GLOBAL INSTITUTE OF TECHNOLOGY SOCIETY, Jaipur V. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTION) CIRCLE, Jaipur

ITA 1066/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2769 (ITAT-JAIPUR)
• Duration Of Justice: 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 12-09-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VARINDER MEHTA
• Assessee Lawyers: ISHA KANOONGO
• Keywords: Depreciation; Notional interest; Capital receipt; Benefit of exemption; Capital expenditure; Set aside
• Section: 12; 11; 143(3); 12AA; 201; 48; 13(2); 13; 22; 10(23C); 20

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES B, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA NO. 1066/JP/2018 FU/KZKJ.K O'KZ@ ASSESSMENT YEAR : 2015-16 GLOBAL INSTITUTE OF TECHNOLOGY, SOCIETY D-91, AMBABARI, JHOTWARA ROAD, JAIPUR. CUKE VS. DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAATG 3217 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI S.L. PODDAR (ADV) & MS. ISHA KANOONGO (ADV) JKTLO DH VKSJ LS@ REVENUE BY : SHRI VARINDER MEHTA (CIT-DR) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 23/10/2018 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 05/11/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04/09/2018 OF LD. CIT(A)-3, JAIPUR FOR THE A.Y. 201 5-16. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD ASSESSING OFFICER HAS ERRED IN REJECTING THE CLAIM OF THE ASSESSEE FO R EXEMPTION U/S 11 AND 12 OF THE INCOME TAX ACT, 1961. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. ASSESSING OFFICER HAS ERRED IN APPLYING THE PROVISIONS OF SEC TION 164(2) OF THE IT ACT FOR ASSESSING THE INCOME OF THE SOCIETY AS BUSI NESS INCOME AFTER DENYING THE EXEMPTION U/S 11 OF THE ACT. ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 2 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 60,60,000/- MADE BY THE A.O. IN VIOLATION OF SECTION 13(1)(C) R.W.S. 13(2)(B) OF TH E INCOME TAX ACT, 1961 ON ACCOUNT OF INTEREST FREE ADVANCES TO THE SP ECIFIED PERSONS. 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 4,68,55,950/- BY TREATING THE DEVELOPMENT RECEIPTS AS REVENUE RECEIPTS INSTEAD OF CAPITAL RECEIPTS FOR DEVELOPMENT PURPOSES WITHOUT CONSIDERING THE EA RLIER JUDGMENTS OF HONBLE ITAT. 5. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS. 71,18,248/- (RS. 2997140/- OF REGISTRATION RECEIPTS, RS. 27500/- OF BOOK BANK REC EIPTS AND RS. 4093608/- OF FORM AND LATE FEES RECEIPTS) BY TREATI NG THE REVENUE RECEIPT AS AGAINST CAPITAL RECEIPTS AND RECEIPTS FO R THE PARTICULAR PURPOSES WITHOUT CONSIDERING THE EARLIER JUDGMENTS OF HONBLE ITAT. 6. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN NOT ALLOWING THE CAPITAL EXPENDITURE AS APPLICAT ION OF INCOME FOR COMPUTING INCOME OF THE TRUST. 7. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING. 2. GROUNDS NO. 1 AND 2 OF THE APPEAL ARE REGARDING DENIAL OF EXEMPTION U/S 11 AND 12 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AND APPLYING THE PROVISIONS OF SECTION 164(2) OF THE ACT. THE ASS ESSEE IS A SOCIETY AND RUNNING EDUCATIONAL INSTITUTION IN THE NAME AND STY LE OF M/S GLOBAL INSTITUTE OF TECHNOLOGY. THE ASSESSEE WAS GRANTED REGISTRATION U /S 12AA OF THE ACT. THE ASSESSEE FILED ITS RETURN OF INCOME ON 28/09/201 5 DECLARING NIL INCOME AFTER CLAIMING THE BENEFIT OF SECTIONS 11 AND 12 OF THE ACT. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT U/S 143(3) O F THE ACT ON ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 3 14/11/2017 DENIED THE EXEMPTION U/S 11 AND 12 OF TH E ACT AND DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS. 6,60,47,840 /-. 3. THE ASSESSEE CHALLENGED THE ACTION OF THE ASSESSI NG OFFICER BEFORE THE LD. CIT(A).THOUGH, THE LD. CIT(A) HAS GRANTED PA RT RELIEF, HOWEVER, THE DENIAL OF EXEMPTION U/S 11 AND 12 OF THE ACT WAS SUS TAINED BY THE LD. CIT(A). THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSING OFFICER HAS DENIED THE CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT IN VIEW OF THE VIOLATION OF PROVISIONS OF SECTION 13 OF THE ACT IN RESPECT OF THE INTEREST PAYMENT TO THE SPECIFIED PERSONS AS WELL AS THE ADV ANCES GIVEN TO THE SPECIFIED PERSONS IN VIOLATION OF SECTION 13(1)(C) READ WITH SECTION 13(2)(B) OF THE ACT. FURTHER THE ASSESSING OFFICER HAS ALSO MADE DISALLOWANCES ON ACCOUNT OF SALARY PAID TO THE SPECIFIED PERSONS. HE HAS REFERRED TO THE DECISIONS OF THIS TRIBUNAL IN ASSESSEES CASE FOR A. Y. 2013-14 AND 2014-15 AND SUBMITTED THAT THE TRIBUNAL HAS ALLOWED THE CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON SIMILAR GROUNDS. THUS, THE LD AR HAS SUBMITTED TH AT EVEN IF THERE IS A VIOLATION OF SECTION 13 OF THE ACT IN RESPECT OF TH E CERTAIN PAYMENTS, THE ENTIRE CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT CANNOT BE DENIED SO LONG THE ASSESSEE IS REGISTERED U/S 12AA OF THE ACT . HE HAS FURTHER CONTENDED THAT ONLY TO THE EXTENT OF THE EXCESS PAY MENT TO THE SPECIFIED PERSONS CAN BE TREATED AS THE INCOME APPLIED FOR NO N-CHARITABLE PURPOSES ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 4 AND CONSEQUENTLY THE AMOUNT TO THE EXTENT OF EXCESS PAYMENT OR BENEFIT GIVEN TO THE SPECIFIED PERSONS CAN BE TREATED AS IN COME NOT ELIGIBLE FOR EXEMPTION U/S 11 AND 12 OF THE ACT. THE ASSESSING O FFICER HAS DENIED THE CLAIM OF EXEMPTION U/S 11 AND 12 OF THE ACT IN ENTI RETY WHICH IS NOT THE SPIRIT OF PROVISIONS OF SECTION 13 OF THE ACT. THUS, THE LD AR HAS SUBMITTED THAT ONCE THE TRIBUNAL HAS ALLOWED THE CLAIM FOR THE A.Y. 2013-14 AND 2014-15 THEN THE DENIAL OF EXEMPTION U/S 11 AND 12 OF THE ACT IS NOT JUSTIFIED AND THE SAME MAY BE ALLOWED TO THE ASSESSE E FOR THE YEAR UNDER CONSIDERATION. 4. ON THE OTHER HAND, THE LD CIT-DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSING O FFICER HAS CLEARLY MADE OUT A CASE OF VIOLATION OF PROVISIONS OF SECTION 13 (1) AND 13(3) OF THE ACT AND CONSEQUENTLY THE ASSESSEE IS NOT ELIGIBLE FOR E XEMPTION U/S 11 AND 12 OF THE ACT SO AS TO EXCLUDE THE INCOME FROM TOTAL I NCOME OF THE PREVIOUS YEAR. