THE HONOURABLE MR v. The Assistant Commissioner of Income TaxCircle II, Coimbatore

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 23.10.2007CORAM:THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANTax Case(Appeal) No.1307 of 2007M/s P.S.Govindasamy Naidu & Sons Charities, Peelamedu, Coimbatore... Appellant / RespondentversusThe Assistant Commissioner of Income TaxCircle II, Coimbatore. .. Respondent / RespondentTAX CASE APPEAL filed under Section 260 A of the Income Tax Act,1961 against the order of the Income Tax Appellate Tribunal, 'D'Bench, Chennai dated 21.10.2005 in ITA No.110/Mds/2002 as againstthe order of the Commissioner of Income Tax (Appeals) IICoimbatore in I.T. Appeal No.299C/98-99 dated 29.10.2001 andagainst the order of the Assistant Commissioner of Income Tax,Circle II, Coimbatore in PAN/GIR No.AT0002 dated 24.3.1998 for theassessment year 1995-96.For Appellant :Mr.C.V.Rajan for M/s Subbaraya Aiyar Padmanabhan J U D G M E N T (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J)The tax case filed at the instance of the assessee relating tothe assessment year 1995-96 seeks admission on the followingquestions of law:-"1. Whether the Appellate Tribunal wasright in law in holding that the Appellant Trustexisted only for the purpose of profit and notsolely for the educational purposes and hencenot entitled to exemption under Section 10(22)of the Act when the claim of exemption wasupheld by the Tribunal for the earlier years?2. Whether on the facts and circumstancesof the case the Appellate Tribunal was right inlaw in holding that the contribution receivedtowards corpus are not voluntary and hence formpart of taxable income?3. Whether on the facts and circumstancesof the case the Appellate Tribunal was right in https://hcservices.ecourts.gov.in/hcservices/ law in holding that the contribution received bythe Trust is not exempt under Sec.10(22) whenthe Trust has utilised the entire receipt forthe purpose of running educationalinstitutions?"2. The facts of the case culminated in the filing of thepresent appeal proceeds as follows:-The assessee is a Public Charitable Trust running severaleducational institutions. In respect of the assessment year 1995-96, the assessment under Section 143(3) was completed determiningthe total income at Rs.2,22,45,740/-. While considering theassessment, the Assessing Officer brought to tax the amountreceived from the students admitted to the College but creditedtowards the Corpus of the Trust under Section 2(24)(iia) of theIncome Tax Act, 1961, taking the view that these 'donations' werenot voluntary, but were received as capitation fee for admissioninto the College and consequently, the Assessing Officer rejectedthe plea for exemption under Section 10(22) of the Income Tax Act,1961. Aggrieved by the said order, the assessee preferred anappeal before the Commissioner of Income Tax (Appeals). By anorder dated 29.10.2001, the Commissioner of Income Tax (Appeals),however granted the relief, following the earlier orders passed inthe same assessee's case. The Revenue preferred appeal before theIncome Tax Appellate Tribunal. By an order dated 21.10.2005, theTribunal allowed the appeal of the Revenue holding that theassessee is not entitled to have the benefit of exemption underSection 10(22) of the Income Tax Act. The Tribunal held that thebasis of the orders passed in the earlier years and relied on bythe assessee, and the relief granted by the Commissioner of IncomeTax (Appeals) were distinguishable from the facts of the yearunder consideration and that each year had to be consideredseparately. In the course of considering the plea of theassessee, the Tribunal pointed out that in all the earlier years,there was no dispute regarding the nature of receipt as donations,but in the present case, the dispute was purely one as regardscapitation fees paid by the students at the time of admission. Insuch circumstances, the Tribunal held that the assessee was notentitled to have the benefit of the orders passed for the earlieryears granting the exemption. The Tribunal also found that thecontributions received by the assessee trust in the shape ofcapitation fees is not voluntary one and hence, cannot be calledas donation. 3. The learned counsel appearing for the assessee submittedthat for the purpose of considering the application of Section 10(22) of the Income Tax Act, 1961, the question of voluntarycharacter has no relevance at all, and as such, the Tribunalcommitted an erroneous interpretation as regards the provision ofSection 10(22) of the Income Tax Act, 1961, to deny the relief. 4. It is seen from the order of the Assessing Authority thaton an examination of a random number of parents who admitted thechildren into the college, it was found that the amount paid was https://hcservices.ecourts.gov.in/hcservices/ not to the Corpus donation account, but it was collected only byway of capitation fee. The assessee treated it on its own ascorpus donation and issued receipts as Corpus Donation andcredited it under the Corpus Donation account. The Assessingauthority rightly held that it is immaterial how the recipient,namely the assessee herein, accounted for the same and issuereceipts towards charitable purpose at the time of receipt of theincome. Admittedly, it was towards capitation fee. In suchcircumstances, the Assessing authority rightly rejected thecontention of the assessee that the contribution by the parentstowards capitation fee could not be characterised as voluntarypayment to be credited under the head "Corpus Donation". It isalso seen that the Assessing Authority referred to the decision ofthe Income Tax Appellate Tribunal, 'B' Bench, Bombay in a similarcircumstance, wherein it was held that the donation given formaterial gain for securing admission could not be characterised asdonation towards charitable purpose, and as such, the assessee isnot entitled to have the benefit. 5. A perusal of the Commissioner of Income Tax (Appeals) showsthat it merely applied the decision made in earlier years to grantthe relief and considered the payment as a voluntary contributionand hence exempted under Section 11(1)(d). However, going by thestatement recorded from the parents, rightly the Tribunal came tothe conclusion that these amounts were in fact paid only by way ofcapitation fee and not towards Corpus account of the Assessee Trust. In the absence of any material to disturb this fact, we donot find any merit in the submission made by the learned counselfor the assessee that the provisions namely Section 10(22) of theIncome Tax Act, 1961, really call for an interpretation beforethis Court. In the face of an admitted fact that the amount waspaid only towards capitation fee, we find no justification toaccept the plea of the assessee that the matter has to be admittedon the question of interpretation. 6. In the course of argument, the learned counsel for theassessee relied on the decision of the Andhra Pradesh High Courtin the case of Governing Body of Rangaraya Medical College vs.Income Tax Officer, A.Ward, Circle I, Kakinada reported in 117 ITR285, wherein the case of the assessee was allowed on the simpleground that the High Court found that the Income Tax Officer hasnot recorded any finding, nor was it suggested in the counter thatany surplus arising from the operations of the institutions isdistributed by way of profit to any individuals. It must be notedthat the nature of quality of the receipt has to be adjudged as atthe time of receipt. The subsequent act of the assessee to enterthe same under some head on receipt cannot alter the quality ofthe receipt.7. Having regard to the fact that the amount that had beenreceived was under capitation fee, it could not be characterisedas donation. Since it does not involve any interpretation asregards Section 10(22) of the Income Tax Act, 1961, we do not find https://hcservices.ecourts.gov.in/hcservices/ any justification to admit this case. In such circumstances, theTax Case Appeal is rejected at the admission stage itself and isaccordingly dismissed.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.rg/ksvTo:1. The Assistant RegistrarIncome tax Appellate TribunalRajaji Bhavan, III Floor,Besant Nagar, Chennai.2. The Commissioner of Income Tax,(Appeals) II, Coimbatore3. The Assistant Commissioner of Income TaxCircle IICoimbatoreT.C(A)No.1307 of 2007 PVR (CO)kk 28/11