. 7. In substance Shri. Chandrashekar's, argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations received are not voluntary in nature. This precise question was considered by Madras High Court in BALAJI EDUCATION CASE (supra) and it is held as follows: 4.7. The question, as has been posed by the Tribunal, is whether the contributions or donations are voluntary or involuntary and what is the effect of such donation. The Tribunal was of the view that there is no concept of involuntary contributions and went on to hold that voluntary contributions should be treated as income under Section 12 of the Act and that corpus donations to be treated as capital receipt under Section 11(1)(d) of the Act and corpus donations are not generally in the nature of income. It further held that voluntary contributions are taxable only if not applied for charitable purposes. The emphasis is on, not applying the same for charitable purposes. 4.8. Whether contribution is voluntary or involuntary and its implication in relation to these provisions was considered by the Tribunal in the following manner: 35. To proceed further, we have to examine the (30) scheme of law of charities provided under the Income-tax Act, 1961. There is no concept of involuntary contributions in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se that the assessee had in this case not utilized the donations or income for charitable purpose. The clear finding of the Tribunal is that if the assessee had not utilized the amount for charitable purpose, it would automatically become taxable and the assessee would not be entitled to exemption. But, on the contrary, without there being a finding of violation of Section 13 of the Act, an inference is drawn on an alleged receipt of donation and consequently, the allegation is made that there is a violation of Section 13(1)(d) of the Act. A hypothetical finding is given that because capitation fee is charged, it is not an income in terms of Section 11 of the Act and, therefore, there is a violation of Section 13(1)(d) of the Act. The Tribunal held that such a reasoning cannot be accepted because if the donations are offered for income and if the department wants to disprove the nature of income on the basis of material, as has been pointed (33) out by the Commissioner of Income Tax (Appeals), it should be borne out by records based on investigation, which the Assessing Officer failed to do, except falling back on a statement which is not supported by materials . 14. We are in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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