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE ASSESSING OFFICER HAS MADE V ARIOUS ADDITIONS ON ACCOUNT OF INTEREST PAYMENT TO THE SPECIFIED PERSON S U/S 13(3) OF THE ACT AS WELL AS THE ADVANCE PAID TO THE SPECIFIED PERSONS . THE ASSESSING OFFICER HAS ALSO MADE DISALLOWANCES IN RESPECT OF THE SALARY PAID TO THE SPECIFIED ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 5 PERSONS. HOWEVER, SOME OF THESE DISALLOWANCES MADE BY THE ASSESSING OFFICER WERE DELETED BY THE LD. CIT(A) ON THE GROUND THAT THE PAYMENT WAS NOT FOUND TO EXCESSIVE OR UNREASONABLE HAVING REGAR D TO THE SERVICES RENDERED BY THOSE PERSONS OR FAIR MARKET PRICE OF T HE SERVICES. EVEN THE INTEREST PAID TO THE SPECIFIED PERSONS WAS CONSIDERE D BY THE LD. CIT(A) AS REASONABLE AND NOT EXCESSIVE. HOWEVER, THESE ISSUES WERE EXAMINED BY THE LD. CIT(A) AS PER PROVISIONS OF SECTION 40A(2) OF TH E ACT. AT THE OUTSET WE NOTE THAT SECTION 13(1) OF THE ACT CONTEMPLATES AS AN EXCEPTION TO SECTION 11 AND 12 OF THE ACT SO FAR AS ANY PART OF THE INCO ME OF THE PROPERTY HELD TRUST IS USED OR APPLIED DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO SUB-SECTION (3) OF SECTION 13 OF THE AC T. THE ASSESSEE HAS NOT DENIED THAT THE INTEREST PAYMENT, ADVANCE AS WELL AS SALARY PAID TO THE PERSONS ARE THE PERSONS REFERRED IN SUB-SECTION (3) OF SECTION 13 OF THE ACT. HOWEVER, THE DENIAL OF BENEFIT OF SECTION 11 AND 12 OF THE ACT IS NOT AUTOMATIC MERELY BECAUSE SOME PAYMENTS MADE TO THE SOME SPECIFIED PERSONS BUT THE SAID PAYMENT SHOULD BE IN THE NATUR E OF BENEFIT OF SUCH SPECIFIED PERSONS. THEREFORE, IF THE PAYMENT IS MAD E WITHOUT ANY SERVICE BY THE SPECIFIED PERSONS THEN TO THE EXTENT OF PAYMENT , WHICH IS EXCESSIVE OR WITHOUT ANY SERVICE, THE SAME WILL BE TREATED AS THE INCOME APPLIED OR USED FOR THE BENEFIT OF THE SPECIFIED PERSON NOT ELIGIBL E FOR EXEMPTION U/S 11 AND 12 OF THE ACT. FURTHER SUB SECTION (2) OF SECTION 1 3 CLARIFIES THAT ANY PART OF ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 6 THE SUCH INCOME OR PROPERTY SHALL BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF PERSON REFERRED TO IN SUB SECTIO N (3) IF IT SATISFIED ANY OF THE CONDITIONS ENUMERATED IN THE SAID SUB-SECTION. FOR READY REFERENCE, WE REPRODUCE SECTION 13(2) OF THE ACT AS UNDER: 13(2) WITHOUT PREJUDICE TO THE GENERALITY OF THE P ROVISIONS OF CLAUSE ( C ) 45 [AND CLAUSE ( D )] OF SUB-SECTION (1), THE INCOME OR THE PROPERTY 46 OF THE TRUST OR INSTITUTION OR ANY PART OF SUCH INCOME OR PROPERTY SHALL, FOR THE PURPOSES OF THAT CLAUSE, BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON REFERRE D TO IN SUB-SECTION (3), ( A ) IF ANY PART OF THE INCOME OR PROPERTY 47 OF THE TRUST OR INSTITUTION IS, OR CONTINUES TO BE, LENT 47 TO ANY PERSON REFERRED TO IN SUB-SECTION (3) FOR A NY PE RIOD DURING THE PREVIOUS YEAR WITHOUT EITHER ADEQUATE SECURITY 47 OR ADEQUATE INTEREST OR BOTH; ( B ) IF ANY LAND, BUILDING OR OTHER PROPERTY 47 OF THE TRUST OR INSTITUTION IS, OR CONTI NUES TO BE, MADE AVAILABLE FOR THE USE OF ANY PERSON REFERRED T O IN SUB- SECTION (3), FOR ANY PERIOD DURING THE PREVIOUS YEAR WITHOUT CHARGING ADEQUATE RENT OR OTHER COMPENSATION; ( C ) IF ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE O R OTHERWISE DURING THE PREVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB- SECTION (3) OUT OF THE RESOURCES OF THE TRUST OR IN STITUTION FOR SERVICES RENDERED BY THAT PERSON TO SUCH TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH S ERVICES; ( D ) IF THE SERVICES OF THE TRUST OR INSTITUTION ARE MAD E AVAILABLE TO ANY PERSON REFERRED TO IN SUB- SECTION (3) DURING THE PREVIOUS YEAR WITHOUT ADEQUA TE REMUNERATION OR OTHER COMPENSATION; ( E ) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS PURC HASED BY OR ON BEHALF OF THE TRUST OR INSTITUTION FROM ANY PERSON REFERRED TO IN SUB- SECTION (3) DURING THE PREVIOUS YEAR FOR CONSIDERATION WHICH IS MORE THAN ADEQUATE; ( F ) IF ANY SHARE, SECURITY OR OTHER PROPERTY IS SOLD BY OR ON BEHALF OF THE TRUST OR INSTITUTION TO ANY PERSON REFERRED TO IN SUB- SECTION (3) DURING THE PREVIOUS YEAR FOR CONSIDERAT ION WHICH IS LESS THAN ADEQUATE; 48 [( G ) IF ANY INCOME OR PROPERTY OF THE TRUST OR INSTITUTI ON IS DIVERTED DURING THE PRE VIOUS YEAR IN FAVOUR OF ANY PERSON REFERRED TO IN SUB-SECTION (3) : PROVIDED THAT THIS CLAUSE SHALL NOT APPLY WHERE THE INCOME, OR THE VALUE OF THE PROPERTY OR, AS THE CASE MAY BE, THE AGGREGATE OF THE INCOME AND THE VALUE OF THE PROPERTY, SO ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 7 DIVERTED D OES NOT EXCEED ONE THOUSAND RUPEES;] ( H ) IF ANY FUNDS 49 OF THE TRUST OR INSTITUTION ARE, OR CONTINUE TO REM AIN, INVESTED 49 FOR ANY PERIOD DURING THE PREVIOUS YEAR (NOT BEING A PERIO D BEFORE THE 1ST DAY OF JANUARY, 1971), IN ANY CONCERN 49 IN WHICH ANY PERSON REFERRED TO IN SUB- SECTION (3) HAS A SUBSTANTIAL INTEREST. CLAUSE (C) OF SECTION 13(2) OF THE ACT ENVISAGES TH AT IF ANY AMOUNT IS PAID BY WAY OF SALARY ALLOWANCES OR OTHERWISE DURING THE PR EVIOUS YEAR TO ANY PERSON REFERRED TO IN SUB-SECTION (3) FOR THE SERVI CES RENDERED BY THAT PERSON TO THE TRUST OR INSTITUTION AND THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES, THEN THE PAYMENT TO THE SPECIFIED PERSONS IS NO DOUBT IS RIGHTLY BARRED UND ER THE PROVISIONS OF SECTION 13 OF THE ACT BUT ONLY TO THE EXTENT THE SA ID PAYMENT IS IN EXCESS OF WHAT MAY BE REASONABLY PAID FOR THE SERVICES RENDERE D BY THE SPECIFIED PERSONS AND WILL BE DEEMED AS SUCH INCOME HAS BEEN U SED OR APPLIED FOR THE BENEFIT OF THE SPECIFIED PERSONS. IN THE CASE I N HAND, THE LD. CIT(A) HAS ALREADY CONSIDERED THAT THE SALARY AND INTEREST PAI D TO THE SPECIFIED PERSONS WAS NOT IN EXCESS OF WHAT MAY BE REASONABLY PAID, THE REFORE, TO THAT EXTENT THE PAYMENT OF SALARY AND INTEREST WILL NOT ATTRACT THE PROVISIONS OF SECTION 13(1) OF THE ACT. HENCE, EVEN IF ANY PART OF THE IN COME OR PROPERTY WHICH IS FOUND TO BE USED OR APPLIED FOR THE BENEFIT OF THE PERSONS SPECIFIED TO IN SUB-SECTION (3) OF SECTION 13 OF THE ACT, THE BENEF IT OF SECTIONS 11 AND 12 IS NOT AVAILABLE ONLY TO THAT EXTENT AND THE CLAIM OF THE ASSESSEE CANNOT BE ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 8 DENIED IN TOTO. ACCORDINGLY WE HOLD THAT THE DENIAL OF EXEMPTION TO THE ASSESSEE U/S 11 AND 12 OF THE ACT IS NOT JUSTIFIED EXCEPT TO THE EXTENT WHERE THE SPECIFIC PART OF THE INCOME OR PROPERTY IS FOUND TO BE USED OR APPLIED FOR THE BENEFIT OF SPECIFIED PERSONS. HENCE , THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE ARE SET ASIDE AND B OTH THE GROUNDS OF THE ASSESSEES APPEAL ARE ALLOWED. 