DDIT, V. M/s Kammavari Sangha,

ITA 207/BANG/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80724 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 12-05-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-02-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUNIL KUMAR AGARWALA JT; SANJAY KUMAR CITIII
• Assessee Lawyers: S VENKATESAN
• Keywords: Charitable institution; Principle of natural justice; Competent authority; Assessment record; Capital receipt; Benefit of exemption; Cancellation of registration
• Section: 133(6); 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NOS.206 & 207/BANG/2014 ASSESSMENT YEARS : 2009-10 & 2010-11 THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1), BANGALORE. VS. M/S. KAMMAVARI SANGHAM, NO.145/4, MOUNT JOY EXTENSION, HANUMANTHANAGAR, BANGALORE 560 019. PAN: AAATK 2287R APPELLANT RESPONDENT ITA NO.1099/BANG/2015 ASSESSMENT YEAR : 2011-12 M/S. KAMMAVARI SANGHAM, NO.145/4, MOUNT JOY EXTENSION, HANUMANTHANAGAR, BANGALORE 560 019. PAN: AAATK 2287R VS. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1), BANGALORE. APPELLANT RESPONDENT REVENUE BY : SHRI SANJAY KUMAR, CIT-III & SHRI SUNIL KUMAR AGARWALA, JT. CIT(DR) ASSESSEE BY : SHRI S. VENKATESAN, CA DATE OF HEARING : 12.05.2016 DATE OF PRONOUNCEMENT : 17.06.2016 ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 2 OF 31 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THESE APPEALS ARE PREFERRED BY THE REVENUE AS WEL L AS THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE CIT(A PPEALS). SINCE THE ISSUES INVOLVED IN THESE APPEALS ARE ALMOST COMMON, WE HEARD THE APPEALS TOGETHER AND AS SUCH THESE ARE BEING DISPOS ED OF THROUGH THIS CONSOLIDATED ORDER. 2. ITA NOS.206 & 207/BANG/2014 ARE THE REVENUES A PPEALS IN WHICH THE ORDER OF CIT(APPEALS) IS ASSAILED BY THE REVENU E ON THE SOLITARY GROUND THAT THE CIT(APPEALS) HAS ERRED IN HOLDING THAT THE ASSESSEE IS ENGAGED IN CHARITABLE ACTIVITIES BY IMPARTING EDUCATION, HAVIN G IGNORED THE FACTS THAT THE CAPITATION FEE/DONATIONS WERE COLLECTED BY THE ASSESSEE TRUST FROM THE PARENTS OF STUDENTS OVER AND ABOVE THE REGULAR FEES IN VIOLATION OF KARNATAKA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1984. HOWEVER, FOR THE SAKE OF REFERENCE, WE EXTRA CT THE GROUNDS IN ITA NO.206/BANG/2014 HEREUNDER:- I) THE ORDER OF THE CIT(A) ON THE ISSUE OF CAPITA TION FEE / DONATIONS COLLECTED BY THE ASSESSEE TRUST OVER AND ABOVE THE REGULAR TUITION FEE AND VIOLATION OF KARNATAKA EDUC ATIONAL INSTITUTION PROHIBITION OF CAPITATION FEE ACT, 1984 , CANNOT BE ACCEPTED FOR THE REASON THAT, THE ASSESSEE IS BASIC ALLY AN ENTITY EXISTING FOR CHARITABLE PURPOSES AND IMPARTI NG EDUCATION, BEING AN OBJECT OF THE TRUST, SHOULD NOT INDULGE IN COLLECTING HEFTY MONEY IN THE FORM OF DONATIONS, FOR WHICH, AS BROUG HT OUT BY THE AO IN THE ASSESSMENT ORDER, PARENTS WERE FORCED TO BORROW LOANS TO GET THEIR WARDS ADMITTED TO THE SAID COLLEGE. ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 3 OF 31 II) THE OPINION OF THE CIT(A), MYSORE THAT THE AO IS NOT THE COMPETENT AUTHORITY TO HOLD THAT THE APPELLANT HAS COMMITTED VIOLATIONS IS NOT ACCEPTABLE FOR THE REASON THAT, T HE AO IS DUTY BOUND TO LOOK OUT FOR ANY VIOLATIONS COMMITTED BY T HE ENTITIES CLAIMING EXEMPTION AND WHETHER THE ENTITY IS CARRYI NG ON ITS ACTIVITIES ON CHARITABLE FOOTING, BEFORE ALLOWING S UCH EXEMPTIONS CLAIMED, WHICH HAS BEEN RIGHTLY DONE BY THE AO AFTER BRINGING ON RECORD THE RELEVANT FACTS AFTER INVESTI GATION AND DISALLOWING THE CLAIM OF EXEMPTION OF THE ASSESSEE TRUST. III) THE OBSERVATION OF THE CIT(A) THAT SO LONG AS THE INCOME FROM THE CHARITABLE ACTIVITY, I.E., PROFITS EARNED FROM THE EDUCATIONAL ACTIVITIES IS APPLIED FOR THE OBJECTS O F THE TRUST OR SOCIETY, THERE IS NO EMBARGO ON THE NATURE OF INCOM E THAT FEEDS THE CHARITY EXCEPT IN THE CASE OF ANY ACTIVITY THAT FALLS WITHIN THE LIMB 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', IS NOT ACCEPTABLE FOR THE REASON THAT, BY WAY OF COLLECTING CAPITATIO N FEE IN THE GUISE OF VOLUNTARY CONTRIBUTIONS FROM THE STUDENTS OVER & ABOVE THE PRESCRIBED FEES, THE SOCIETY HAS ACTED AGAINST THE OBJECTS FOR WHICH THE SOCIETY IS ESTABLISHED, VIZ., HELPING THE BACKWARD STUDENTS FROM KAMMA COMMUNITY IN IMPARTING EDUCATIO N AND ALSO TO HELP THE DESERVING STUDENTS BY GIVING FREE EDUCATION AND SCHOLARSHIPS. 3. ITA NO.1099/BANG/2015 IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF CIT(APPEALS) FOR THE AY 2011-1 2 ON VARIOUS GROUNDS, BUT THEY ALL RELATE TO DENIAL OF EXEMPTION U/S. 11 OF THE ACT ON ACCOUNT OF RECEIPT OF CAPITATION FEES FROM THE STUDENTS. WE, HOWEVER, FOR THE SAKE OF REFERENCE EXTRACT THE GROUNDS RAISED IN ASSESSEES APPEAL ALSO:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED CIT[A] HAS ERRED IN UPHOLDING THE O RDER OF THE LEARNED A.O. IN DENYING EXEMPTION U/S.11 OF THE ACT , TO THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 4 OF 31 APPELLANT'S CASE ESPECIALLY BY DISSENTING FROM THE DECISION OF THE PREDECESSOR CIT[A] IN THE APPELLANT'S OWN CASE AND BY NOT FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH C OURT IN THE CASE OF CHILDRENS EDUCATIONAL SOCIETY REPORTED IN 358 ITR 395, WHICH RATIO HAS BEEN UPHELD BY IMPLICATION IN THE CASE QUEEN'S EDUCATIONAL SOCIETY REPORTED IN 372 ITR 699 IN PREFERENCE TO THE RATIO OF THE DECISION OF THE H ON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF QUEEN'S EDUCATIONAL SOCIETY REPORTED IN 319 ITR 160 AND IN PARTICULAR BY FOLLOWING THE DECISION OF THE NON- JURISDICTIONAL ITAT, HYDERABAD 'B' BENCH IN THE CAS E OF VODITHALA EDUCATION SOCIETY REPORTED IN 20 SOT 353 IN PREFERENCE TO THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF CHILDRENS EDUCATION SOCIETY AND ALSO THE EXPRESS PROVISIONS OF SECTION 11[7] OF THE ACT, UND ER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 3. THE LEARNED CIT[A] HAS SERIOUSLY ERRED IN UPHOL DING THE ORDER OF THE LEARNED A.O. THAT THE AMOUNTS COLLECTE D BY THE APPELLANT TRUST AS VOLUNTARY CONTRIBUTIONS FROM GEN ERAL PUBLIC AND WHICH ARE ACCOUNTED IN ITS OWN BOOKS AS 'VOLUNTARY CONTRIBUTIONS' IN THE 'HEAD OFFICE SEGMENT' AND IN THE INCOME & EXPENDITURE ACCOUNT OF THE BOOKS OF ACCOUNTS OF THE APPELLANT TRUST, AS FEE FOR GRANTING ADMISSIONS BY THE EDUCAT IONAL INSTITUTIONS RUN BY THE APPELLANT TRUST ESPECIALLY WHEN THE BOOKS OF ACCOUNTS AND THE ENTRIES MADE THEREIN ARE NOT RE JECTED UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT 'S CASE. 3.1 THE FINDING OF THE AUTHORITIES BELOW ARE PUREL Y ON SUSPICION AND SURMISE, ASSUMPTIONS AND PRESUMPTIONS AND PER SE PERVERSE AS CONTRARY TO THE EVIDENCE ESPECIALLY BY RELYING UPON THE STATEMENTS OF ONLY 7 PERSONS, WHICH HAVE NOT BE EN PUT TO THE APPELLANT TO LEAD EVIDENCE IN REBUTTAL AND IF FOUND NECESSARY TO CROSS-EXAMINE THEM AND THUS THE FINDING IS VITIATED AND THE ADDITION MADE AND FINDING RENDERED ON THE BASIS OF WHICH DENIAL OF EXEMPTION U/S.11 OF THE ACT IS MADE ARE LIABLE T O BE DELETED/VACATED. