COMMISSIONER OF INCOME TAX V. M/S KHALSA RURAL HOSPITAL

ITA/33/2007

AI Insights

The case involves the Commissioner of Income Tax, Bathinda, as the appellant, and M/s Khalsa Rural Hospital & Nursing Training Institute, V & PO Nangal Kalan (Mansa), as the respondent. The core issue was the exemption claimed by the respondent under Section 10(22) of the Income Tax Act, 1961, and the revenue's challenge to the deletion of an addition of Rs. 40 lacs on account of alleged unaccounted capitation fees. The Assessing Officer initially disallowed the exemption and added the amount as income, which was contested by the respondent. The CIT (Appeals) and the Tribunal both found in favor of the respondent, leading to the revenue's appeal to the High Court.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 719858 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 04-02-2008
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: YOGESH PUTNEY
• Keywords: Capitation Fee; Charitable Activities; Educational purposes; Exemption; Income Tax
• Section: 143(3); 11; 12; 260A; 10(22)

Judgement Text

"ITA No.33 of 2007 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No.33 of 2007 Date of decision: 4.2.2008 Commissioner of Income tax, ......Appellant Bathinda Versus M/s Khalsa Rural Hospital & Nursing Training Institute, V & PO Nangal Kalan (Mansa) ......Respondent CORAM:- HON'BLE MR.JUSTICE SATISH KUMAR MITTAL HON'BLE MR.JUSTICE RAKESH KUMAR GARG * * * Present: Mr. Yogesh Putney, Advocate for the appellant-revenue. * * * Rakesh Kumar Garg, J . 1. This order shall dispose of ITA Nos.33 and 34 of 2007. 2. The revenue has filed these appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the 'Act') against the order dated 11.8.2006 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar in ITA Nos.418(ASR)2000 and 513(ASR)2001 in the case of respondent-assessee for the assessment year 1997-98 raising the following substantial questions of law:- “1. Whether on the facts and circumstances of the case the Ld. ITAT is right in law in confirming the order of the CIT(A) granting exemption u/s 10(22) of the Income-tax Act, 1961? 2. Whether on the facts and circumstances of the case the Ld. ITAT is right in law confirming the order of CIT (A) deleting the addition of Rs.40 lacs on account of unaccounted capitation fee? ITA No.33 of 2007 2 3. Whether on the facts and circumstances of the case, the Ld. ITAT is right in law confirming the order of CIT (A), in granting the exemption u/s 10(22) against the claim of assessee u/s 11 of the Income-tax Act, 1961? 4. Whether on the facts and circumstances of the case, the Ld. ITAT is right in law in recording a perverse finding that the assessee is carrying on charitable activities u/s 10(22) of the Income-tax Act, 1961?” 2. Brief facts giving rise to this appeal are as under:- The assessee runs M/s Khalsa Rural Hospital & Nursing Training Institute, V & PO Nangal Kalan (Mansa). During the course of assessment proceedings under Section 143(3) for the assessment year 1997-98, the Assessing Officer noticed that the assessee has claimed exemption under Section 11 of the Income Tax Act, 1961 on the income derived by the assessee. The Assessing Officer disallowed the benefit of Sections 11 and 12 of the Act to the assessee and made an addition of Rs.40 lacs on account of capitation fee not declared in the income of return. The Assessing Officer also rejected the books of accounts of the assessee and refuted the claim of the assessee that the same has been damaged in floods. 3. The Commissioner of Income Tax (Appeals), Bathinda vide his order dated 23.6.2000 allowed the appeal filed by the assessee and accepted the claim of the assessee that books of accounts were damaged in floods as per the evidence given by the assessee. The CIT(Appeals) also held that the entire income of the Trust including the alleged receipt of capitation fee stands exempted under the provisions of Section 10(22) of the Act as the trust is running solely for the educational purposes and not for profits. Regarding the addition on account of the capitation fee to the ITA No.33 of 2007 3 tune of Rs.40 lacs made by the Assessing Officer, CIT (Appeals) held that the same is not justified in view of the fact that no evidence has been brought on record in this regard. 4. Aggrieved against this order of the Commissioner of Income Tax (Appeals), Bathinda, the revenue filed an appeal before the Tribunal who vide its order dated 11.8.2006 affirmed the order of the Commissioner of Income Tax (Appeals), Bathinda observing that the assessee-trust exists solely for the educational purposes and its income has been utilised for the purpose of education only. The Tribunal also accepted the plea of the assessee that its records have been destroyed in floods. Regarding capitation fee the Tribunal upheld the view of the CIT (Appeals), for want of evidence on record and found that in fact there is no evidence on record to show that the assessee has charged an amount of Rs.2 lacs from each medical student as capitation fee. 5. Mr. Yogesh Putney, learned counsel for the revenue has stated that it is an admitted fact and is known to every concerned person that majority of the BDS seats were allotted after the payment of capitation fee. However, the assessee has not furnished any details of the criteria followed for the allotment of seats to PMT students on merits. It has been further argued by him that the media has also published a number of times that a huge amount of capitation fee is charged from the students seeking admission in the BDS course in the institute of the assessee. Sh. Yogesh Putney has argued that during the course of the assessment proceedings, the Managing Director of the Trust verbally admitted to have allotted some seats free of any charges of capitation fee and therefore, the order of the Tribunal cannot be sustained and the findings of the Tribunal are perverse. 6. We have heard learned counsel for the revenue and perused the record. ITA No.33 of 2007 4 7. The contentions raised by Mr. Putney are devoid of any force. There is nothing on record to show that the assessee's trust was charging any capitation fee. There is no admission of the respondent-trust on record. The so-called verbal admission during the course of assessment proceedings by the Managing Director of the Trust cannot be relied upon. Neither it can be presumed from mere assumptions that BDS seats are allotted after payment of capitation fee in the absence of any material. Even otherwise, the Assessing Officer has not found any irregularity in the accounts of the Trust. There is no document to show that the Trust is being run for any purpose of profit except that for educational purposes. 8. In view of this, no interference is called for in the pure findings of fact given by the Tribunal . No substantial question of law arises from the order of the Tribunal. Thus, both the aforementioned appeals are dismissed being without any merit. (RAKESH KUMAR GARG) JUDGE February 4, 2008 (SATISH KUMAR MITTAL) ps JUDGE "