6. GROUND NO. 3 OF THE APPEAL IS REGARDING THE ADDI TION OF RS. 60,60,000/- ON ACCOUNT OF INTEREST FREE ADVANCES T O SPECIFIED PERSONS. THE LD AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESS EE TRUST ADVANCED A SUM OF RS. 5,05,00,000/- TO M/S PERENNIAL REAL ESTA TE PVT. LTD. FOR PURCHASE OF LAND VIDE AGREEMENT DATED 27/8/2012. TH E ASSESSING OFFICER HELD THAT THE PROVISIONS OF SECTION 13(2) OF THE AC T ARE ATTRACTED ON SUCH ADVANCES AS THE TRUSTEES OF THE ASSESSEE ARE ALSO D IRECTOR IN THE SAID COMPANY. THE LD AR HAS SUBMITTED THAT SINCE IT IS NO T A LOAN OR ADVANCE GIVEN TO THE COMPANY BUT THE MONEY WAS PAID FOR PURC HASE OF THE LAND AND IT WAS NOT EITHER USED OR APPLIED DIRECTLY OR INDIRE CTLY FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SECTION 13(3) OF THE ACT. ONC E THE AMOUNT WAS PAID FOR PURCHASE OF LAND UNDER AN AGREEMENT THEN IT WILL NOT FALL IN THE CATEGORY OF THE INCOME OR PROPERTY USED FOR THE BENEFIT OF T HE SPECIFIED PERSON. THE LD AR HAS SUBMITTED THAT THE ASSESSING OFFICER HAS MADE ADDITION ON NOTIONAL INTEREST OF RS. 60.60 LACS. THE LD AR HAS P OINTED OUT THAT THE ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 9 PAYMENT WAS MADE UNDER AN AGREEMENT FOR PURCHASE OF LAND FOR A TOTAL CONSIDERATION OF RS. 8.00 CRORES AGAINST WHICH AN AD VANCE OF RS. 5,05,00,000/- WAS PAID. THE POSSESSION OF THE SAID LA ND WAS ALREADY TRANSFERRED TO THE ASSESSEE, HOWEVER, DUE TO INEVITA BLE CIRCUMSTANCES, NO FURTHER PAYMENT COULD BE MADE AND THE CONVEYANCE DE ED COULD NOT BE REGISTERED. ONCE THE ASSESSEE TRUST HAS TAKEN OVER T HE POSSESSION AND ENJOYING THE LAND IN QUESTION THEN THE ADVANCE PAID UNDER THE AGREEMENT FOR THE PURCHASE OF LAND CANNOT BE TREATED AS BENEF IT TO THE SPECIFIED PERSONS. THE ASSESSING OFFICER HAS ADDED THE NOTIONA L INTEREST WHEREAS THE ASSESSEE HAS NOT PAID ANY INTEREST ON THE SAID AMOU NT AS IT WAS OUT OF ASSESSEES OWN CAPITAL FUND/CORPUS FUND. ONCE THE AS SESSEE HAS NOT INCURRED ANY EXPENDITURE ON ACCOUNT OF INTEREST THE N THE ADDITION MADE BY THE ASSESSING OFFICER AS NOTIONAL INTEREST IS NOT J USTIFIED. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. (2013) 358 ITR 295 (SC) AND THE DECISION OF THE HONBLE GUWAHATI HIGH COURT IN T HE CASE OF KESRI CHAND JAIN SUKH LAL VS. CIT 238 ITR 47 (GAU). 7. ON THE OTHER HAND, THE LD. CIT-DR HAS RELIED UPO N THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ADVANCE WAS GIVEN BY THE ASSESSEE TO THE SPECIFIED PERSONS AS PER PROVISIONS OF SECTION 13(3)(C) OF THE ACT. THE LD CIT-DR HAS SUBMITTED THAT UNDISPUTED LY THE ADVANCE WAS ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 10 GIVEN TO THE COMPANY IN WHICH THE TRUSTEES OF THE AS SESSEE ARE HAVING SUBSTANTIAL INTEREST AND THEREFORE, THE CASE FALLS UNDER THE PROVISIONS OF SECTION 13(1) READ WITH SECTION 13(3) OF THE ACT. SI NCE THE ASSESSEE HAS NOT CHARGED ANY INTEREST ON THE SAID ADVANCE GIVEN TO THE SPECIFIED PERSONS, THEREFORE, THE ASSESSING OFFICER HAS MADE THE ADDITION OF THE REASONABLE INTEREST TO BE CHARGED. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THOUGH, THE ADVANCE OF RS. 5,05,00,000/- WAS PAID TO THE COMPANY IN WHICH THE TRUSTEES OF THE ASSESSEE ARE AL SO DIRECTOR AND THEREFORE, THEY ARE HAVING SUBSTANTIAL INTEREST IN THE SAID COMPANY. HOWEVER, SINCE THE ADVANCE IN QUESTION WAS GIVEN UNDE R AN AGREEMENT DATED 27/08/2012 FOR PURCHASE OF LAND MEASURING 26, 720 SQ. METERS FOR A TOTAL CONSIDERATION OF RS. 8.0. CRORES THEN IT IS N OT A SIMPLE CASE OF APPLYING THE INCOME OR PROPERTY FOR THE BENEFIT OF THE SPECI FIED PERSONS. IT IS PART CONSIDERATION FOR PURCHASE OF LAND AND IN ABSENCE O F ANY ALLEGATION THAT THE CONSIDERATION WAS MORE THAN THE FAIR MARKET RATE OR THE PREVAILING PRICE OF THE LAND, PAYMENT MADE UNDER THE AGREEMENT FOR PURC HASE OF LAND CANNOT BE CONSIDERED AS THE INCOME OR PROPERTY OF THE TRUS T IS USED OR APPLIED FOR THE BENEFIT OF THE SPECIFIED PERSONS. TH E ASSESSEE HAS CLEARLY MADE OUT A CASE THAT THE LAND IN QUESTION WAS IN THE POSSESSION OF THE ASSESSEE AND THEREFORE, THE PAYMENT MADE UNDER THE AGREEMENT FOR ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 11 PURCHASE OF LAND. ONCE THE POSSESSION OF LAND WAS AL READY TRANSFERRED TO THE ASSESSEE THEN THE PAYMENT IN QUESTION WAS EVIDEN TLY FOR PURCHASE OF LAND. THEREFORE, MERELY BECAUSE THE CONVEYANCE DEED WAS NOT REGISTERED AS THE ASSESSEE HAS NOT PAID THE BALANCE PAYMENT OF PURCHASE CONSIDERATION WOULD NOT LEAD TO THE CONCLUSION OR AN Y INFERENCE THAT THE SAID PAYMENT WAS MADE FOR THE BENEFIT OF THE SPECIFI ED PERSONS. THE ASSESSEE IS IN POSSESSION OF THE LAND OF RS. 8.00 C RORES AGAINST WHICH ONLY RS. 5,05,00,000/- WAS PAID, THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN THE OPINION OF THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) HOLDING THAT THE SAID PAYMENT IS FALLING IN THE CATEGORY OF APPLICAT ION OF INCOME OR PROPERTY FOR THE BENEFIT OF SPECIFIED PERSONS. EVEN OTHERWISE THE ASSESSING OFFICER HAS MADE THE ADDITION OF NOTIONAL INTEREST WHEREAS T HERE WAS NO CORRESPONDING EXPENDITURE INCURRED BY THE ASSESSEE. IN ANY CASE WHEN THE PAYMENT WAS MADE AS A CONSIDERATION FOR PURCHASE OF LAND, POSSESSION OF WHICH WAS ALREADY TRANSFERRED TO THE ASSESSEE UNDER T HE AGREEMENT DATED 27/08/2012 THEN THE SAID AMOUNT WILL NOT PARTAKE THE CHARACTER OF INCOME OR PROPERTY OF THE TRUST APPLIED OR USED FOR THE BEN EFIT OF SPECIFIED PERSONS. HENCE, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. 