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT [A] FAILED TO APPRECIATE THAT THERE WAS NO SURPLUS AT ALL WITH REFERENCE TO 3 INSTITUTIONS AND HOSPITAL AND THERE WAS SURPLUS ONL Y WITH REFERENCE TO THE 'HEAD OFFICE SEGMENT OF THE APPELL ANT TRUST' AND THAT TOO SUCH SURPLUS WAS WITHOUT RECKONING THE CAP ITAL ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 5 OF 31 EXPENDITURE, WHICH WAS NOT CLAIMED AS AN EXPENDITUR E IN THE INCOME & EXPENDITURE ACCOUNT AND IF THEY WERE CONSI DERED, THE SURPLUS EARNED WOULD BE VERY REASONABLE AND COULD N OT BE CONSIDERED AS ANY INCOME DERIVED BY EXPLOITING THE EDUCATION AS A MEANS TO ACHIEVE THE OBJECTS AS ALLEGED BY THE LEARNED AUTHORITIES BELOW. 4.1 THE FINDING OF THE AUTHORITIES BELOW IS PURELY ON SUSPICION AND SURMISE, ASSUMPTIONS AND PRESUMPTIONS AND IN GR OSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE AND LIABLE TO BE VACATED. 5. THE LEARNED CIT[A] ERRED IN HOLDING THAT THE AP PELLANT HAS NOT LEAD ANY EVIDENCE TO COUNTER TO THE OBSERVATION OF THE LEARNED A.O. FOR HAVING RELIED ON THE EVIDENCE ON 7 PERSONS WITHOUT APPRECIATING THAT IT WAS ELEMENTARY PRINCIPLE OF JU RISPRUDENCE THAT THE PERSON SHOULD KNOW WHAT THE ACCUSATION HE HAD T O FACE AND THE EVIDENCE ON THE BASIS OF WHICH SUCH ACCUSATION WAS MADE TO STUDY THE SAME AND CROSS-EXAMINE THE SAME HAVING RE GARD TO THE RATIO OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MEENGLAS TEA ESTATE V. THE WORKMEN REPORTED IN 1963 AIR 1719 [SC] CONSEQUENTLY, THE EVIDENCE RELIE D UPON BY THE LEARNED A.O. TO RENDER SUCH FINDING WAS IN VIOL ATION OF THE PRINCIPLES OF NATURAL JUSTICE CONSEQUENTLY, SUCH FI NDING ON THE BASIS OF WHICH THE EXEMPTION U/S.11 WAS DENIED REQUIRED TO BE VACATED HAVING REGARD TO THE RATIO OF THE DECISION OF THE HON'BLE ITAT IN THE CASE OF COLONISERS REPORTED IN 41 ITD 5 7 AND UNREPORTED DECISION OF THE HON'BLE BOMBAY HIGH COUR T RW PROMOTIONS P. LTD., IN ITA NO.1489 OF 2013 DATED 13/0712015. 6. THE LEARNED CIT[A] FAILED TO APPRECIATE HAVING REGARD TO THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CHILDRENS' EDUCATION SOCIETY [SUPRA] AND ALSO DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F PINE GROVE INTERNATIONAL CHARITABLE TRUST [372 ITR 699], IN WHICH THE HON'BLE SUPREME COURT HAS UPHELD THAT THE SURPLUS EARNED ON ACCOUNT OF RUNNING THE EDUCATIONA L INSTITUTIONS WOULD NOT BE IMPRESSED SUCH EDUCATIONAL ACTIVITY BY VIRTUE OF RESULTANT SURPLUS YEAR AFTER YEAR AS NON-CHARITABLE ACTIVITY ON ACCOUNT OF PROFIT MOTIVE FOR BEING EXEMPT U/S.10[23 C] AS WELL AS U/S.11 AND BALANCE IN VIEW OF THE EXPRESS PROVISIONS OF SE CTION 11 [7] OF THE ACT, WHICH WAS NOT SO EXEMPT WAS ENTITLE D FOR ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 6 OF 31 EXEMPTION U/S. 11[1] OF THE ACT, AS PER THE RATIO O F THE DECISION OF THE JURISDICTIONAL ITAT IN THE CASE OF CHILDRENS EDUCATION SOCIETY IN ITA NOS.1439 & 1554/BANG/2012 DATED 30105/2015 CONTRARY TO THE NON-JURISDICTIONAL TRIBUNAL, HYDERABAD 'B' BENCH IN THE CASE OF VODITHALA EDUCATION SOCIETY [SUPRA], WHICH IS NOT BINDING ON THE LEARNED CIT[A]. 7. WITHOUT PREJUDICE TO THE RIGHT TO SEEK WAIVER W ITH THE HON'BLE CCIT/DG, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST U/S 234-B OF THE ACT, WHICH UNDER THE F ACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE DESERVES TO B E CANCELLED ESPECIALLY, THERE WAS NO OBLIGATION TO FILE AN ESTI MATE AND PAY ADVANCE-TAX AND THEREFORE, THE INTEREST CHA RGED U/S.234B OF THE ACT REQUIRES TO BE CANCELLED. 8. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URG ED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBL Y PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE C OSTS FOR NOT FOLLOWING THE BINDING JURISDICTIONAL HIGH COURT IN THE CASE OF CHILDRENS EDUCATION SOCIETY. 4. HENCE, IN BOTH THE APPEALS THE ISSUE INVOLVED IS , WHETHER RECEIPT OF CAPITATION FEES OR DONATIONS BY THE ASSESSEE IN VIO LATION OF THE KARNATAKA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1984, FROM THE STUDENTS/PARENTS OF THE STUDENTS DISENTITLE THE ASS ESSEE TO CLAIM EXEMPTION U/S. 11 OF THE ACT. 5. THE INITIAL ASSESSMENT YEARS ARE AYS 2009-10 AND 2010-11 IN WHICH THE AO HAS DENIED THE EXEMPTION U/S. 11 OF THE ACT ON RECEIPTS OF LETTING OUT OF KALYANA MANTAP FOR MARRIAGE PURPOSES AND THE RECEIPTS OF CAPITATION ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 7 OF 31 FEES FROM VARIOUS STUDENTS OVER AND ABOVE THE TUITI ON FEES. BESIDES, DENYING THE EXEMPTION U/S. 11 OF THE ACT, THE AO HA D ALSO MADE A REFERENCE TO THE CIT FOR CANCELLATION OF THE REGIST RATION GRANTED U/S. 12AA OF THE ACT. 6. AGGRIEVED, THE ASSESSEE HAD PREFERRED APPEAL BEF ORE THE CIT(APPEALS) WITH THE SUBMISSION THAT LETTING OUT O F KALYANA MANTAPA FOR MARRIAGE PURPOSES IS ALSO ONE OF THE OBJECTS OF THE SOCIETY, THEREFORE THIS LETTING OUT IS FOR CHARITABLE PURPOSES. 7. WITH REGARD TO DONATIONS, IT WAS CONTENDED THAT DONATIONS WERE GIVEN BY THE PARENTS OF THE STUDENTS TOWARDS THE CO RPUS, THEREFORE ON ACCOUNT OF THE SAID DONATION, THE BENEFIT OF EXEMPT ION CANNOT BE DENIED TO THE ASSESSEE. 