COMMISSIONER OF INCOME TAX EXEMPTIONS LUCKNOW AND ANOTHER V. MAJOR SHIV DAYAL SINGH CHIKITSA TRUST

IAPL/45/2022

AI Insights

The case revolves around an appeal by the Commissioner of Income Tax Exemptions against the Major Shiv Dayal Singh Chikitsa Trust, which operates a medical institution. The trust was initially assessed under Section 143(3) of the Income Tax Act, 1961, with an alleged income of Rs. 10,32,13,500 due to excess fees charged for various courses. However, the CIT(A) reversed this decision, leading to the present appeal. The Income Tax Appellate Tribunal and the High Court found that the trust was registered under Section 12AA for charitable activities, specifically education, and that the fees charged were within the regulatory framework established by the Supreme Court and the Uttar Pradesh government.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 728497 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 07-07-2022
• Assessment Year: misc
• Other Referred Cases: Islamic Academy, P.A. Inamdar
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Respondent
• Court: HIGH COURT
• Assessee Lawyers: ASHISH AGRAWAL
• Keywords: Capitation Fee; Charitable Trust; Fee fixation; Income Assessment; Profiteering; Medical Institution
• Section: 143(3); 12AA

Judgement Text

"Court No. - 3 Case :- INCOME TAX APPEAL No. - 45 of 2022 Appellant :- Commissioner Of Income Tax Exemptions Lucknow And Another Respondent :- Major Shiv Dayal Singh Chikitsa Trust Counsel for Appellant :- Ashish Agrawal Hon'ble Surya Prakash Kesarwani,J. Hon'ble Jayant Banerji,J. Heard Sri Ashish Agrawal, learned counsel for the appellant-Income Tax Department. The respondent/assessee is a Charitable Trust and runs a Medical Institution. The society was granted Registration under Section 12AA of the Income Tax Act, 1961 by the competent authority. Return of the income was filed by the respondent-assessee on 30.09.2014 for the Assessment Year 2014-15 declaring total income of Rs.\"Nil\". The case was selected for scrutiny and assessment was completed under Section 143(3) of the Income Tax Act on 26.12.2016, assessing the income of respondent-assessee of Rs. 10,32,13,500/- on account of some alleged excess fee charged by the respondent-assessee for various courses offered by the medical college. Aggrieved with the assessment order, the respondents-assessee preferred appeal before CIT(A) who vide order dated 19.06.2017 allowed the appeal of the assessee and deleted the additions made by the Assessing Officer. Aggrieved with the order of the CIT(A), the appellant herein preferred appeal before the Income Tax Appellate Tribunal on the following grounds:- \"1. The Ld. CIT(A) has erred in law and facts in deleting addition of Rs. 10,32,13,500/- made by the AO on the plea that Income Tax Department concerns only with the application of income and it is not significant how that income was earned. 2. The order of Ld. CIT(A) be cancelled and the order of the AO be restored. 3. Appellant craves leave to modify/amend or add any one or more grounds of appeal\" Departmental appeal filed by the appellant herein before the Income Tax Appellate Tribunal, has been dismissed by the impugned order dated 29.07.2021. In the impugned order, while affirming the order of CIT(A), the Income Tax Appellate Tribunal has recorded the following findings of fact- (Relevant para nos. 6, 6.1.1, 6.1.2, 6.1.3, 6.2, 6.3, 6.4) \"6. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. We find that the society is registered under Section 12AA of the Act by the Competent Authority for Charitable activity of \"Education\" and said registration is in operation during the financial year relevant to the assessment year under consideration. In terms of section 2(15) of the Act, the activity of \"Education\" has been included in charitable activity. We find that the learned Assessing Officer has alleged the assessee of collecting capitation fee, however, no order or finding of any regulatory authority dealing with medical colleges of charges of collection of capital fee has been pointed out by the Assessing Officer. 6.1.1 The Hon'ble Supreme Court framed 11 questions and majority of judges answered the Question No. 9 that there should not be capitation fee or profiteering, but reasonable surplus to meet cost of expansion and augmentation of facilities does not, however, amounted to profiteering. 6.1.2 In the case of Islamic Academy (supra) also held that each institute must have the freedom to fix its own fee structure taking into consideration the needs to generate funds to run the institution and to provide facilities necessary for the benefit of the students, however, there can be no profiteering and charging of capitation fees. 6.1.3 In P.A. Inamdar (supra), the Supreme Court while answering question no. 3 held that every institution is free to devise its own fee structure but the same can be regulated in the interest of preventing profiteering. No capitation fee can be charged. Leverage was allowed to educational institutions to generate reasonable surplus to meet cost of expansion and augmentation of facilities which would not amount to profiteering. The Court upheld the two Committees for monitoring admission procedure and determining fee structure as held in Islamic Academy was permissible as regulatory measures aimed at protecting the interest of the student community as a whole as also the minorities 6.2 Before the learned CIT(A), the assessee has submitted that pursuant to Supreme Court decision's mentioned above, the State Government of Uttar Pradesh enacted the Uttar Pradesh Private professional Educational Institution (Regulation of Admission and Fixation of Fees) Act, 2006 and fee fixation committee was constituted