9. GROUND NO. 4 OF THE APPEAL IS REGARDING THE ADDI TION OF DEVELOPMENT RECEIPT/FEE TREATING THE SAME AS REVENUE RECEIPT. TH E LD AR OF THE ASSESSEE ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 12 HAS SUBMITTED THAT THE ASSESSEE IS RUNNING EDUCATIO NAL INSTITUTION WHICH IS TECHNICAL INSTITUTE AND IT CHARGES FEE AS PER THE A PPROVED FEES STRUCTURE BY THE GOVERNMENT OF RAJASTHAN FOR PRIVATE TECHNICAL I NSTITUTIONS. HE HAS REFERRED TO THE CIRCULAR DATED 28/7/2012 AND 04/9/2 012 ISSUED BY THE GOVERNMENT OF RAJASTHAN WHEREBY PRIVATE INSTITUTIONS ARE PERMITTED TO CHARGE UP TO 15% OF THE TOTAL TUITION FEE AS DEVELO PMENT FEE WHICH CAN BE UTILIZED FOR SPECIFIC PURPOSES AS MENTIONED IN THES E CIRCULARS. THUS, THE LD AR HAS SUBMITTED THAT THE RECEIPT OF DEVELOPMENT FE E IS IN ACCORDANCE WITH THE GUIDELINES ISSUED BY THE STATE GOVERNMENT AND I T IS NOT IN THE HAND OF THE ASSESSEE TO FIXE AND CHARGE THE FEE BUT IT IS M ONITORED AND SUPERVISED BY THE STATE GOVT., THEREFORE, THE STUDENTS WHO VOLU NTARILY AGREE TO PAY THE FEE AS PER THE GOVERNMENT FEES STRUCTURE TAKES THE ADMISSION. THEREFORE, THE DEVELOPMENT FEE RECEIVED BY THE ASSESSEE HAS TO BE USED FOR THE SPECIFIC PURPOSE AND FOR CREATING INFRASTRUCTURES A ND ACQUISITION OF FIXED ASSETS AND HENCE IS A CAPITAL RECEIPT BY NATURE. THE LD AR HAS RELIED UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF MODERN SCHOOL VS. UNION OF INDIA IN CIVIL APPEAL NO. 2699 OF 2001 DAT ED 27/04/2004 AND SUBMITTED THAT THE HON'BLE SUPREME COURT HAS HELD T HAT AS PER THE RECOMMENDATION OF THE DUGGAL COMMITTEE, DEVELOPMENT FEES CAN BE CHARGED FROM 10 TO 15% OF TUITION FEE AND THE SAME SHALL BE TREATED AS CAPITAL RECEIPT. THE SAID FEE SHALL BE COLLECTED ONL Y IF THE SCHOOL MAINTAINED ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 13 THE DEPRECIATION RESERVE FUND. THE HON'BLE SUPREME C OURT HAS FURTHER HELD THAT THE DEVELOPMENT FEE FOR SUPPLEMENTING RESOURCE S FOR PURCHASE, UP- GRADATION AND REPLACEMENT OF FURNITURE AND FIXTURE S AS WELL AS EQUIPMENTS IS JUSTIFIED. THUS, THE LD AR HAS SUBMITTED THAT EVE N THE HON'BLE SUPREME COURT HAS HELD THAT THE DEVELOPMENT FEE IS A CAPITA L RECEIPT TO BE USED BY THE INSTITUTIONS FOR SUPPLEMENTING THE RESOURCES FO R PURCHASE OF THE REQUISITE FURNITURE, FIXTURES, UP-GRADATION ETC. HE HAS RELIED UPON THE DECISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. CHILDRENS EDUCATION SOCIETY 358 ITR 373 AND SUBMITT ED THAT THE HON'BLE HIGH COURT HAS HELD THAT BUILDING FUND RECEIVED FRO M STUDENTS IS A CAPITAL RECEIPT IN NATURE AND THEREFORE, IT IS CREATED DIRE CTLY TO THE CORPUS FUND. THE LD AR HAS THEN RELIED UPON THE DECISION OF THE H ONBLE DELHI BENCHES OF THE TRIBUNAL DATED 08/1/2014 IN THE CASE OF ITO VS. J .D. TYTLER SCHOOL SOCIETY IN ITA NO. 4476/DEL/2011 AND SUBMITTED THAT THE TRIBUNAL HAS HELD THAT THE DEVELOPMENT FEE COLLECTED BY THE ASSESSEE IS CAPITAL RECEIPT IN NATURE AND CANNOT BE ASSESSED AS INCOME OF THE ASSE SSEE. HENCE, THE LD AR HAS SUBMITTED THAT ONCE THE ASSESSEE HAVING NO D ISCRETION FOR UTILIZING THE DEVELOPMENT FEE RECEIVED FROM THE STUDENTS BUT IT HAS TO BE USED FOR THE SPECIFIC PURPOSES AS SPECIFIED IN THE CIRCULARS /ORDERS OF THE STATE GOVT. THEN THE SAME IS IN FACT CAPITAL RECEIPT AND NOT RE VENUE RECEIPT. ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 14 10. ON THE OTHER HAND, THE LD DR HAS SUBMITTED THAT EVEN IF THE DEVELOPMENT FEE IS TREATED AS CAPITAL IN NATURE THE BENEFIT OF SECTION 12 OF THE ACT IS NOT AVAILABLE AS IT IS NOT A VOLUNTARY C ONTRIBUTION BY THE STUDENTS BUT IT IS A FEES CHARGED BY THE ASSESSEE. HE HAS RE LIED UPON THE ORDER OF THIS TRIBUNAL DATED 15/11/2017 IN THE CASE OF ACIT VS . M/S SCHOLARS EDUCATION TRUST OF INDIA IN ITA NO. 1087/JP/2016. THE LD CIT-DR HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 11. IN THE REJOINDER, THE LD AR HAS SUBMITTED THAT THE DECISION OF THIS TRIBUNAL IN THE CASE OF ACIT VS. M/S SCHOLARS EDUCATI ON TRUST OF INDIA (SUPRA) IS NOT APPLICABLE IN THE CASE OF THE ASSESS EE AS IN THE SAID CASE, THE TRIBUNAL HAS GIVEN A FINDING THAT THE FEE WAS CHARGED AS A COMPULSORY PAYMENT BY THE STUDENTS AND FURTHER THE TRUST WAS FRE E TO UTILIZE THE SAID RECEIPT AS PER ITS DISCRETION, THEREFORE, IT WAS NOT TREATED AS CAPITAL IN NATURE. FURTHER THE TRIBUNAL HAS NOT CONSIDERED THE DECISIONS RELIED UPON BY THE LD AR IN THIS CASE. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS RECEIVED SUM OF RS. 4,68 ,55,950/- AS DEVELOPMENT FEE FROM THE STUDENTS. THE ASSESSING OFF ICER HAS TREATED THE SAID RECEIPT AS REVENUE IN NATURE AND THEREBY ADDED THE SAME TO THE INCOME OF THE ASSESSEE WHILE COMPLETING THE ASSESSME NT U/S 143(3) OF THE ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 15 ACT. THE ASSESSING OFFICER HAS GIVEN THIS FINDING IN PARA 7.1 AND 7.2 AS UNDER: 7.1 THE REPLY OF THE ASSESSEE HAS BEEN CONSIDERED BUT NOT FOUND ACCEPTABLE FOR THE FOLLOWING REASONS:- (A) THE DEVELOPMENT FEES IS A RECURRING INCOME REC EIPT LIKE THE OTHER FEE RECEIPTS WHICH IS CHARGED FROM THE STUDENTS ALONG W ITH THE TUITION FEES. WHILE THE TUITION FEES IS REGARDED AS REVENUE RECEIPT BY THE TRUST, THE DEVELOPMENT FEES IS REGARDED AS CAPITAL RECEIPT FOR NO SPECIFIC REASON; (B) AS PER THE LEDGER OF DEVELOPMENT RESERVE, THERE ARE NO AMOUNTS DEBITED AGAINST THE RESERVES, WHICH SHOWS THAT THE ENTIRE DEVELOPMENT FEE RECEIPTS ARE TREATED SEPARATELY ONL Y FOR THE PURPOSES OF CLAIMING THE SAME AS CAPITAL RECEIPTS A ND NOT FOR EXPENDITURE PURPOSES. THE CAPITAL EXPENDITURE INCUR RED FOR INFRASTRUCTURE DEVELOPMENT AND ON FIXED ASSETS IS N OT DEBITED TO THE DEVELOPMENT RESERVE ACCOUNT WHICH SHOWS THAT THE AS SESSEE HAS ITSELF NOT UTILIZED THE AMOUNT IN THE DEVELOPMENT R ESERVE FOR THE DEVELOPMENT PURPOSES AS CLAIMED. (C) FURTHER, THIS ALSO SHOWS THAT ON ONE HAND, THE ASSESSEE INTENDS TO CLAIM DEPRECIATION AS WELL AS INVESTMENT/PURCHASE O F FIXED ASSETS TOWARDS APPLICATION OF FUND AS ALLOWED U/S 11, HOWE VER, AT THE SAME TIME THE ASSESSEE INTENDS TO IMMUNE THE FUNDS RECEI VED AS DEVELOPMENT