8. THE CIT(APPEALS) BEING CONVINCED WITH THE EXPLAN ATION OF THE ASSESSEE HAS GRANTED EXEMPTION TO THE ASSESSEE, HAV ING HELD THAT LETTING OUT OF KALYANA MANTAP IS A PART OF THE CHARITABLE A CTIVITIES BEING ONE OF THE OBJECTS AND RECEIPT OF VOLUNTARY DONATIONS DOES NOT DISENTITLE THE ASSESSEE FROM CLAIMING THE EXEMPTION. 9. THE REVENUE HAS CHALLENGED THIS ORDER BEFORE THE TRIBUNAL WITH THE SUBMISSION THAT THE AO HAS MADE NECESSARY INVESTIGA TION FROM THE PARENTS OF THE STUDENTS, WHO GOT ADMISSION IN THE RELEVANT ASSESSMENT YEARS AND HAVING MADE ENQUIRY FROM THE PARENTS, THE AO WAS OF THE VIEW THAT MOST OF ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 8 OF 31 THE PARENTS OF THE STUDENTS BELONGED TO A MIDDLE CL ASS FAMILY AND WERE NOT IN A POSITION TO PART WITH SUBSTANTIAL AMOUNT OF DO NATION/CAPITATION FEES ON ADMISSION OF THEIR CHILDREN. THE LD. DR HAS ALSO P LACED RELIANCE UPON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF P.S. GOVINDASWAMY NAIDU & SONS V. ACIT, 324 ITR 44 (MAD) IN WHICH IT WAS HELD THAT WHERE IT WAS FOUND THAT AMOUNT PAID BY TH E PARENTS OF THE STUDENTS ADMITTED TO ASSESSEE EDUCATIONAL INSTITUTI ON WAS NOT TO THE CORPUS DONATION ACCOUNT, BUT IT WAS COLLECTED ONLY BY WAY OF CAPITATION FEE, SUCH AMOUNT OF CAPITATION FEE WAS NOT EXEMPT IN THE HAND S OF THE ASSESSEE- INSTITUTION. 10. THE LD. DR FURTHER INVITED OUR ATTENTION TO THE KARNATAKA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1 984, ACCORDING TO WHICH, CAPITATION FEE MEANS ANY AMOUNT, BY WHATEVER NAME CALLED, PAID OR COLLECTED DIRECTLY OR INDIRECTLY IN EXCESS OF THE F EE PRESCRIBED UNDER SECTION 5, BUT DOES NOT INCLUDE THE DEPOSIT SPECIFIED UNDER THE PROVISO TO SECTION 3 OF THE ACT. THE LD. DR FURTHER CONTENDED THAT SINC E THE ASSESSEE HAS RECEIVED THE CAPITATION FEES OVER AND ABOVE THE TUI TION FEES, THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S. 11 OF THE ACT. HE ALSO PLACED RELIANCE UPON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF MS. MOHINI JAIN V. STATE OF KARNATAKA & ORS. (1992) 3 SCC 666 , WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT CAPITATION FEE WAS NOTH ING BUT PRICE OF SELLING EDUCATION AND SUCH TEACHING SHOPS WERE CONTRARY T O THE CONSTITUTIONAL SCHEME AND ABHORRENT TO OUR INDIAN CULTURE. RELIANC E WAS ALSO PLACED ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 9 OF 31 UPON THE DECISION OF THE HYDERABAD TRIBUNAL IN THE CASE OF VODITHALA EDUCATION SOCIETY V. ADDL. CIT (EXEMPTION) REPORTED IN 20 SOT 353, WHEREIN IT WAS HELD THAT THE ASSESSEE HAD COLLECTED MONEY OVER AND ABOVE THE PRESCRIBED FEE BY THE AUTHORITY FOR ADMISSION O F STUDENTS AND SUCH AMOUNT WAS TO BE CLASSIFIED AS CAPITATION FEE AND I T COULD BE SAID THAT ASSESSEES CASE WAS CLEAR CASE OF SELLING EDUCATION AND IT COULD NOT BE CONSIDERED AS CHARITABLE INSTITUTION U/S. 2(15) OF THE ACT. IN THE LIGHT OF THESE FACTS, THE AO HAS RIGHTLY HELD THE ASSESSEE A S NOT A CHARITABLE ORGANIZATION U/S. 2(15) OF THE ACT AS IT WAS ENGAGE D IN CHARGING CAPITATION FEES. 11. IN THE SUBSEQUENT ASSESSMENT YEAR I.E., AY 2011 -12, FOR THE SIMILAR REASONS THE AO HAS DENIED THE EXEMPTION U/S. 11 OF THE ACT HAVING MADE MORE ENQUIRIES AGAINST WHICH AN APPEAL WAS FILED BE FORE THE CIT(APPEALS) AND IN THIS YEAR, THE CIT(APPEALS) HAS ALSO CONCURR ED WITH THE VIEW OF THE AO THAT THE ASSESSEE WAS NOT ENGAGED IN CHARITABLE ACTIVITIES. WHILE ADJUDICATING THE ISSUE, THE CIT(APPEALS) HAS ALSO R EPRODUCED THE DETAILS OF VOLUNTARY CONTRIBUTIONS RECEIVED FROM DIFFERENT PAR ENTS OF THE STUDENTS. AGAINST THIS ORDER OF THE CIT(APPEALS), THE ASSESSE E HAS PREFERRED AN APPEAL BEARING ITA NO.1099/BANG/2015 BEFORE THE TRI BUNAL. 12. THEREFORE, THE ISSUE BEFORE US IS, WHETHER THE ASSESSEE HAS RECEIVED THE CAPITATION FEES FROM THE STUDENTS FOR WHICH THE BENEFIT OF EXEMPTION U/S. 11 OF THE ACT CAN BE DENIED? ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 10 OF 31 13. THE LD. COUNSEL FOR THE ASSESSEE IN SUPPORT OF HIS CONTENTIONS HAS PLACED RELIANCE UPON THE JUDGMENTS IN THE CASE OF CIT V. SMT. SHAKUNTALA DEVI KHETAN, 352 ITR 484 (MAD) AND MAHAN MARBLES PVT. LTD., 354 ITR 238 (RAJ) , BUT BOTH THESE JUDGMENTS ARE NOT RELEVANT TO THE PRESENT CONTROVERSY OF THE CASE. 14. THE LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT WHILE DENYING THE EXEMPTION U/S. 11 OF THE ACT IN AY 2009-10, THE AO HAS ALSO MADE A REFERENCE TO THE CANCELLATION OF REGISTRATION U/S. 12AA OF THE ACT. CONSEQUENTLY, REGISTRATION WAS CANCELLED BY THE CIT , BUT LATER ON ORDER OF THE CIT WAS REVERSED BY THE TRIBUNAL, AGAINST WHICH AN APPEAL WAS FILED BEFORE THE HONBLE HIGH COURT OF KARNATAKA AND THE ORDER OF THE TRIBUNAL WAS CONFIRMED AND THE APPEAL OF THE REVENUE WAS DIS MISSED. THEREFORE, THE TRIBUNAL HAS EXAMINED THE NATURE OF ACTIVITIES OF THE ASSESSEE WHILE ADJUDICATING THE ISSUE OF GRANT OF REGISTRATION. SI MILAR ISSUE CANNOT BE RE- EXAMINED BY THE AO FOR DENYING THE EXEMPTION U/S. 1 1 OF THE ACT. HE HAS ALSO PLACED RELIANCE UPON THE FOLLOWING JUDGMENTS:- (1) ITO V. KALINGA CULTURAL TRUST, 177 TTJ 233 (HYD) (2) DIT(E) V. LALA LAJPATRAI MEMORIAL TRUST, 383 ITR 3 45 (BOM) (3) CIT V. KARNATAKA LINGAYAT EDUCATIONAL SOCIETY, KAR NATAKA HIGH COURT, DHARWAD BENCH, ITA NO.5004/2012 DATED 15.10 .2014. (4) CHILDRENS EDUCATION SOCIETY, 358 ITR 373 (KAR) (5) K.T. VENKATAPPA V. K.N. KRISHNAPPA, 173 ITR 678 (K AR) (6) SHRI ANANDA MARAKALA, ITAT BANGALORE, ITA NO. 1584/BANG/2012 & CO 58/BANG/2013 DATED 13.9.2013. ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 11 OF 31 (7) COLONISERS V. ACIT, 41 ITD 57 (HYD) [SB] (8) KISHINCHAND CHELLARAM, 125 ITR 713 (SC) 15. HAVING CAREFULLY EXAMINED THE ORDERS OF AUTHORI TIES BELOW AND DOCUMENTS PLACED ON RECORD, WE FIND THAT THE CONTRO VERSY IN THESE APPEALS IS ONLY WITH REGARD TO DENIAL OF EXEMPTION U/S. 11 OF THE ACT ON ACCOUNT OF RECEIPT OF CAPITATION FEES BY THE ASSESSEE FROM THE PARENTS OF THE STUDENTS WHO HAVE BEEN ADMITTED DURING THAT YEAR. IN THIS R EGARD, WE HAVE CAREFULLY EXAMINED THE ORDER OF AO AND WE FIND THAT IN THE AY 2009-10, THE AO HAS MADE A DETAILED INVESTIGATION AND HAS NOTICED THAT THE ASSESSEES RECEIPT WAS ALSO FOUND FROM LEASING OF KALYANA MANTAPA FOR MARRIAGE PURPOSES WHICH WAS CONSIDERED TO BE THE COMMERCIAL ACTIVITY BY THE AO IN THE LIGHT OF THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF SRI SUBHARAM TRUST IN ITA NO.380/2009 DATED 30.5.2011 . BESIDES, THE AO HAS ALSO EXAMINED THE NATURE OF RECEIPTS FROM THE P ARENTS OF STUDENTS AND HE NOTICED THAT THIS RECEIPT WAS OVER AND ABOVE THE TUITION FEES WHICH WAS CONSIDERED BY THE AO AS CAPITATION FEES IN THE LIGH T OF THE PROVISIONS OF KARNATAKA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1984. BESIDES, THE AO HAS ALSO MADE NECESSARY ENQU IRIES FROM THE PERSONS WHO HAVE GIVEN THE DONATIONS/CONTRIBUTIONS TO THE CAPITATION FEES. THE INVESTIGATION AND THE RELEVANT OBSERVATIONS OF THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ARE EXTRACTED HERE UNDER FOR THE SAKE OF REFERENCE:- ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 12 OF 31 14. THE SANGHAM IS ALSO RUNNING EDUCATIONAL INSTI TUTIONS AND RUNNING OF COLLEGE/ INSTITUTIONS FALLS UNDER THE LI MB 'EDUCATION'. HOWEVER IMPARTING EDUCATION WHICH IS A CHARITABLE A CTIVITY, DOESN'T APPEAR TO BE THE PREDOMINANT OBJECT OF SANGHAM AT L EAST IN PRACTICE. IN FACT THE PURPOSE OF RUNNING THE EDUCATIONAL INST ITUTIONS IS OVER- SHADOWED BY PROFIT MAKING MOTIVES OF THE SOCIETY. IT IS WORTH MENTIONING THAT SANGHAM IS MAKING HUGE SURPLUS AND THERE IS NO CORRESPONDING APPLICATION OF SURPLUS/INCOME . IT WA S HELD BY THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF QUEEN 'S EDUCATION SOCIETY, AS REPORTED IN 177 TAXMAN 326 , THAT IF SYSTEMATIC PROFITS ARE BEING EARNED, THEN THE PURPO SE MAY NOT BE HELD AS CHARITABLE AND EXEMPTION U/S 11 MAY NOT BE PERMI SSIBLE. THIS DECISION APPEARS TO BE SQUARELY APPLICABLE TO THE F ACTS OF THE CASE. 15. DURING THE COURSE OF SCRUTINY PROCEEDIN GS FOR THE A.Y. 2009- 10 THE SANGHAM WAS ASKED TO FURNISH VARIOUS DETAILS IN CONNECTIONS WITH THE SCRUTINY PROCEEDINGS INCLUDING DETAILS OF THE DONATIONS RECEIVED DURING THE YEAR VIDE THE QUESTIONNAIRE DT. 3.10.2011. THE ASSESSEE SUBMITTED THAT THE INSTITUTION HAS RECEIVE D VOLUNTARY CONTRIBUTIONS FROM DIFFERENT PERSONS AND ONE LIST W AS GIVEN FROM WHICH IT WAS NOTICED THAT SANGHAM HAS RECEIVED A SU M OF RS. 1,14,20,000/- AS DONATIONS WHICH HAVE BEEN ACCOUNTE D UNDER THE HEAD 'VOLUNTARY CONTRIBUTIONS'. IT WAS FURTHER SEEN THAT THE AMOUNT WAS RECEIVED MAINLY IN CASH AND VARIES FROM 1 LAKH TO 5 LAKHS. A NOTICE DATED 1.11.2011 WAS ISSUED U/S 133(6) OF T HE IT ACT, 1961 TO FEW OF THE PERSONS WHOSE NAME FIGURED IN THE LIST A ND WHICH IS REPRODUCED HERE: '1. WHETHER YOU HAVE GIVEN ANY DONATION TO THIS IN STITUTION IN EARLIER EARLIER OR SUBSEQUENT YEAR , IF YES, DETAILS THEREOF. 2. WHETHER YOU HAVE GIVEN ANY DONATION TO ANY OTHE R ORGANIZATION / INSTITUTE DURING THE YEAR OR EARLIER . 3. THE PURPOSE FOR WHICH THE DONATIONS WERE GIVEN . 4. THE REASONS FOR GIVING DONATIONS IN CASH AND N OT IN CHEQUE. WHETHER THE RECIPIENT TRUST HAD INSISTED ON GIVING THE AMOUNT IN CASH. 5. WHETHER YOUR SON / DAUGHTER / ANY CLOSE RELATIV E / WARD WAS GIVEN ADMISSION IN KAMMAVARI INSTITUTE OF TECHNOLOG Y / POLYTECHNIC DURING THE FINANCIAL YEAR 2008-09, IF SO, NAME ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 13 OF 31 AND ACADEMIC COURSE IN WHICH THE ADMISSION WAS GIVE N. IF SO, WHETHER ANY RECEIPT WAS ISSUED BY THE TRUST, IF YES, A COPY MAY KINDLY BE FURNISHED. 6. ARE YOU ASSESSED TO TAX, YOUR PAN AND INCOME SHOW N IN ASSESSMENT YEAR 2008-09 AND 2009-10 MAY BE FURNISHE D. ' 16. IT WAS GATHERED FROM FEW PERSONS THAT THEIR SO N/DAUGHTER IS STUDYING IN KAMMAVARI INSTITUTE OF TECHNOLOGY AND A CCORDINGLY THE PAYMENT WAS MADE TO THE SOCIETY AND FOR WHICH RECEI PTS WERE ISSUED TOWARDS VOLUNTARY CONTRIBUTION. MOREOVER THESE PERS ONS HAVE ALSO CLARIFIED THAT THEY HAVE MADE THE DONATION ONLY TO THIS ASSESSEE AND THAT TOO IN THE YEAR OF ADMISSION OF THEIR WARD. FR OM THE PERUSAL OF THOSE LETTERS/INFORMATION PRIMA FACIE IT APPEARED T HAT THE ASSESSEE IS TAKING HUGE DONATIONS/CAPITATION FEES IN THE GARB O F VOLUNTARY CONTRIBUTIONS. 17. IN THIS CONNECTION, IT WOULD BE RELEVANT TO REFER TO THE PROVISIONS OF KARNATAKA EDUCATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1984, WHICH IS REPRODUCED AS UNDER- 2. DEFINITIONS.- IN THIS ACT, UNLESS THE CONTE XT OTHERWISE REQUIRES,- (B) 'CAPITATION FEE' MEANS ANY AMOUNT, BY WHATEVER NAME CALLED, PAID OR COLLECTED DIRECTLY OR INDIRECTLY IN EXCESS OF THE FEE PRESCRIBED UNDER SECTION 5,BUT DOES NOT INC LUDE THE DEPOSIT SPECIFIED UNDER THE PROVISO TO SECTION 3; (C) 'EDUCATIONAL INSTITUTION' MEANS ANY INSTITUTION BY WHATEVER NAME CALLED, WHETHER MANAGED BY GOVERNMENT , PRIVATE BODY, LOCAL AUTHORITY, TRUST, UNIVERSITY OR ANY OTHER PERSON CARRYING ON THE ACTIVITY OF IMPARTING EDUCAT ION IN MEDICINE OR ENGINEERING LEADING TO A DEGREE CONFERR ED [BY A UNIVERSITY ESTABLISHED UNDER ANY LAW FOR THE TIME BEING IN FORCE AND ANY OTHER EDUCATIONAL INSTITUTIO N, OR CLASS OR CLASSES OF SUCH INSTITUTION, AS THE GOVERN MENT MAY, BY NOTIFICATION, SPECIFY; 3. COLLECTION OF CAPITATION FEE PROHIBITED .- NOTWITHSTANDING ANYTHING CONTAINED IN ANY LAW FOR THE TIME BEING IN FORCE, NO CAPITATION FEE SHALL BE COLLECTED BY OR ON BEHALF O F ANY EDUCATIONAL INSTITUTION OR BY ANY PERSON WHO IS IN- CHARGE OF OR IS RESPONSIBLE FOR THE MANAGEMENT OF SUCH INSTITUTION: ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 14 OF 31 PROVIDED THAT SUBJECT TO SUCH RULES AS MAY BE PRESC RIBED OR SUCH CONDITIONS AS MAY BE SPECIFIED BY GENERAL OR SPECIA L ORDER, FROM TIME TO TIME, THE GOVERNMENT MAY, NOTWITHSTANDING A NYTHING CONTAINED IN THIS ACT PERMIT ANY EDUCATIONAL INSTIT UTION ESTABLISHED BEFORE THE DATE OF COMMENCEMENT OF THIS ACT AND MAINTAINED OR DEVELOPED SOLELY OR SUBSTANTIALLY OUT OF AMOUNTS COLLECTED AS CAPITATION FEE OR ANY CLASS OR CLASSES OF SUCH INSTITUTIONS, TO CONTINUE TO RECEIVE SUCH CAPITATIO N FEE OR CASH DEPOSITS IN SUCH MANNER, TO SUCH EXTENT AND FOR SUC H PERIOD AS THE GOVERNMENT MAY, BY ORDER, SPECIFY, SO HOWEVER THAT SUCH PERIOD SHALL NOT IN ANY CASE EXTEND BEYOND FIVE YEARS FROM SUCH DATE. 16. IN THE SUCCEEDING YEAR I.E., AY 2010-11, THE AO HAS ALSO MADE FURTHER INVESTIGATION AND REPRODUCED THE DETAILS OF THE PERSONS FROM WHOM THE CAPITATION FEES WAS RECEIVED BY THE ASSESSEE. 