on 27.06.2008. As regard to fees, the assessee submitted beore the Id. CIT(A) as under:- 13, Pursuant to Supreme Court/ Govt. of U.P. order, the committee fixed provisional fee for Academic Year 2011-12 at Rs. 4.07 lacs vide G.O. no. 3392/71-2-11-W- 64/2007 dated 14.09.2011. Committee also decided to fix final fee and also fee for academic year 2012-13 and 2013-14 later on. Consequently, the Committee was required to fix the final fee for session 2011-12 and thereafter. This has not been done in the instant case, in fact the assessee has gone on record to make a request to this effect. In the G.O. it is also mentioned that final fee will be fixed later on and if the college has taken excess fee, the same will be refunded to students or adjusted against future dues. If fee paid by student is less than fixed, the college will collect the difference from student. 14. The fee fixation order came on 14.09.201, till then the admissions for academic year 2011-12 were almost completed and fee, as decided by the college committee, was deposited by students. Since the final fee was never fixed by the Government, there was no question of refund/ collection of different of fee. 15. The facts of the instant case would reveal that there is no surplus at all, that is earned by the assessee. Ld. Assessing Officer has herself accepted that total utilization of income was Rs. 28,59,66,154/- and total receipts was RS. 27,02,54,348.23 as per para 13 of assessment order. 16 That Ld. Assessing Officer have not referred to any fee fixation order in the assessement order but merely mentioned that the fee fixation committee order has been brought on records by the assessee or the fee fixation order is available in public domain. There after neither final fee for academic year 2011-12 nor fee for next academic years, as mentioned in para-3, been fixed by Govl DGME. It means no fee has been fixed by the competent authority for academic session 2013-14 relevant to A.Y. 2014-15 under consideration. As regards fee for BAMS course, the Govt./ DGME/ Fee Fixation Committee has fixed fee for Govt. Unani, Aurvedic and Homeopathic Medical Colleges only which is clearly mentioned in the order and has no application on the private ayurvedic meadical colleges. As regards fee for paramedical courses, it is submitted that Uttar Pradesh State Medical Faculty, U.P., had granted permission to start the paramedical courses vide letter no. 3461/12 dated 23.05.2012. As per point 3 of the aforesaid letter the college is permitted to charge tution fee of Rs. 36000/- per student. The assessee college has charged the total fee of Rs. 37500/- which includes tution fee Rs. 36000/- and examination fee Rs. 1500/-. Thus the assessee has not charged any excess fee than fixed by the authorities. Ld. AO has taken the fee fixed of Rs.28000/- as per own imagination. The copy of letter of U.P. State Medical Faculty is enclosed and marked as Annexure-G. In view of the discussion and facts stated above it is very clear that no fee has been fixed by the Government, or and other competent authority for MBBS and BAMS courses run by the assessee, for the academic session 2013-14 (relevant to A. Y. 2014-15). 19. That with regards to question no 2 as to whether assessee has charged fee in excess of fee fixed by the Fee Fixation Authority, the question has no relevancy for MBBS and BAMS courses because, as discussed in para 18 above, no fee has been fixed by the Authority for F.Y. 2013-14 (relevant to A.Y. 2014-15) for these courses, hence there is no question of charging/ collecting fee in excess of fee fixed. As regards paramedical courses the assessee has charged the fee as permitted by Uttar Pradesh State Medical Faculty and no excess fee has been charged. 6.3 On perusal of submission of the assessee, it is clear that only extra fee of Rs.1,500/- was charged and that too was for examination fee. In such circumstances, it cannot be said that any capitation fee has been charged from the students. Moreover, there is no surplus has been generated in the year under consideration and the assessee cannot be alleged for engaged in profiteering also. 6.4 The assessee has contested that no fee was fixed by the state level fee fixation committee for the year under consideration and, therefore, computation of the excess fee by the Assessing Officer, is based on presumption and without any documentary evidence in support. The decisions relied upon 'by the Assessing Officer are in respect of the capitation fee and in absence of any such evidence of collection of capitation fee, the decisions relied upon are not applicable over the facts of the assessee. The Ld. CIT(A) has correctly held that once the assessee is registered section l2AA of the Act, the Assessing Officer has to examine applicability pf section 11, 12 and 13 of the Act. No such violation has been pointed out by the learned Assessing Officer of section 11, 12 and 13 of the Act. The Section 11 prescribe application of the income toward charitable purposes, which in the case of the assessee is for education and the assessee has duly applied its income for said purposes as per the rules specified in the Act. In view of the above facts and circumstances, we do not find any error in the order of the Ld. CIT(A) on the issue in dispute and, accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed\". The findings recorded by CIT(A) and ITAT are findings of fact based on consideration of the relevant materiel on record. Thus, no substantial question of law involved in the present appeal. In view of the aforesaid, the appeal is dismissed. Order Date :- 7.7.2022 T.S. Digitally signed by TRIBHUWAN SINGH Date: 2022.07.08 15:16:11 IST Reason: Location: High Court of Judicature at Allahabad "