FEES FROM THE TAX LIABILITY BY DIRECTLY TAKING THEM TO THE BALANCE SHEET IN THE FORM OF DEVELOPMENT RESERVE. (D) THE ASSESSEE CLAIMS THAT SUCH FUNDS WERE NOT UT ILIZED FOR OPERATIONAL PURPOSES BUT ONLY FOR THE DEVELOPMENT OF THE INSTIT UTION. HOWEVER, ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 16 THE BOOKS OF THE ASSESSEE TELL A DIFFERENT STORY AL TOGETHER. NOWHERE FROM THE BOOKS, IT IS SEEN THAT THE ASSESSEE HAS SP ENT THIS AMOUNT TOWARDS THE DEVELOPMENT OF THE INSTITUTION. THE ASS ESSEE HAS ITSELF NOT QUANTIFIED IN ITS RECORDS AS TO HOW MUCH OF THE AMOUNT FROM THIS DEVELOPMENT RESERVE WAS UTILIZED TOWARDS DEVELOPMEN T OF THE INSTITUTION. THOUGH, THE ASSESSEE HAS SPENT ON INFR ASTRUCTURE PROJECTS DURING THE YEAR BUT AT THE SAME TIME THE ASSESSEE H AS NOT CLAIMED ANY EXPENDITURE FROM THE DEVELOPMENT RESERVE TOWARD S THIS PURPOSE. HENCE, THE CONTENTION OF THE ASSESSEE IN THIS REGAR D IS NOT ACCEPTABLE. 7.2 IN VIEW OF THE ABOVE FACTS AND DISCUSSION, IT I S HELD THAT THE DEVELOPMENT FEES OF RS.4,68,55,950/- COLLECTED BY THE ASSESSEE IS A REVENUE RECEIPT AND MUST BE TAKEN INTO ACCOUNT WHILE COMPUTATION OF THE TOTAL SURPLUS/DEFICIT. THE SAME IS THEREFORE ADDED BACK TO THE TOTAL INCOM E OF THE ASSESSEE FOR THE A.Y. 2015-16. THUS, IT IS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS KEPT THE ENTIRE DEVELOPMENT FEE IN THE DEVELOPMENT RESERVE S EPARATELY AND NOT CLAIMED ANY EXPENDITURE AGAINST THE SAID RESERVE. TH EREFORE, THE TREATMENT OF THE SAID RECEIPT IN THE BOOKS OF ASSESSEE IS NOT DISPUTED BY THE ASSESSING OFFICER AS IT IS KEPT IN THE SEPARATE DEVELOPMENT R ESERVE. THE QUESTION ARISES WHETHER THE DEVELOPMENT FEE RECEIVED BY THE A SSESSEE IS REVENUE IN NATURE OR IT IS CAPITAL. OUR ATTENTION WAS INVITED T O THE ORDERS DATED 18/07/2008 AS WELL AS 04/09/2012 OF GOVERNMENT OF RA JASTHAN. BY THESE ORDERS, THE GOVERNMENT HAS PRESCRIBED THE GUIDELINE S AND FEES STRUCTURE TO BE CHARGED FROM THE STUDENTS BY THE PRIVATE TECHNIC AL INSTITUTIONS APART ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 17 FROM THE OTHER CONDITIONS THAT THE FEE SHOULD BE CO LLECTED SEMESTER WISE AND NOT FOR THE ENTIRE YEAR. IT IS ALSO PRESCRIBED THAT THE DEVELOPMENT AND DEPRECIATION AMOUNT TO BE DEPOSITED IN SEPARATE ACC OUNT CALLED AS DEPRECIATION RESERVE FUND. FURTHER AS PER THE GUIDE LINES, THE INSTITUTIONS ARE PERMITTED TO USE THE DEVELOPMENT FEE FOR SPECIFIC P URPOSE SUCH AS (A) PURCHASE AND REPLACEMENT OF INFRASTRUCTURE, (B) BET TERMENT, GROWTH AND UP-GRADATION OF INSTITUTION AND (C) SPECIAL AMENITI ES TO THE STUDENTS. IT WAS FURTHER PROVIDED THAT THE MANAGEMENT MAY CHARGE DEV ELOPMENT FEE NOT EXCEEDING 15% OF THE TOTAL AMOUNT OF TUITION FEE. TH E DEVELOPMENT FEE IS TO BE TREATED AS CAPITAL RECEIPT AND SHALL BE COLLE CTED ONLY IF THE INSTITUTION MAINTAINS THE DEPRECIATION RESERVE FUND EQUIVALENT TO THE DEPRECIATION CHARGED IN THE REVENUE ACCOUNTS AND COLLECTED UNDER THE REVENUE HEAD AS WELL AS INCOME GENERATED FROM THE INVESTMENTS MADE O UT OF THIS FUND. THUS, THE STATE GOVT. VIDE THESE ORDERS DATED 18/7/2 012 AND 04/9/2012 HAS ALLOWED THE TECHNICAL INSTITUTIONS TO CHARGE DEV ELOPMENT FEE NOT EXCEEDING 15% OF TOTAL TUITION FEE AND FURTHER THE SAID FEE SHOULD BE TREATED AS CAPITAL RECEIPT AND CAN BE UTILIZED ONLY FOR SPECIFIC PURPOSES SUCH AS PURCHASE OR REPLACEMENT OF INFRASTRUCTURE, UP-GR ADATION OF INSTITUTION, SPECIAL AMENITIES TO STUDENTS ETC. HENCE, THE ASSES SEE IS HAVING NO DISCRETION ABOUT UTILIZATION OF THE DEVELOPMENT FEE CHARGED FROM THE STUDENTS BUT THE SAID FEE HAS TO BE UTILIZED FOR TH E SPECIFIC PURPOSE AS ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 18 ALLOWED BY THE GOVERNMENT. THE HON'BLE SUPREME COURT IN THE CASE OF MODERN SCHOOL VS UNION OF INDIA (SUPRA) WHILE CONSID ERING THE PROVISIONS OF DELHI SCHOOL EDUCATION ACT, 1973 AS WELL AS THE DELH I EDUCATION RULES HAS OBSERVED AS UNDER: THE JUDGMENT IN TMA PAI FOUNDATION'S CASE WAS DELIV ERED ON 31.10.2002. THE UNION OF INDIA, STATE GOVERNMENTS AND EDUCATIONAL I NSTITUTIONS UNDERSTOOD THE MAJORITY JUDGMENT IN THAT CASE IN DIFFERENT PERSPEC TIVES. IT LED TO LITIGATIONS IN SEVERAL COURTS. UNDER THE CIRCUMSTANCES, A BENCH OF FIVE JU DGES WAS CONSTITUTED IN THE CASE OF ISLAMIC ACADEMY OF EDUCATION V. STATE OF KARNATA KA REPORTED IN [(2003) 6 SCC 697] SO THAT DOUBTS/ANOMALIES, IF ANY, COULD BE CLARIFIE D. ONE OF THE ISSUES WHICH AROSE FOR DETERMINATION CONCERNED DETERMINATION OF THE FEE ST RUCTURE IN PRIVATE UNAIDED PROFESSIONAL EDUCATIONAL INSTITUTIONS. IT WAS SUBMI TTED ON BEHALF OF THE MANAGEMENTS THAT SUCH INSTITUTIONS HAD BEEN GIVEN C OMPLETE AUTONOMY NOT ONLY AS REGARDS ADMISSION OF STUDENTS BUT ALSO AS REGARDS D ETERMINATION OF THEIR OWN FEE STRUCTURE. IT WAS SUBMITTED THAT THESE INSTITUTIONS WERE ENTITLED TO FIX THEIR OWN FEE STRUCTURE WHICH COULD INCLUDE A REASONABLE REVENUE SURPLUS FOR THE PURPOSE OF DEVELOPMENT OF EDUCATION AND EXPANSION OF THE INSTI TUTION. IT WAS SUBMITTED THAT SO LONG AS THERE WAS NO PROFITEERING, THERE COULD BE N O INTERFERENCE BY THE GOVERNMENT. AS AGAINST THIS, ON BEHALF OF UNION OF INDIA, STATE GOVERNMENTS AND SOME OF THE STUDENTS, IT WAS SUBMITTED, THAT THE RIGHT TO SET-U P AND ADMINISTER AN EDUCATIONAL INSTITUTION IS NOT AN ABSOLUTE RIGHT AND IT IS SUBJ ECT TO REASONABLE RESTRICTIONS. IT WAS SUBMITTED THAT SUCH A RIGHT IS SUBJECT TO PUBLIC AN D NATIONAL INTERESTS. IT WAS CONTENDED THAT IMPARTING EDUCATION WAS A STATE FUNC TION BUT DUE TO RESOURCE CRUNCH, THE STATES WERE NOT IN A POSITION TO ESTABL ISH SUFFICIENT NUMBER OF EDUCATIONAL INSTITUTIONS AND CONSEQUENTLY THE STATE S WERE PERMITTING PRIVATE EDUCATIONAL INSTITUTIONS TO PERFORM STATE FUNCTIONS . IT WAS SUBMITTED THAT THE GOVERNMENT HAD A STATUTORY RIGHT TO FIX THE FEES TO ENSURE THAT THERE WAS NO PROFITEERING. BOTH SIDES RELIED UPON VARIOUS PASSAG ES FROM THE MAJORITY JUDGMENT IN TMA PAI FOUNDATION'S CASE. IN VIEW OF RIVAL SUBMISS IONS, FOUR QUESTIONS WERE FORMULATED. WE ARE CONCERNED WITH FIRST QUESTION, N AMELY, WHETHER THE EDUCATIONAL