17. WHILE DEALING WITH THE APPEAL FOR THE AY 2011-1 2, THE CIT(APPEALS) WAS NOT CONVINCED WITH THE CONTENTIONS OF THE ASSES SEE AND HE HIMSELF ALSO MADE A DETAILED ENQUIRY IN RESPECT OF VOLUNTAR Y CONTRIBUTIONS IN HIS ORDER. HE HAS EXTRACTED THE MODE OF PAYMENTS AND DE TAILS OF PERSONS FROM WHOM THE PAYMENTS WERE MADE. HE HAS ALSO PLACED RE LIANCE UPON VARIOUS JUDGMENTS IN THIS REGARD WHILE HOLDING THAT CAPITAT ION FEES HAS BEEN GIVEN IN THE DISGUISE OF SO-CALLED VOLUNTARY CONTRIBUTION . THE RELEVANT OBSERVATIONS OF THE CIT(APPEALS) IS EXTRACTED HEREU NDER FOR THE SAKE OF REFERENCE:- 14. I HAVE CONSIDERED THE AO'S ORDER AND THE APPEL LANT'S SUBMISSIONS AS ABOVE ALONG WITH THE AVAILABLE EVIDE NCES. COMING FIRST TO THE IDENTIFICATION OF THE IMPUGNED AMOUNTS AS 'VOLUNTARY CONTRIBUTION', IT IS SEEN THAT THE SAME HAVE BEEN C REDITED AS INCOME IN THE INCOME & EXPENDITURE ACCOUNT AND HAVE NOT BEEN ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 15 OF 31 POSITED AS CORPUS DONATIONS ELIGIBLE FOR SEPARATE T REATMENT AS CAPITAL RECEIPTS. THE ASSESSMENT RECORDS WERE VERIF IED TO EXAMINE THE EVIDENCES FROM THE DONORS SENT IN RESPONSE TO T HE AO'S QUERIES U/S 133(6). IT IS AN UNDISPUTED FACT THAT E XCEPT IN ONE OF THE REPLIES ALL THE OTHER RESPONDENTS HAVE DESCRIBED TH EIR PAYMENT AS GENERAL DONATION, ALTHOUGH IT WAS ADMITTED THAT THE SAME WAS GIVEN AT THE TIME OF ADMISSION OF THEIR WARD TO THE ENGIN EERING COURSE IN KSIT. TWO OF THE SAMPLE 'YES' REPLIES FROM B.S. RAJ ASHEKAR AND RAVEENDRAN ARE EXTRACTED AND SCANNED BELOW IN THIS REGARD WITH RELATED MONEY RECEIPTS AVAILABLE. IN CASE OF RAVEEN DRAN THE MANY RECEIPT FOR THE LEGALLY PRESCRIBED COLLEGE FEES AND THE VOLUNTARY CONTRIBUTION ARE BOTH SCANNED SHOWN. ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 16 OF 31 ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 17 OF 31 IN ONE CASE, THE CLAIMED DONOR COMPLETELY DENIED HA VING MADE THE DONATIONS. HIS RESPONSE IS SCANNED AND SHOWN BELOW: ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 18 OF 31 ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 19 OF 31 4.1 FROM A COMBINED EXAMINATION OF ALL THE ABOVE RESPONSES, IT IS CLEAR THAT THE CHARACTER OF THE CLAIMED RECEIPTS AS BEING VOLUNTARY'' IN NATURE IS NOT ESTABLISHED. IN FACT, THE CONTRARY POSITION OF QUID PRO QUO APPEARS TO BE MORE TRUE. IT IS ALSO EVIDENT THAT PART OF THE RECEIPTS ARE NOT SUPPORTED BY EVIDENCES AS SEEN FROM THE DENIAL OF ONE OF THE RESPONDENT RE PRODUCED SUPRA. THE CHARACTERIZATION OF THE AMOUNT AS VOLUNTARY CONTRIB UTION, THEREFORE, CANNOT BE ACCEPTED AND THE AO'S CONCLUSION APPEAR TO BE FAR M ORE REASONABLE. 4.2 IT IS ALSO SEEN THAT EVEN THOUGH THE ASSESSEE CLAIMS THAT THE DONATIONS/VOLUNTARY CONTRIBUTIONS HAVE BEEN RECEIVE D IN THE BOOKS OF KAMMAVARI SANGHAM (HO) ITS PRIMARY ACCOUNTING AND D ETAILING, EVEN AS PER ITS OWN SUBMISSION BEFORE THE AO, SHOW THAT THE AMO UNTS ARE RECEIVED IN RESPECT OF KSIT AND KSP SEPARATELY MEANING KS INSTI TUTE OF TECHNOLOGY (FOR ENGINEERING COURSES) AND KS POLYTECHNIC (FOR DIPLOM A COURSES). THE SCAN OF THE FIRST PAGE OF THE SEPARATE DETAILS SUBMITTED BE FORE THE AO THROUGH SUBMISSION DT. 05.03.2014 EVIDENCES THIS LINKAGE TO SPECIFIC COURSES AND NOT TO ANY 'GENERAL PURPOSE' DONATION THAT WOULD MERIT DIRECT CREDIT INTO THE HO ACCOUNT. ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 20 OF 31 4.3 THE 'CONSENT' BY PARENTS OF STUDENTS ADMITTED TO THE APPELLANT PROFESSIONAL COURSES IN THEIR REPLIES TO THE AO COULD NOT HAVE BEEN OTHERWISE, CONSIDERING THE ENORMOUS BUT S UBTLE PRESSURES THAT CONSTRAIN PARENTS IN SUCH SITUATION. INFACT, THE PRINTED RECEIPTS OF ANDHRA BANK, KSIT BRANCH REPROD UCED ABOVE WITH MENTION OF 'VOLUNTARY CONTRIBUTION FOR THE YEA R .. . ' DISPLAYS THE BLATANT AND SYSTEMATIC MANNER IN WHICH PARENTS OF STUDENTS SEEKING ADMISSION ARE PULLED INTO THE SYSTEM WHERE READYMADE RECEIPTS FOR VOLUNTARY CONTRIBUTION EXIST TO GIVE A N IMPRESSION OF LEGITIMACY FOR THE SO CALLED 'VOLUNTARY' DONATIONS. 5. COMING NEXT TO THE QUESTION OF WHETHER THE IMPU GNED AMOUNTS, THEREFORE, PARTAKE THE CHARACTER OF CAPITA TION FEES, IT IS SEEN THAT FOR THE IMPUGNED PERIOD OF 2010-11 , THE ADMISSIONS TO PRIVATE PROFESSIONAL COLLEGES FOR MEDICAL, DENTAL A ND ENGINEERING COURSES WERE GOVERNED BY THE CONSENSUAL ARRANGEMENT ENTERED INTO BETWEEN THE GOVERNMENT OF KARNATAKA AND THE KA RNATAKA PRIVATE MEDICAL, DENTAL AND ENGINEERING COLLEGES AS SOCIATION (KPM & DECA) ENTERED INTO UNDER THE KARNATAKA PROFESSIONAL EDUCATION INSTITUTION (REGULATION OF ADMISSIONS AND FIXATION OF FEE) (SPECIAL PROVISIONS) ACT, 2006 BEING ACT NO.13 OF 2006. THE ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 21 OF 31 SUMMARY OF THE FEES STRUCTURE AND PERCENTAGE OF SEA TS AS PER THIS AGREEMENT IS IN RESPECT OF 3 CATEGORIES I.E. GOVERN MENT QUOTA SEAT (TO BE FILLED THROUGH CET (EXAM), COMED-K MEMBER INSTITUTIONS SEAT (TO BE FILLED THROUGH COMED-K EXA M) AND THE BALANCE MANAGEMENT QUOTA OR NRI QUOTA SEATS TO BE F ILLED LARGELY THROUGH DISCRETION (BUT SUBJECT TO ELIGIBILITY AS P ER AICTE/MCI/DCI NORMS) . THE SUMMARY IS REPRODUCED BELOW FROM PAGE 14 OF THE CONSENSUAL ARRANGEMENT WH I CH WAS APPLICABLE FOR FY 2010-11. ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 22 OF 31 5.1 THE ABOVE ARRANGEMENT FOR DIVERSE FEE S TRUCTURES IS A CONSEQUENCE OF THE HON'BLE SUPREME COURT'S DECISION S IN CASE OF TMA PAI FOUNDATION VS. STATE OF KARNATAKA (2002) (8 SCC 481), ISLAMIC ACADEMY OF EDUCATION VS. STATE OF KARNATAKA (2003) (6 SCC 697) AND P.A. INAMDAR VS. STATE OF MAHARASHTRA (2005) (6 SCC 537). IN THE CASE OF ISLAMIC ACADEMY OF EDUCATI ON THE HON'BLE COURT HAD SAID THAT A COMMITTEE IN EACH STA TE, HEADED BY A RETIRED HIGH COURT JUDGE, SHOULD APPROVE THE FEES STRUCTURE WHICH SHALL BE BINDING FOR 3 YEARS. THE HON'BLE SUP REME COURT HAD OPINED IN THIS ORDER THAT THE REASONABLE SURPLU S FOR AN EDUCATIONAL INSTITUTION SHOULD ORDINARILY RANGE FRO M 6% TO 15%. IT MAY BE NOTED THAT STARTING FROM ACADEMIC YEAR 20 11-12, THE CONSENSUAL ARRANGEMENT PROVIDED THAT THE 'NRI/NRI SPONSORED/OTHERS IN THE SAID CATEGORY', WHICH DENOT ED THE DISCRETIONARY MANAGEMENT QUOTA SEATS, WOULD HAVE AN UPPER LIMIT OF FEES PAYABLE INCLUDING DEVELOPMENT FEES FOR THE ENTIRE COURSE, AND THIS LIMIT WOULD BE NOTIFIED BY EACH OF THE PRI VATE INSTITUTIONS AND FEES COLLECTED ACCORDINGLY. FOR THE IMPUGNED FY 2010-11, NOTIFICATION OF THIS UPPER LIMIT WAS NOT INCLUDED I N THE CONSENSUAL AGREEMENT BUT IN THE LIGHT OF THE DECISIONS OF THE HON'BLE SUPREME COURT CITED ABOVE THE EXISTENCE OF A FAIR, TRANSPARENT SYSTEM WITH CAPS ON THE FEES THAT COULD BE CHARGED WAS INHERENTLY PRESENT. THIS INCLUDED THE TUITION FEES, VARIOUS F EES COLLECTED AND PAID TO VTU AND A REASONABLE COMPONENT OF 'COLLEGE AND OTHER FEE' TO SUPPORT THE DIFFERENTIAL FACILITIES AVAILAB LE IN DIFFERENT COLLEGES. THE SCANNED RECEIPT FOR 'COLLEGE FEE' AT PAGE 06 OF THIS ORDER EVIDENCES THIS. THIS WAS INTENDED TO PREVENT THE PROFESSIONAL EDUCATION IMPARTING COLLEGES FROM TURN ING INTO 'TEACHING SHOPS' AS HAD BEEN STRONGLY NOTED BY THE HON'BLE APEX COURT IN THE CASE OF MISS MOHINI JAIN VS STATE OF K ARNATAKA (1992) 2 SCC 666. 5.2 IN THE BACKGROUND OF THE ABOVE FACTS, AND THE EXISTENCE OF THE ANTI-CAPITATION FEES RELATED LEGISLATION REF ERRED TO SUPRA, IT APPEARS THAT THE VOLUNTARY CONTRIBUTIONS COLLECTED WITH THE QUID PRO QUO OF ENGINEERING SEAT FOR THE WARDS OF THE DO NORS CARRIES A VERY STRONG COLOUR OF COMMERCIAL ORIENTATION IN EDU CATION. IN ORDER TO CLAIM EXEMPTION OF INCOME U/S, 11(1)(A), T HE INCOME SHOULD HAVE BEEN DERIVED FROM A PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. IN THE CASE O F THE APPELLANT, THE EDUCATIONAL INSTITUTIONS RUN BY IT CONSTITUTE T HIS PROPERTY HELD UNDER TRUST. IT, THEREFORE, FOLLOWS THAT THIS PROPE RTY I.E. THE ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 23 OF 31 EDUCATIONAL INSTITUTIONS, SHOULD EXIST WHOLLY FOR E DUCATIONAL PURPOSES, EDUCATION BEING ONE OF THE COMPONENTS OF CHARITABLE ACTIVITIES PERMITTED U/S, 2(15). 5.3 THE HON'BLE SUPREME COURT HAVE PASSED A NUMBER OF LAND MARK DECISIONS TO DETERMINE WHETHER AN EDUCATI ONAL INSTITUTION IS EXISTING WHOLLY FOR EDUCATIONAL PURP OSE AND NOT FOR PURPOSES OF PROFIT. THE DECISIONS, EVEN WHEN RENDER ED IN THE CONTEXT OF SEC.10(23C), ARE APPLICABLE TO INSTITUTI ONS CLAIMING EXEMPTION U/S. 11 FOR THEIR ENGAGEMENT IN EDUCATION AL ACTIVITIES. THE LATEST DECISION IN THIS REGARD IS THE CASE OF M /S QUEENS EDUCATION SOCIETY VS. CIT (CIVIL APPEAL NO.5167 OF 2008) IN ORDER DT. 16.03.2015. THE EARLIER LAND MARK DECISIO NS OF THE HON'BLE SUPREME COURT HAVE BEEN DISCUSSED IN THIS L ATEST ORDER AND THEY INCLUDE THE FOLLOWING 1. ADITANAR EDUCATIONAL INSTITUTION VS. ADDL.CIT (1 997) 224 ITR 310 2. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION ( 1980) 121 ITR 1 3. AMERICAN HOTEL & LODGING ASSOCIATION VS. CBDT (2 008) 301 ITR 86 4. LOKA SHIKSHANA TRUST (1975) 101 ITR 234 5. THE INDIAN CHAMBER OF COMMERCE (1975) 101 ITR 79 6 5.4 THE HON'BLE COURT HAVE HELD THAT IF SUR PLUS RESULTS INCIDENTALLY FROM THE EDUCATIONAL ACTIVITIES THEN N O ADVERSE INFERENCE SHOULD BE DRAWN ABOUT THE ASSESSEE HAVING A PROFIT MOTIVE OR A COMMERCIAL ORIENTATION. IN THE CASE OF THE APPELLANT, THE SURPLUS HAS RESULTED FROM THE CLAIMED VOLUNTARY CONTRIBUTIONS IN EACH OF THE INSTITUTIONS WHERE IT WAS TAKEN FROM GUARDIANS/PARENTS. THE NATURE OF THE SAMPLE EVIDENC E, AS DISCUSSED ABOVE, ESTABLISHES THE NON-VOLUNTARY, OR RATHER THE 'UNDER DURESS' CHARACTER OF THE CONTRIBUTIONS WITH DESPERATE MIDDLE CLASS OR LOWER MIDDLE CLASS PARENTS EVEN OPT ING TO BECOME INDEBTED IN ORDER TO MEET THE FINANCIAL DEMANDS FOR THEIR CHILD'S PROFESSIONAL EDUCATION. I AM IN AGREEMENT WITH THE AO THAT THESE CONTRIBUTIONS WHICH ARE IN EXCESS OF THE FEES FIXED FOR THE PARTICULAR COURSE SATISFY THE DEFINITION OF 'CAPITA TION FEE' IN TERMS ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 24 OF 31 OF SEC.2(B) OF THE ACT OF 1984. AS PER THIS ACT 'CA PITATION FEE MEANS ANY AMOUNT, BY WHATEVER NAME CALLED, PAID OR COLLECTED DIRECTLY OR INDIRECTLY IN EXCESS OF THE FEE PRESCRI BED U/S.5, BUT DOES NOT INCLUDE THE DEPOSIT SPECIFIED UNDER THE PR OVISO TO SEC.3.' 5.5 I AM UNABLE TO RESIST REPRODUCING THE F OLLOWING EXTRACT FROM THE ORDER OF THE HON'BLE ITAT HYDERABAD BENCH 'B' IN CASE OF VODITHALA EDUCATION SOCIETY VS ADIT (E) II HYDER ABAD (2008) 20 SOT 353 WHERE, AFTER DISCUSSING THE HON'BLE APEX COURTS POSITION ON THE 'SALE OF EDUCATION' IN THE DECISION IN CASE OF MSS MOHINI JAIN AND ISLAMIC ACADEMY OF EDUCATION (SUPRA ) THE BENCH DESERVED AS FOLLOWS (PARAS 9 & 10) 'COLLECTION OF CAPITATION FEE IS CONTRARY TO THE CONSTITUTIONAL SCHEME AND PROHIBITED BY STATE ENACT MENT ....................WHEN THE ASSESSEE USED THE CHAR ITABLE ACTIVITY/ EDUCATIONAL INSTITUTION AS AN APPARATUS F OR SELLING THE EDUCATION, IN OUR OPINION, THE ELEMENT OF CHARI TY NO LONGER REMAINS IN THE ACTIVITY OF THE ASSESSEE .... .............. IN THE CASE ON HAND, THE MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATION CLEARLY ESTABLISHED THE COLLECT ION OF MONEY OVER AND ABOVE THE FEE PRESCRIBED BY GOVERNME NT FOR ADMISSION OF A STUDENT. THEREFORE, IT IS A CLEA R CASE OF SALE OF EDUCATION BY THE ASSESSEE-SOCIETY. IN OUR O PINION AS SUCH, THE ASSESSEE CANNOT BE CONSIDERED AS A CHARIT ABLE INSTITUTION UNDER SECTION 2(15) OF THE INCOME-TAX A CT. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTI ON UNDER SECTION 11 OF THE INCOME-TAX ACT ................ WE WOULD LIKE TO FURTHER ADD THAT COLLECTION OF MON EY OVER AND ABOVE THE FEES PRESCRIBED BY THE COMMITTEE APPOINTED AS PER THE DIRECTIONS OF THE HON 'BLE APEX COURT IS INCREASING DAY-BY-DAY FOR ADMITTING STUDENTS UND ER MANAGEMENT QUOTA. THIS COLLECTION OF MONEY OVER AN D ABOVE THE FEES PRESCRIBED BY THE COMMITTEE, SHALL B E CONSTRUED AS COLLECTION OF 'CAPITATION FEES' AS HEL D BY THE APEX COURT. COLLECTION OF CAPITATION FEE IS NOT AN I SOLATED PROBLEM OF AN INDIVIDUAL STUDENT AND THE INSTITUTIO N. THIS IS A SOCIAL PROBLEM AND MAKES THE AVAILABILITY OF E DUCATION BEYOND THE REACH OF THE VAST MAJORITY OF THE POPULA TION. MORE THAN 30 PER CENT OF THE POPULATION IS LIVING B ELOW POVERTY LINE AND BULK OF THE REMAINING POPULATION I S STRUGGLING FOR EXISTENCE UNDER POVERTY. IN THIS ECO NOMIC SITUATION, IF WE ALLOW A FEW INDIVIDUALS WHO HAD AN OPPORTUNITY TO ESTABLISH AN EDUCATIONAL INSTITUTION TO ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 25 OF 31 COLLECT MONEY DIRECTLY OR INDIRECTLY FOR ADMISSION OF STUDENTS, IT WOULD BE A THREAT TO VERY EXISTENCE OF DEMOCRACY AND SOVEREIGNTY OF THIS COUNTRY. THEREFOR E, THE JUDICIAL AND QUASI-JUDICIAL AUTHORITIES, CANNOT BE EXPECTED TO BE A SILENT SPECTATORS OF WHAT IS HAPPENING IN T HE EDUCATIONAL INSTITUTIONS ...............' IN THE PRESENT CASE THE AO AS THE QUASI JUDICIAL AU THORITY HAS ACTED IN THE CORRECT SPIRIT OF LAW TO DENY THE EXEM PTION U/S 11. 6. THE APPELLANT HAS FILED BEFORE ME COPIES OF ORDERS PASSED BY CIT(A), MYSORE IN ITS OWN CASE FOR AY 2009-10 AN D 2010-11. THE LATTER ORDER HAS MERELY FOLLOWED THE CONCLUSION IN THE FORMER. IN THE ORDER FOR AY 2009-10 DT. 24.10.2013 THE CIT( A) HAS ACCEPTED THE APPELLANT'S CLAIM THAT THE ACTIVITY OF RUNNING EDUCATIONAL INSTITUTIONS AMOUNTS TO 'CHARITABLE PUR POSE' U/S.2(15), THAT THE ENTIRE SURPLUS HAS BEEN APPLIED TO THE OBJECTS OF THE SOCIETY AND THAT NO VIOLATION U/S. 13 HAS BEEN ESTABLISHED BY THE AO. HE, THEREFORE, PROCEEDED TO ALLOW THE EXEMP TION U/S. 11 OF THE IT ACT. 6.1 ON EXAMINATION OF THE CIT(A)'S ORDER, I FIND THAT IT SUFFERS FROM SOME FACTUAL INACCURACIES AND INCORREC T OBSERVATIONS ABOUT APPLICABLE LEGAL PROVISIONS DUE TO WHICH I DO NOT CONSIDER IT NECESSARY TO FOLLOW HIS ORDER. IN RESPECT OF GROUND NOS. 4, 5 & 6 RAISED BY THE APPELLANT BEFORE HIM, IT WAS CONTENDE D BY THE APPELLANT THAT IT WAS ENTITLED TO THE BENEFIT OF SE CTION 10(23C)(IIIAD) IN RESPECT OF THE EDUCATIONAL INSTIT UTIONS WHERE THE GROSS RECEIPTS DID NOT EXCEED RS.1 CRORE. THIS WAS INSPITE OF THE CLAIM FOR EXEMPTION IN THE IT RETURN HAVING BEEN MA DE U/S. 11. THE CIT(A) AT PARA 7.4 OF HIS ORDER HAS REFERRED TO THE DIFFERENCE BETWEEN SEC.11 AND SEC.L0(23C). HE HAS THEN MENTION ED THAT 'THE RELIANCE PLACED ON THE DECISION OF THE UTTARAKHAND HIGH COURT IN M/S QUEENS EDUCATIONAL SOCIETY (177 TAXMANN 326) IS NOT APPLICABLE HERE AS THE SAID CASE WAS NOT RENDERED I N THE CONTEXT OF SEC.10(23C) OF THE ACT. HENCE, THE OBSERVATIONS THA T THE APPELLANT HAS MADE HUGE SURPLUS ETC ARE NOT GERMANE TO THE ISSUE RELATING TO THE EXEMPTION U/S. 11 OF THE ACT.' THE FACTUAL INACCURACY IN THIS OBSERVATION IS THAT THE M/S QUEE NS EDUCATION SOCIETY MATTER WAS ACTUALLY DELIVERED ON SEC.10(23C )(IIIAD). THE ISSUE OF SURPLUS GENERATION IS AT THE HEART OF UNDE RSTANDING THE PROFIT ORIENTATION OR CHARITABLE ORIENTATION OF AN ASSESSEE SINCE THE HON'BLE SUPREME COURT IN THE CASE OF M/S QUEEN'S ED UCATIONAL ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 26 OF 31 SOCIETY ITSELF, AS DISCUSSED SUPRA, HAVE OBSERVED T HAT IF THE SURPLUS IS NOT INCIDENTAL TO THE EDUCATIONAL ACTIVI TY, IT SHOWS THAT THE INSTITUTION DID NOT DERIVE INCOME FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE PURPOSE. 6.2 THE CIT(A) HAD HELD THAT THE AO IS NOT THE COMPETENT AUTHORITY TO CONCLUDE THAT THE APPELLANT HAS COMMIT TED VIOLATION UNDER THE KARNATAKA EDUCATION INSTITUTION (PROHIBIT ION OF CAPITATION FEE) ACT OF 1984. IT NEEDS TO BE MENTION ED THAT THE AO'S DISCUSSION IN THE ORDER FOR THAT YEAR HAS NOT BEEN MADE AS A COMPETENT AUTHORITY UNDER THE ANTI CAPITATION FEE S TATUTE BUT ONLY AS A COMPETENT AUTHORITY UNDER THE INCOME TAX ACT S INCE HE IS ENTRUSTED WITH THE RESPONSIBILITY OF VERIFYING WHET HER THE CLAIMED CHARITABLE ACTIVITIES OF AN ASSESSEE FLOW FROM LEGA L AND LEGITIMATE ACTIVITIES SANCTIONED BY STATUTE. THE CIT(A) HAS CO MMENTED NEGATIVELY ON THE AO'S INFERENCE 'SOUGHT TO BE DRAW N BASED ON THE FACT THAT THE PERSONS WHO GAVE THE VOLUNTARY CO NTRIBUTIONS HAD ADMITTED THEIR STUDENTS IN THE INSTITUTIONS RUN BY THE APPELLANT IN CERTAIN CASES.' IT NEEDS TO BE EMPHASIZED THAT THE QUID PRO QUO ARRANGEMENT EVEN IN THAT YEAR DID NOT EXIST IN CERT AIN CASES BUT IN EVERY CASE WHERE AN ENGINEERING SEAT HAD BEEN OFFER ED TO THE CONCERNED STUDENT. 6.3 IN THE IMPUGNED AY 2011-12, AS IN THE E ARLIER AYS 2009-10 & 2010-11, THE ASSESSEE HAD FILED ITS RETUR NS BY CLAIMING EXEMPTION U/S. 11. IT WAS NOT, THEREFORE, OPEN TO I T TO MAKE A DIFFERENT CLAIM IN TERMS OF SEC. 10(23C) AT A LATER STAGE. IN THE CASE OF VODITHALA EDUCATION SOCIETY (SUPRA) THE HON 'BLE ITAT AT PARA 3 OF THEIR ORDER, INFACT PULLED UP THE AO BY S AYING THAT 'WHEN THE ASSESSEE SPECIFICALLY CLAIMED EXEMPTION U NDER SECTION 11 OF THE ACT, THE ASSESSING OFFICER OUGHT NOT TO H AVE CONSIDERED THE CLAIM UNDER SECTION 10(23C) OF THE ACT.' THE CI T(A)'S ORDERS FOR AYS 2009-10 & 2010-11 DO NOT APPEAR TO HAVE APP RECIATED THIS FACT THAT THE APPELLANT CANNOT MAKE ONE CLAIM IN THE RETURN AND ANOTHER BEFORE APPELLATE AUTHORITIES, THUS SUBV ERTING THE SANCTITY OF THE RETURN. 7. WITH REGARD TO THE JUDICIAL DECISIONS RE LIED UPON BY THE AO AND THE APPELLANT, I AM INCLINED TO HOLD THAT TH E CASE LAWS CITED BY THE AO IN THE CONTEXT OF CAPITATION FEE AN D QUID PRO QUO BASED CONTRIBUTIONS ARE APPROPRIATE. THE APPELLANT' S CITED CASE LAWS HAVE ALL BEEN SUPERCEDED BY THE LATEST DECISIO N OF THE HON'BLE APEX COURT IN CASE OF M/S QUEENS EDUCATIONA L SOCIETY ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 27 OF 31 (SUPRA). THE DECISION OF THE HON'BLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF PINE GROVE INTERNATIONAL CHARI TABLE TRUST 230 CTR 477 CITED BY THE APPELLANT IS FOUND TO HAVE BEEN DELIVERED IN THE CONTEXT OF SEC.10(23C) AND DOES NO T FIT THE DIFFERENT FACTS IN THE APPELLANT'S CASE. THE APPELL ANT HAD CLAIMED THAT THE AO'S CITING OF THE HON'BLE SUPREME COURT D ECISION IN THE CASE OF MOHINI JAIN VS. STATE OF KARNATAKA SUPRA HA S NO APPLICATION TO ITS CASE SINCE THE APPELLANT HAD NOT COLLECTED ANY CAPITATION FEE AT ALL IN THE FIRST PLACE. THIS UNDE RSTANDING OF THE APPELLANT IS FOUND TO BE FACTUALLY INCORRECT SINCE THE IN THE MOHINI JAIN DECISION, THE HON'BLE SUPREME COURT HAD SAID T HAT THE FEES CHARGED IN PRIVATE INSTITUTIONS IN EXCESS OF TUITIO N FEES FIXED IN GOVERNMENT COLLEGES IS 'DEEMED TO BE CAPITATION FEE S'. IN THE PRESENT CASE, THE AO HAS SIMILARLY POINTED OUT THAT THE CAPITATION FEES HAS BEEN GIVEN IN THE DISGUISE OF SO CALLED 'V OLUNTARY CONTRIBUTIONS', THE IDENTITY OF FACTS IS, THUS, OBV IOUS.' 18. FROM A CAREFUL PERUSAL OF THE ORDERS OF THE LOW ER AUTHORITIES AND DETAILS OF RECEIPT OF DONATION/VOLUNTARY CONTRIBUTI ON, WE FIND THAT THESE DONATIONS/VOLUNTARY CONTRIBUTIONS WERE RECEIVED OVE R AND ABOVE THE TUITION FEES. THERE IS NO IOTA OF EVIDENCE PRODUCED BY THE ASSESSEE TO SUPPORT THAT THESE DONATIONS WERE TOWARDS THE CORPUS. HAD IT BEEN A CASE OF DONATION TOWARDS CORPUS, THERE SHOULD BE A SPECIFIC NARRATION ON THE DONATION RECEIPTS THAT THIS CONTRIBUTION WAS MADE T OWARDS THE CORPUS. MOREOVER IN KARNATAKA RECEIPT OF DONATION/CAPITATIO N FEE IS STRICTLY PROHIBITED BY THE KARNATAKA EDUCATIONAL INSTITUTION S (PROHIBITION OF CAPITATION FEE) ACT, 1984. THROUGH THIS LEGISLATIO N, THE GOVT. OF KARNATAKA HAS PROHIBITED THE RECEIPT OF CAPITATION FEES BY DE FINING THAT CAPITATION FEE MEANS ANY AMOUNT BY WHATEVER NAME CALLED, PAID OR C OLLECTED DIRECTLY OR INDIRECTLY IN EXCESS OF THE FEE PRESCRIBED U/S.5, B UT DOES NOT INCLUDE THE ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 28 OF 31 DEPOSIT SPECIFIED UNDER THE PROVISO TO SEC.3. UNDI SPUTEDLY, THE ASSESSEE HAS RECEIVED THESE VOLUNTARY CONTRIBUTIONS/DONATION S OVER AND ABOVE THE TUITION FEES. NOW THE ONUS IS UPON THE ASSESSEE TO DEMONSTRATE THAT THE VOLUNTARY CONTRIBUTIONS/DONATIONS FALLS WITHIN THE PROVISO TO SECTION 3 OF THE ACT, BUT NO EVIDENCE IS PLACED ON RECORD THAT PROVI SO TO SECTION 3 WOULD APPLY IN THE CASE OF ASSESSEE. WHERE THE DEFINITIO N OF CAPITATION FEE HAS BEEN GIVEN IN THE KARNATAKA EDUCATIONAL INSTITUTION S (PROHIBITION OF CAPITATION FEE) ACT, 1984, NO OTHER DEFINITION OF CAPITATION FEE CAN BE ADOPTED, AS THE WORD CAPITATION FEE HAS NOT BEEN DEFINED IN THE INCOME- TAX ACT. THE REVENUE HAS ALSO ESTABLISHED THAT DON ATION/VOLUNTARY CONTRIBUTION WAS COLLECTED FROM THE PARENTS OF THE STUDENTS ADMITTED DURING THE YEAR AND MORE SO THE PARENTS WERE NOT FINANCIAL LY SOUND TO PART WITH SUBSTANTIAL AMOUNT OF DONATION IN LAKHS TO THE EDUC ATIONAL INSTITUTION. THEREFORE, WE ARE OF THE VIEW THAT THE RECEIPTS OF THE ASSESSEE FROM THE PARENTS OF STUDENTS IS NOTHING BUT CAPITATION FEES AND ONCE CAPITATION FEE IS CHARGED FOR ADMISSION OF THE STUDENTS BY THE EDUCAT IONAL INSTITUTION, THE EDUCATIONAL INSTITUTION CAN BE HELD THAT IT IS NOT ENGAGED IN CHARITABLE ACTIVITIES, BUT SELLING THE EDUCATION IN THE LIGHT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF MS. MOHINI JAIN V. STATE OF KARNATAKA & ORS. (1992) 3 SCC 666 WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT CAPITATION FEES WAS NOTHING BUT PRICE OF SELLING EDUCATION AND SUCH TEACHING SHOPS WERE CONTRARY TO THE CONSTITU TIONAL SCHEME AND ABHORRENT TO OUR INDIAN CULTURE. WE HAVE ALSO CAR EFULLY EXAMINED THE ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 29 OF 31 JUDGMENTS REFERRED TO BY THE PARTIES AND IN THE CAS E OF P.S. GOVINDASWAMY NAIDU & SONS V. ACIT, 324 ITR 44 (MAD) , THE HONBLE MADRAS HIGH COURT HAS HELD THAT WHERE IT WAS FOUND THAT AMOUNT PAID B Y PARENTS OF STUDENTS ADMITTED TO ASSESSEES EDUCATIONAL INSTITUTION WAS NOT CORPUS DONATION AMOUNT, BUT IT WAS COLLECTED ONLY BY WAY OF CAPITAT ION FEES, SUCH CAPITATION FEES WAS NOT EXEMPT IN THE HANDS OF ASSESSEE INSTIT UTION. 19. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGMENTS R EFERRED TO BY THE ASSESSEE, BUT THEY ALL ARE DISTINGUISHABLE ON FACTS , AS IN NONE OF THE JUDGMENTS IT HAS BEEN HELD THAT EVEN THOUGH THE ASS ESSEE RECEIVED DONATION OVER AND ABOVE THE TUITION FEES FROM THE P ARENTS OF THE STUDENTS WHO BELONGED TO MEDIOCRE FAMILY IS A DONATION TOWAR DS THE CORPUS AND NOT THE CAPITATION FEE AS DEFINED IN THE KARNATAKA EDUC ATIONAL INSTITUTIONS (PROHIBITION OF CAPITATION FEE) ACT, 1984. 20. SO FAR AS THE GRANT OF REGISTRATION U/S. 12AA B Y THE TRIBUNAL IS CONCERNED, WE ARE OF THE VIEW THAT THE SCOPE OF GRA NT OF REGISTRATION U/S. 12AA IS ENTIRELY DIFFERENT THAN THE SCOPE OF GRANT OF EXEMPTION U/S. 11 OF THE ACT. WHILE GRANTING REGISTRATION U/S. 122AA OF THE ACT, THE AUTHORITY WAS REQUIRED TO EXAMINE THE OBJECTS OF THE SOCIETY IF T HE OBJECT OF THE SOCIETY IS OF CHARITABLE NATURE, BUT NO OTHER CONTRARY MATERIA L IS PLACED, THE REGISTRATION U/S. 12AA IS TO BE GRANTED. 21. BUT WHILE GRANTING EXEMPTION U/S. 11 OF THE ACT , THE AO IS REQUIRED TO EXAMINE THE NATURE OF ACTIVITIES OF THE ASSESSEE AN D IF HE NOTICED THAT THE ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 30 OF 31 ASSESSEE IS NOT ENGAGED IN CHARITABLE ACTIVITIES AN D IS ENGAGED IN COMMERCIAL ACTIVITIES, THE BENEFIT OF EXEMPTION U/S . 11 CAN BE DENIED. IN THE INSTANT CASE, THE AO HAS BROUGHT OUT ENORMOUS E VIDENCE ON RECORD ESPECIALLY TO ESTABLISH THAT THE ASSESSEE IS NOT EN GAGED IN CHARITABLE ACTIVITIES AND ALL THESE EVIDENCE WAS OVERLOOKED BY THE CIT(APPEALS) IN THE AYS 2009-10 & 2010-11. THEREFORE, WE FIND NO ERROR IN THE ORDER OF THE AO BY DENYING THE BENEFIT OF EXEMPTION U/S. 11 TO THE ASSESSEE. 22. IN THE RESULT, THE ORDERS OF THE CIT(APPEALS) I N ITA NOS. 206 & 207/BANG/14 ARE SET ASIDE AND THE ORDERS OF THE ASS ESSING OFFICER ARE RESTORED, WHEREAS IN ITA NO.1099/BANG/2015 THE ORDE R OF THE CIT(APPEALS) IS CONFIRMED. 23. THE APPEALS OF THE REVENUE ARE ALLOWED AND THAT OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JUNE, 2016. SD/- SD/- ( INTURI RAMA RAO ) (SUNIL KUMAR YADA V ) ACCOUNTANT MEMBER JUDICIA L MEMBER BANGALORE, DATED, THE 17 TH JUNE, 2016. /D S/ ITA NOS.206 & 207/BANG/2014 & 1099/BANG/2015 PAGE 31 OF 31 COPY TO: 1. REVENUE 2. ASSESSEE 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.