INSTITUTIONS ARE ENTITLED TO FIX THEIR OWN FEE STRU CTURE. IT WAS HELD THAT THERE COULD BE NO RIGID FEE STRUCTURE. EACH INSTITUTE MUST HAVE FR EEDOM TO FIX ITS OWN FEE STRUCTURE, AFTER TAKING INTO ACCOUNT THE NEED TO GENERATE FUND S TO RUN THE INSTITUTION AND TO PROVIDE FACILITIES NECESSARY FOR THE BENEFIT OF THE STUDENTS. THEY MUST BE ABLE TO GENERATE SURPLUS WHICH MUST BE USED FOR BETTERMENT AND GROWTH OF THAT EDUCATIONAL INSTITUTION. THE FEE STRUCTURE MUST BE FIXED KEEPIN G IN MIND THE INFRASTRUCTURE AND FACILITIES AVAILABLE, INVESTMENT MADE, SALARIES PAI D TO TEACHERS AND STAFF, FUTURE PLANS ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 19 FOR EXPANSION AND/OR BETTERMENT OF INSTITUTION SUBJ ECT TO TWO RESTRICTIONS, NAMELY, NON-PROFITEERING AND NON- CHARGING OF CAPITATION FE ES. IT WAS HELD THAT SURPLUS/PROFIT CAN BE GENERATED BUT THEY SHALL BE USED FOR THE BEN EFIT OF THAT EDUCATIONAL INSTITUTION. IT WAS HELD THAT PROFITS/SURPLUS CANNO T BE DIVERTED FOR ANY OTHER USE OR PURPOSES AND CANNOT BE USED FOR PERSONAL GAINS OR F OR OTHER BUSINESS OR ENTERPRISE. THE COURT NOTICED THAT THERE WERE VARIOUS STATUTES/ REGULATIONS WHICH GOVERNED THE FIXATION OF FEE AND, THEREFORE, THIS COURT DIRECTED THE RESPECTIVE STATE GOVERNMENTS TO SET UP COMMITTEE HEADED BY A RETIRED HIGH COURT JUDGE TO BE NOMINATED BY THE CHIEF JUSTICE OF THAT STATE TO APPROVE THE FEE STRU CTURE OR TO PROPOSE SOME OTHER FEE WHICH COULD BE CHARGED BY THE INSTITUTE. IN THE LIGHT OF THE JUDGMENT OF THIS COURT IN THE C ASE OF ISLAMIC ACADEMY OF EDUCATION (SUPRA) THE PROVISIONS OF 1973 ACT AND THE RULES FR AMED THEREUNDER MAY BE SEEN. THE OBJECT OF THE SAID ACT IS TO PROVIDE BETTER ORGANIZ ATION AND DEVELOPMENT OF SCHOOL EDUCATION IN DELHI AND FOR MATTERS CONNECTED THERET O. SECTION 18(3) OF THE ACT STATES THAT IN EVERY RECOGNIZED UNAIDED SCHOOL, THERE SHAL L BE A FUND, TO BE CALLED AS RECOGNIZED UNAIDED SCHOOL FUND CONSISTING OF INCOME ACCRUING TO THE SCHOOL BY WAY OF FEES, CHARGES AND CONTRIBUTIONS. SECTION I8(4)(A ) STATES THAT INCOME DERIVED BY UNAIDED SCHOOLS BY WAY OF FEES SHALL BE UTILIZED ON LY FOR THE EDUCATIONAL PURPOSES AS MAY BE PRESCRIBED BY THE RULES. RULE 172(1) STATES THAT NO FEE SHALL HE COLLECTED FROM ANY STUDENT BY THE TRUST/SOCIETY RUNNING ANY RECOGN IZED SCHOOL; WHETHER AIDED OR UNAIDED. THAT UNDER RULE 172(2), EVERY FEE COLLECTE D FROM ANY STUDENT BY A RECOGNIZED SCHOOL, WHETHER AIDED OR NOT, SHALL BE C OLLECTED IN THE NAME OF THE SCHOOL. RULE 173(4) INTER ALIA STATES THAT EVERY RECOGNIZED UNAIDED SCHOOL FUND SHALL BE DEPOSITED IN A NATIONALIZED BANK. UNDER RULE 175, T HE ACCOUNTS OF RECOGNIZED UNAIDED SCHOOL FUND SHALL CLEARLY INDICATE THE INCO ME ACCRUING TO THE SCHOOL BY WAY OF FEES, FINE, INCOME FROM RENT, INCOME BY WAY OF I NTEREST, INCOME BY WAY OF DEVELOPMENT FEES ETC. RULE 177 REFERS TO UTILIZATIO N OF FEES REALIZED BY UNAIDED RECOGNIZED SCHOOL. THEREFORE, RULE 175 INDICATES AC CRUAL OF INCOME WHEREAS RULE 177 INDICATES UTILIZATION OF THAT INCOME. THEREFORE, RE ADING SECTION 18(4) WITH RULES 172,173, 174,175 AND 177 ON ONE HAND AND SECTION 17 (3) ON THE OTHER HAND, IT IS CLEAR THAT UNDER THE ACT, THE DIRECTOR IS AUTHORIZE D TO REGULATE THE FEES AND OTHER CHARGES TO PREVENT COMMERCIALIZATION OF EDUCATION. UNDER SECTION 17(3), THE SCHOOL HAS TO FURNISH A FULL STATEMENT OF FEES IN ADVANCE BEFORE THE COMMENCEMENT OF THE ACADEMIC SESSION. READING SECTION 17(3) WITH SECTIO N I 8(3)&(4) OF THE ACT AND THE RULES QUOTED ABOVE, IT IS CLEAR THAT THE DIRECTOR H AS THE AUTHORITY TO REGULATE THE FEES UNDER SECTION 17(3) OF THE ACT. THE SECOND POINT FOR DETERMINATION IS WHETHER CLAUS E (8) OF THE ORDER PASSED BY THE DIRECTOR ON 15TH DECEMBER 1999 (HEREINAFTER REFERRE D TO AS 'THE SAID ORDER') UNDER SECTION 24(3) OF THE ACT IS CONTRARY TO RULE 177? ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 20 IT WAS ARGUED ON BEHALF OF THE MANAGEMENT THAT RULE 177 ALLOWS THE SCHOOLS TO INCUR CAPITAL EXPENDITURE IN RESPECT OF THE SAME SCHOOL O R TO ASSIST ANY OTHER SCHOOL OR TO SET UP ANY OTHER SCHOOL UNDER THE SAME MANAGEMENT A ND CONSEQUENTLY, THE DIRECTOR HAD NO AUTHORITY UNDER CLAUSE (8) TO RESTRAIN THE S CHOOL FROM TRANSFERRING THE FUNDS FROM THE RECOGNIZED UNAIDED SCHOOL FUND TO THE SOCI ETY OR THE TRUST OR ANY OTHER INSTITUTION AND, THEREFORE, CLAUSE (8) WAS IN CONFL ICT WITH RULE 177. WE DO NOT FIND MERIT IN THE ABOVE ARGUMENTS. BEFORE ANALYZING THE RULES HEREIN, IT MAY BE POINTED OUT, THAT AS OF TODAY, WE HAVE GENER ALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP). AS STATED ABOVE, COMMERCIALIZATI ON OF EDUCATION HAS BEEN A PROBLEM AREA FOR THE LAST SEVERAL YEARS. ONE OF THE METHODS OF ERADICATING COMMERCIALIZATION OF EDUCATION IN SCHOOLS IS TO INS IST ON EVERY SCHOOL FOLLOWING PRINCIPLES OF ACCOUNTING APPLICABLE TO NOT-FOR-PROF IT ORGANIZATIONS/ NON- BUSINESS ORGANIZATIONS. UNDER THE GENERALLY ACCEPTED ACCOUNT ING PRINCIPLES, EXPENSE IS DIFFERENT FROM EXPENDITURE. ALL OPERATIONAL EXPENSE S FOR THE CURRENT ACCOUNTING YEAR LIKE SALARY AND ALLOWANCES PAYABLE TO EMPLOYEES, RE NT FOR THE PREMISES, PAYMENT OF PROPERTY TAXES ARE CURRENT REVENUE EXPENSES. THESE EXPENSES ENTAIL BENEFITS DURING THE CURRENT ACCOUNTING PERIOD. EXPENDITURE, ON THE OTHER HAND, IS FOR ACQUISITION OF AN ASSET OF AN ENDURING NATURE WHICH GIVES BENEFITS SPREAD OVER MANY ACCOUNTING PERIODS, LIKE PURCHASE OF PLANT AND MACHINERY, BUIL DING ETC. THEREFORE, THERE IS A DIFFERENCE BETWEEN REVENUE EXPENSES AND CAPITAL EXP ENDITURE. LASTLY, WE MUST KEEP IN MIND THAT ACCOUNTING HAS A LINKAGE WITH LAW. ACC OUNTING OPERATES WITHIN LEGAL FRAMEWORK. THEREFORE, BANKING, INSURANCE AND ELECTR ICITY COMPANIES HAVE THEIR OWN FORM OF BALANCE-SHEETS UNLIKE BALANCE-SHEETS PRESCR IBED FOR COMPANIES UNDER THE COMPANIES ACT 1956. THEREFORE, WE HAVE TO LOOK AT T HE ACCOUNTS OF NON-BUSINESS ORGANIZATIONS LIKE SCHOOLS, HOSPITALS ETC. IN THE L IGHT OF THE STATUTE IN QUESTION. IN THE LIGHT OF THE ABOVE OBSERVATIONS, WE ARE REQU IRED TO ANALYSE RULES 172,175,176 AND 177 OF 1973 RULES. THE ABOVE RULES INDICATE THE MANNER IN WHICH ACCOUNTS ARE REQUIRED TO BE MAINTAINED BY THE SCHOOLS. UNDER SEC TION 18(3) OF THE SAID ACT EVERY RECOGNISED SCHOOL SHALL HAVE A FUND TITLED 'RECOGNI SED UNAIDED SCHOOL FUND'. IT IS IMPORTANT TO BEAR IN MIND THAT IN EVERY NON-BUSINES S ORGANIZATION, ACCOUNTS ARE TO BE MAINTAINED ON THE BASIS OF WHAT IS KNOWN AS 'FUN D BASED SYSTEM OF ACCOUNTING'. SUCH SYSTEM BRINGS ABOUT TRANSPARENCY. SECTION 18(3 ) OF THE ACT SHOWS THAT SCHOOLS HAVE TO MAINTAIN FUND BASED SYSTEM OF ACCOUNTING. T HE SAID FUND, CONTEMPLATED BY SECTION 18(3), SHALL CONSIST OF INCOME BY WAY OF FE ES, FINE, RENT, INTEREST ETC. SECTION 18(3) IS TO BE READ WITH RULE 175. READING THE TWO TOGETHER, IT IS CLEAR THAT EACH ITEM OF INCOME SHALL BE ACCOUNTED FOR SEPARATELY UNDER T HE COMMON HEAD, NAMELY, RECOGNISED UNAIDED SCHOOL FUND. FURTHER, RULE 175 I NDICATES ACCRUAL OF INCOME UNLIKE RULE 177 WHICH DEALS WITH UTILIZATION OF INC OME. RULE 177 DOES NOT COVER ALL THE ITEMS OF INCOME MENTIONED IN RULE 175. RULE 177 ONL Y DEALS WITH ONE ITEM OF INCOME ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 21 FOR THE SCHOOL, NAMELY, FEES. RULE 177(1) SHOWS THA T SALARIES, ALLOWANCES AND BENEFITS TO THE EMPLOYEES SHALL CONSTITUTE DEDUCTION FROM TH E INCOME IN THE FIRST INSTANCE. THAT AFTER SUCH DEDUCTION, SURPLUS IF ANY, SHALL BE APPROPRIATED TOWARDS, PENSION, GRATUITY, RESERVES AND OTHER ITEMS OF APPROPRIATION S ENUMERATED IN RULE 177(2) AND AFTER SUCH APPROPRIATION THE BALANCE (SAVINGS) SHAL L BE UTILIZED TO MEET CAPITAL EXPENDITURE OF THE SAME SCHOOL OR TO SET UP ANOTHER SCHOOL UNDER THE SAME MANAGEMENT. THEREFORE, RULE 177 DEALS WITH APPLICAT ION OF INCOME AND NOT WITH ACCRUAL OF INCOME. THEREFORE, RULE 177 SHOWS THAT S ALARIES AND ALLOWANCES SHALL COME OUT FROM THE FEES WHEREAS CAPITAL EXPENDITURE WILL BE A CHARGE ON THE SAVINGS. THEREFORE, CAPITAL EXPENDITURE CANNOT CONSTITUTE A COMPONENT OF THE FINANCIAL FEES STRUCTURE AS IS SUBMITTED ON BEHALF OF THE SCHOOLS. IT ALSO SHOWS THAT SALARIES AND ALLOWANCES ARE REVENUE EXPENSES INCURRED DURING THE CURRENT YEAR AND, THEREFORE, THEY HAVE TO COME OUT OF THE FEES FOR THE CURRENT Y EAR WHEREAS CAPITAL EXPENDITURE/CAPITAL INVESTMENTS HAVE TO COME FROM T HE SAVINGS, IF ANY, CALCULATED IN THE MANNER INDICATED ABOVE. IT IS FOR THIS REASON T HAT UNDER SECTION 17(3) OF THE ACT, EVERY SCHOOL IS REQUIRED TO FILE A STATEMENT OF FEE S WHICH THEY WOULD LIKE TO CHARGE DURING THE ENSUING ACADEMIC YEAR WITH THE DIRECTOR. IN THE LIGHT OF THE ANALYSIS MENTIONED ABOVE, WE ARE DIRECTING THE DIRECTOR TO A NALYSE SUCH STATEMENTS UNDER SECTION 17(3) OF THE ACT AND TO APPLY THE ABOVE PRI NCIPLES IN EACH CASE. THIS DIRECTION IS REQUIRED TO BE GIVEN AS WE HAVE GONE THROUGH THE BALANCE- SHEETS AND PROFIT AND LOSS ACCOUNTS OF TWO SCHOOLS AND PRIMA FACIE, WE FI ND THAT SCHOOLS ARE BEING RUN ON PROFIT BASIS AND THAT THEIR ACCOUNTS ARE BEING MAIN TAINED AS IF THEY ARE CORPORATE BODIES. THEIR ACCOUNTS ARE NOT MAINTAINED ON THE PR INCIPLES OF ACCOUNTING APPLICABLE TO NON-BUSINESS ORGANIZATIONS/NOT-FOR- PROFIT ORGAN IZATIONS. AS STATED ABOVE, IT WAS ARGUED THAT CLAUSE 8 OF THE ORDER OF DIRECTOR WAS IN CONFLICT WITH RULE 177. WE DO NOT FIND ANY MERIT IN THIS ARG UMENT. RULE 177(1) REFERS TO INCOME DERIVED BY UNAIDED REC OGNIZED SCHOOL BY WAY OF FEES AND THE MANNER IN WHICH IT SHALL BE APPLIED/UTILIZE D. ACCRUAL OF INCOME IS INDICATED BY RULE 175, WHICH STATES THAT INCOME ACCRUING TO THE SCHOOL BY WAY OF FEES, FINE, RENT, INTEREST, DEVELOPMENT FEES SHALL FORM PART OF RECOG NIZED UNAIDED SCHOOL FUND ACCOUNT. THEREFORE, EACH ITEM OF INCOME HAS TO BE S EPARATELY ACCOUNTED FOR. THIS IS NOT BEING DONE IN THE PRESENT CASE. RULE 177(1) FUR THER PROVIDES THAT INCOME FROM FEES SHALL BE UTILIZED IN THE FIRST INSTANCE FOR PA YING SALARIES AND OTHER ALLOWANCES TO THE EMPLOYEES AND FROM THE BALANCE THE SCHOOL SHALL PROVIDE FOR PENSION, GRATUITY, EXPANSION OF THE SAME SCHOOL, CAPITAL EXPENDITURE F OR DEVELOPMENT OF THE SAME SCHOOL, RESERVE FUND ETC. AND THE NET SAVINGS ALONE SHALL BE APPLIED FOR ESTABLISHMENT OF ANY OTHER RECOGNIZED SCHOOL UNDER RULE 177(I)(B) . UNDER ACCOUNTING PRINCIPLES, THERE IS A DIFFERENCE BETWEEN APPROPRIATION OF SURP LUS (INCOME) ON ONE HAND AND TRANSFER OF FUNDS ON THE OTHER HAND. IN THE PRESENT CASE, RULE 177(1) REFERS TO ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 22 APPROPRIATION OF SAVINGS WHEREAS CLAUSE 8 OF THE OR DER OF DIRECTOR PROHIBITS TRANSFER OF FUNDS TO ANY OTHER INSTITUTION OR SOCIETY. THIS VIEW IS FURTHER SUPPORTED BY RULE 172 WHICH STATES THAT NO FEE SHALL BE COLLECTED FROM TH E STUDENT BY ANY TRUST OR SOCIETY. THAT FEES SHALL BE COLLECTED FROM THE STUDENT ONLY FOR THE SCHOOL AND NOT FOR THE TRUST OR THE SOCIETY. THEREFORE, ONE HAS TO READ RULE 172 WITH RULE 177. UNDER RULE 175, FEES COLLECTED FROM THE SCHOOL HAVE TO BE CREDITED TO RE COGNIZED UNAIDED SCHOOL FUND. THEREFORE, READING RULES 172,175 AND 177, IT IS CLE AR THAT APPROPRIATION OF SAVINGS (INCOME) IS DIFFERENT FROM TRANSFER OF FUND. UNDER CLAUSE 8, THE MANAGEMENT IS RESTRAINED FROM TRANSFERRING ANY AMOUNT FROM RECOGN IZED UNAIDED SCHOOL FUND TO THE SOCIETY OR THE TRUST OR ANY OTHER INSTITUTION, WHEREAS RULE 177(1) REFERS TO APPROPRIATION OF SAVINGS (INCOME) FROM REVENUE ACCO UNT FOR MEETING CAPITAL EXPENDITURE OF THE SCHOOL. IN THE CIRCUMSTANCES, TH ERE IS NO CONFLICT BETWEEN RULE 177 AND CLAUSE 8. THE THIRD POINT WHICH ARISES FOR DETERMINATION IS W HETHER THE MANAGEMENTS OF RECOGNISED UNAIDED SCHOOLS ARE ENTITLED TO SET UP A DEVELOPMENT FUND ACCOUNT? IN OUR VIEW, ON ACCOUNT OF INCREASED COST DUE TO IN FLATION, THE MANAGEMENT IS ENTITLED TO CREATE DEVELOPMENT FUND ACCOUNT. FOR CR EATING SUCH DEVELOPMENT FUND, THE MANAGEMENT IS REQUIRED TO COLLECT DEVELOPMENT F EES. IN THE PRESENT CASE, PURSUANT TO THE RECOMMENDATION OF DUGGAL COMMITTEE, DEVELOPMENT FEES COULD BE LEVIED AT THE RATE NOT EXCEEDING 10% TO 15% OF TOTA L ANNUAL TUITION FEE. DIRECTION NO.7 FURTHER STATES THAT DEVELOPMENT FEES NOT EXCEE DING 10% TO 15% OF TOTAL ANNUAL TUITION TEE SHALL BE CHARGED FOR SUPPLEMENTING THE RESOURCES FOR PURCHASE, UPGRADATION AND REPLACEMENT OF FURNITURE, FIXTURES AND EQUIPMENTS. IT FURTHER STATES THAT DEVELOPMENT FEES SHALL BE TREATED AS CAPITAL R ECEIPT AND SHALL BE COLLECTED ONLY IF THE SCHOOL MAINTAINS A DEPRECIATION RESERVE, FUN D. IN OUR VIEW, DIRECTION NO.7 IS APPROPRIATE. IF ONE GOES THROUGH THE REPORT OF DUGG AL COMMITTEE, ONE FINDS ABSENCE OF NON-CREATION OF SPECIFIED EARMARKED FUND. ON GOI NG THROUGH THE REPORT OF DUGGAL COMMITTEE, ONE FINDS FURTHER THAT DEPRECIATION HAS BEEN CHARGED WITHOUT CREATING A CORRESPONDING FUND. THEREFORE, DIRECTION NO.7 SEEKS TO INTRODUCE A PROPER ACCOUNTING PRACTICE TO BE FOLLOWED BY NON-BUSINESS ORGANIZATIO NS/NOT-FOR-PROFIT ORGANIZATION. WITH THIS CORRECT PRACTICE BEING INTRODUCED, DEVELO PMENT FEES FOR SUPPLEMENTING THE RESOURCES FOR PURCHASE, UPGRADATION AND REPLACEMENT S OF FURNITURE AND FIXTURES AND EQUIPMENTS IS JUSTIFIED. TAKING INTO ACCOUNT THE CO ST OF INFLATION BETWEEN 15TH DECEMBER, 1999 AND 31ST DECEMBER, 2003 WE ARE OF TH E VIEW THAT THE MANAGEMENT OF RECOGNIZED UNAIDED SCHOOLS SHOULD BE PERMITTED T O CHARGE DEVELOPMENT FEE NOT EXCEEDING 15% OF THE TOTAL ANNUAL TUITION FEE. TO SUM UP, THE INTERPRETATION WE HAVE PLACED ON THE PROVISIONS OF THE SAID 1973 ACT IS ONLY TO BRING IN TRANSPARENCY, ACCOUNTABILITY, E XPENDITURE MANAGEMENT AND ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 23 UTILIZATION OF SAVINGS FOR CAPITAL EXPENDITURE/INVE STMENT WITHOUT INFRINGEMENT OF THE AUTONOMY OF THE INSTITUTE IN THE MATTER OF FEE FIXA TION. IT IS ALSO TO PREVENT COMMERCIALIZATION OF EDUCATION TO THE EXTENT POSSIB LE. THUS, THE HON'BLE SUPREME COURT WHILE CONSIDERING THE RECOMMENDATION OF DUGGAL COMMITTEE HAS HELD THAT THE DEVELOPMENT FEE COULD BE LEVIED AT THE RATE NOT EXCEEDING 10 TO 15% OF THE TOTAL ANNUAL TU ITION FEE. FURTHER THE SAID FEE SHALL BE TREATED AS CAPITAL RECEIPT AND SH ALL BE COLLECTED ONLY IF SCHOOL MAINTAINS A DEPRECIATION RESERVE FUND. HENCE , THE DEVELOPMENT FEE COLLECTED FROM THE STUDENTS CAN BE USED ONLY FOR TH E SPECIFIC PURPOSE INCURRING CAPITAL EXPENDITURE. THE HONBLE KARNATAK A HIGH COURT IN THE CASE OF CIT VS. CHILDRENS EDUCATION SOCIETY (SUPRA) HAS CONSIDERED THIS QUESTION IN PARA 27 AS UNDER: 27. THIS ADDITION RELATES TO ASSESSMENT YEAR 2001 TO 2003. THIS ADDITION IS UNDER THE HEAD OF BUILDING FUND. THE ASSESSING AUTHORITY TREATED THE BUILDING FUND AS REVENUE RECEIPT. ACCORDING TO THE SOCIETY EVEN I F THE ADDITION IS CONSIDERED AS INCOME, THAT SUM BEING AN INCOME OF THE SOCIETY THEY CAN CLAIM FOR EXEMPTION UNDER SECTION 10(23C) OF THE ACT. THEREFO RE THE SOCIETY SOUGHT FOR EXEMPTION. THE TRIBUNAL HELD THAT THE BUILDING FUND ARE RECEIVED SPECIFICALLY TOWARDS THE CORPUS OF THE ASSESSEE-SOCIETY FOR BEIN G APPLIED IN THE CONSTRUCTION OF THE BUILDING, THE RECEIPT IS CAPITA L IN NATURE AND THEREFORE IT IS CREDITED DIRECTLY TO THE CORPUS FUND. THE GRIEVANCE IS, THE ASSESSING AUTHORITY HAS CONSIDERED THE SAME AS REVENUE RECEIPT AND HAS MADE ADDITION. IT IS NOT IN DISPUTE THAT THE ASSESSEE AND THE VARIOUS EDUCATION AL INSTITUTIONS RUN BY THE ASSESSEE HAVE RECEIVED SUBSTANTIAL DONATIONS. THE A MOUNT SO RECEIVED FROM THE BUILDING FUND IS NOT INCLUDED IN THE INCOME AND EXP ENDITURE ACCOUNT OF THE SOCIETY. THE AMOUNTS RECEIVED ARE ACCOUNTED UNDER T HE BUILDING FUND. BUILDING IS TO BE CONSTRUCTED ONLY FOR THE EDUCATIONAL INSTI TUTION RUN BY THE SOCIETY. THE OBJECT OF DONATION IS CHARITY IN NATURE. THEREFORE THE TRIBUNAL GRANTED THE BENEFIT OF EXEMPTION. ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 24 ACCORDINGLY, IT WAS HELD BY THE HON'BLE SUPREME COUR T AS WELL AS THE HON'BLE HIGH COURT THAT THE BUILDING FUND IS A CAPI TAL IN NATURE AND THEREFORE IS CREDITED DIRECTLY TO THE CORPUS FUND A ND THE SAME WILL NOT BE INCLUDED IN THE INCOME AND EXPENDITURE ACCOUNT OF T HE TRUST/INSTITUTION. HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF TH E CASE AS WELL AS THE DECISIONS RELIED UPON BY THE LD AR, WE HOLD THAT THE DEVELOPMENT FEE RECEIVED BY THE ASSESSEE FROM THE STUDENTS AS PER T HE GUIDELINES FIXING THE FEE STRUCTURE BY THE STATE GOVERNMENT FOR THE TECHN ICAL INSTITUTIONS AND APPLYING THE OTHER CONDITIONS AS SPECIFIED IN THE O RDERS OF THE STATE GOVT. IS CAPITAL IN NATURE AND NOT REVENUE. THE DECISION AS R ELIED UPON BY THE LD CIT-DR IN THE CASE OF ACIT VS. M/S SCHOLARS EDUCATIO N TRUST OF INDIA (SUPRA) IS BASED ON DIFFERENT SET OF FACTS AND IT WA S NOT EITHER PLEADED OR BROUGHT ON RECORD BY THE ASSESSEE IN THE SAID CASE THAT THE DEVELOPMENT FEE WAS TO BE USED FOR SPECIFIC PURPOSE. HENCE, THE TRIBUNAL HAS GIVEN THE FINDING BASED ON THE FACT THAT THE SAID FEE WAS NOT PART OF THE CORPUS FUND OF THE ASSESSEE TRUST. ACCORDINGLY, WE DELETE THE ADD ITION MADE BY THE ASSESSING OFFICER ON THIS ACCOUNT. 13. GROUND NO. 5 & 6 OF THE APPEAL ARE REGARDING TH E ADDITION OF RS. 71,18,248/- ON ACCOUNT OF REGISTRATION RECEIPT, BOO K BANK RECEIPT AND LATE FEE RECEIPTS ETC. AND NOT ALLOWING THE CAPITAL EXPEN DITURE AS APPLICATION OF INCOME FOR COMPUTING INCOME OF THE TRUST. ITA 1066/JP/2018_ GLOBAL INSTITUTE OF TECHNOLOGY VS. DCIT(E) 25 14. AT THE TIME OF HEARING, THE LD AR OF THE ASSESS EE STATED AT BAR THAT THE ASSESSEE DOES NOT PRESS GROUND NO. 5 AND 6 OF T HE APPEAL AND PLEADED THAT THE SAME MAY BE DISMISSED AS NOT PRESSED. THE L D CIT-DR HAS RAISED NO OBJECTION IF GROUNDS NO. 5 AND 6 ARE DISMISSED A S NOT PRESSED. ACCORDINGLY, GROUNDS NO. 5 AND 6 OF THE ASSESSEES APPEAL ARE DISMISSED BEING NOT PRESSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/11/2018. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05 TH NOVEMBER, 2018 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- GLOBAL INSTITUTE OF TECHNOLOGY, JAIPUR . 2. IZR;FKHZ @ THE RESPONDENT- THE DCIT(E), CIRCLE, JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1066/JP/2018) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR