Addl.C.I.T.(A.O.),Range-1, Aligarh V. Kailash Chand Jain Keshav Chand Jain, Aligarh

ITA 225/AGR/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0390 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 11 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 23-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 15-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MAURYA
• Keywords: Gift
• Section: 12AA; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 225/AGRA/2011 ASSTT. YEAR : 2006-07 ADDL. C.I.T., RANGE-1, VS. KAILASH CHAND JAIN ALIGARH. KESHAV CHAND JAIN EDUCATIONAL TRUST VIMALANCHAL, HARI NAGAR, ALIGARH. (PAN: AAATP 0873 E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.L. MAURYA, SR. D.R. RESPONDENT BY : SHRI DEEPENDRA MOHAN, C.A. DATE OF HEARING : 23.07.2013 DATE OF PRONOUNCEMENT OF ORDER : 26.07.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GHAZIABAD DATED 14.03.2011 FOR THE ASSESSMENT YEAR 2006-07, CHALLENGING THE DELETION OF ADDITION OF RS.36,96,835/- IGNORING THE FACT THAT THE DEVELOPMENT FUND WAS NOT VOLUNTARY CONTRIBUTION WITH THE SPECIFIC DI RECTION FROM PARENTS. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME AT NIL. THE ASSESSEE TRUST I S CHARITABLE AND ENGAGED IN SOCIAL ITA NO. 225/AGRA/2011 2 AND RELIGIOUS ACTIVITIES AND RUNNING EDUCATIONAL IN STITUTION IN THE NAME OF DELHI PUBLIC SCHOOL, AGRA ROAD, ALIGARH AND DELHI PUBLIC SCHOOL SIKSHA KENDRA, ALIGARH AND ALSO PROVIDED HOTEL FACILITY FOR THEIR STUDENTS. THE ASSESSEE TRUST IS REGISTERED U/S. 12AA VIDE CIT, AGRA ORDER DATED 20. 07.1998. THE CASE WAS SELECTED FOR SCRUTINY AND ON PERUSAL OF THE BALANCE SHEET, IT WAS SEEN THAT THE ASSESSEE HAS SHOWN DEVELOPMENT FUND OF RS.36,96,834 /- COLLECTED FROM STUDENT DURING THE YEAR. THE ASSESSEE EXPLAINED THAT THE AF ORESAID AMOUNT IS RECEIVED TOWARDS DEVELOPMENT AND IS MEANT AND RECEIVED FOR T HE DEVELOPMENT OF INFRASTRUCTURE AND OTHER FACILITIES PROVIDED BY THE TRUST. ACCORDINGLY, THIS AMOUNT HAS BEEN ADDED TO THE RESERVE FUND. SAME HAS BEEN U TILIZED FOR THE PURPOSE FOR WHICH THE SAME HAS BEEN RECEIVED. THE REPLY OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE BECAUSE DEVELOPMENT FUND WAS PART OF THE FEES COLLECTED AND IT WAS NOT CONSIDERED TO BE PART OF THE CORPUS OF THE TRUST AN D ACCORDINGLY, THE ADDITION WAS MADE. ADDITION WAS CHALLENGED BEFORE THE LD. CIT(A) . SUBMISSIONS OF THE ASSESSEE ARE INCORPORATED IN THE APPELLATE ORDER IN WHICH TH E ASSESSEE EXPLAINED THAT ADDITION HAS BEEN MADE BY THE AO ON SURMISES AND CO NJECTURES WITHOUT BRINGING ANY EVIDENCE AGAINST THE ASSESSEE. IT WAS EXPLAINED THAT THE ASSESSEE TRUST IS ENGAGED IN IMPARTING EDUCATION. IT IS RUNNING THREE SCHOOLS UNDER THE NAME OF DELHI PUBLIC SCHOOL, DELHI PUBLIC SCHOOL SHIKSHA KE NDRA AND ASHA KIRAN. SCHOOLS ARE FROM PLAY GROUP TO CLASS 12 AND ARE AFFILIATED TO CBSE, NEW DELHI. DELHI ITA NO. 225/AGRA/2011 3 PUBLIC SCHOOL SHIKSHA KENDRA IS FOR POOR STUDENTS A ND ASHA KIRAN IS FOR DISABLED CHILDREN. THERE IS NO DISTINCTION IN THE SET UP OF EDUCATIONAL ACTIVITIES. THE PARENTS WHO GO TO DELHI PUBLIC SCHOOL ARE WELL AWARE OF FEE STRUCTURE AND ARE INFORMED OF THE QUALITY OF EDUCATION. SCHOOL DOES NOT COMPEL AN Y PARENT TO ADMIT THEIR CHILDREN IN DELHI PUBLIC SCHOOL AND PAY DEVELOPMENT FEE TO T HE SCHOOL. PARENTS HAVE OPTION TO OPT ANY OF THE SCHOOLS. THERE ARE LARGE NUMBER O F SCHOOLS IN THE TOWN. THE AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO PROVE THA T THE PARENTS ARE FORCED TO GET THEIR CHILDREN ADMITTED IN THEIR SCHOOL OR TO PAY A NY DEVELOPMENT FUND. DEVELOPMENT FUND IS RECEIVED FROM THE STUDENTS ONCE IN YEAR TOWARDS RESERVE FUND, WHICH IS NOT INCOME OF THE ASSESSEE. IN ALTERNATE C ONTENTION, IT WAS ALSO EXPLAINED THAT EVEN IF OBSERVATION OF THE AO ARE CONSIDERED F OR THE SAKE OF ARGUMENTS, THE DEVELOPMENT FUND CHARGED FROM THE STUDENTS IS CONSI DERED TO BE PART OF THE REVENUE ACCOUNT/FEE, THE ASSESSEE TRUST HAS STILL S PENT MORE THAN 85% OF THE GROSS RECEIPTS ON THE CHARITABLE ACTIVITIES IN THE MATTER OF IMPORTING EDUCATION TO THE STUDENTS AND INCOME/SURPLUS IF ANY, LEFT IN REVENUE ACCOUNT SHALL BE EXEMPT U/S. 11 AND 12 OF THE IT ACT. THE WORKING IS GIVEN AT PAGE 21 OF THE IMPUGNED ORDER TO CLARIFY THAT THE ASSESSEE TRUST HAS UTILIZED MORE T HAN 85% OF THE GROSS RECEIPTS ON CHARITABLE ACTIVITIES. IT WAS, THEREFORE, SUBMITTED THAT THERE IS NO VIOLATION OF ANY PROVISION OF SECTION 11, 12 AND 13 OF THE IT ACT. N O DEFECTS HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE OR THE VOLUNTARY AMOUNT ITA NO. 225/AGRA/2011 4 RECEIVED TOWARDS CORPUS. THE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE FINDING OF THE AO DELE TED THE ADDITION. HIS FINDINGS IN APPELLATE ORDER IN PARA 5.2 IS REPRODUCED AS UNDER : 5.2. REGARDING THE OTHER ADDITION OF RS. 36,96,83 4/-, I AGREE WITH ALL THE CONTENTIONS RAISED BY THE APPELLANT. ANY INSTITUTION RUNS ON THE BASIS OF CERTAIN UNIFOR M AND ORGANIZED FEE STRUCTURE. IF THAT FEE STRUCTURE FORE TELLS ALL STUDENTS TO DEPOSIT RS.2000/- TOWARDS 'DEVELOPMENT FUND', IT IS AKIN TO CORPUS DONATION WITH A SPECIFIC DIRECTION REGARDING OBJECT IVE AND DESTINATION TOWARDS WHICH THE FEE/CONTRIBUTION WOULD GO!! ALSO, ONCE A STUDENT CHOOSES TO BE ENROLLED IN THIS INSTITUTE, IT IS HIS VOLUNTARY DECISION, AND IT IS PART OF THAT VOLUNTARY DECISIONS TO PAY THE F EE STRUCTURE (INCLUDING RS. 2000/- TOWARDS 'DEVELOPMENT FUND) WHICH IS BEIN G PAID BY OTHER ENROLLERS ALSO; THERE IS NO ELEMENT OF 'FORCE' OR ' EXTRACTION' IN THAT!! IT HAS BEEN HELD THAT MEMBERSHIP FEES/SUBSCRIPTIONS PAID BY MEMBERS OF ORGANIZATION CANNOT BE CONSIDERED AS PAYMENTS WI THOUT CONSIDERATION AND, THEREFORE, THEY SHOULD NOT BE CO NSIDERED AS VOLUNTARY CONTRIBUTIONS FOR THE PURPOSE OF SECTION 12. IN THE CASE OF CIT V. DIVINE, LIGHT MISSION [2005] 146 TAXMAN 653 (DELHI) IT WAS HELD THAT MEMBERSHIP FEE AND SUB SCRIPTION AMOUNTS RECEIVED BY TRUST/SOCIETY FROM ITS MEMBERS CANNOT B E CHARACTERIZED AS VOLUNTARY CONTRIBUTION WITHIN MEANING OF EXPRESSION 'FUND' IN SECTION 12. THE MEMBERSHIP FEE AND SUBSCRIPTIONS HAVE TO BE CONSIDERED AS INCOMES DERIVED FROM PROPERTY HELD UNDER TRUST AND, THEREFORE, ARE EXEMPT UNDER SECTION 11. IT WAS FURTHER OBSERVED TH AT THE SAID SUBSCRIPTION HAS TO BE CONSIDERED AS INCOME DERIVED FROM PROPERTY HELD UNDER TRUST AND, THEREFORE, IS EXEMPT UNDER SE CTION 11. THE COURT FURTHER OBSERVED THAT THE CONTRIBUTIONS ARE VOLUNTA RY AND ARE MADE WILLINGLY AND WITHOUT COMPULSION. TO BE VOLUNTARY T HE MONEY IS TO BE GIFTED OR IS GIVEN GRATUITOUSLY WITHOUT CONSIDERATI ON. THESE TESTS SHOULD BE SATISFIED FOR CONTRIBUTION. HOWEVER, WHEN A PERSON PAYS MEMBERSHIP FEE OR SUBSCRIPTION TO A SOCIETY OR A TR UST, HE DOES NO MAKE A GIFT OF THE MEMBERSHIP FEE OR SUBSCRIPTION A MOUNT TO THE SOCIETY. THE AMOUNT OF SUBSCRIPTION PAID BY A MEMBE R TO THE SOCIETY ITA NO. 225/AGRA/2011 5 CAN NEVER BE CONSIDERED AS GRATUITOUS, PAYMENT MADE BY A MEMBER TO THE SOCIETY OR AS A PAYMENT WITHOUT CONSIDERATION. THUS, MEMBERSHIP AND SUBSCRIPTION AMOUNTS RECEIVED BY THE ASSESSEE , .TRUST/SOCIETY FROM ITS MEMBERS CANNOT BE CHARACTERIZED AS VOLUNTARY CO NTRIBUTIONS WITHIN THE MEANING OF THE EXPRESSION 'FUND' IN SECTION 12. THUS THERE IS A DISTINCTION BETWEEN VOLUNTARY CONTRIBUTION AND SUBS CRIPTION. WHEN A SUM IS PAID IN THE NATURE OF GIFT OR A GRATUITOUS P AYMENT TO THE TRUST WITHOUT ANY CONSIDERATION, IT WOULD BE CONSIDERED A S A VOLUNTARY CONTRIBUTION. IN THE PRESENT CASE, DEVELOPMENT FEE WOULD BE LIKE A SUBSCRIPTION FEE, BEING PAID BY A MEMBER ENROLLED I N THE COURSE/CURRICULUM. THUS, I REJECT THE VIEW OF THE AO. THE APPELLANT'S ALTERNATIVE ARGUMENT OF UTILIZATION OF MORE THAN 85%, EVEN IF DEVELOPMENT FUND RECEIPT IS ADDED AS INCOME, IS ALSO VALID. HOWEVER, THAT IS OF ACADEMIC INTEREST ONLY, ONCE THE MAIN ARGUMENT IS ACCEPTED. THUS, THE ADDITION OF RS.36,96,834/- IS DELETED. 3. THE LD. DR RELIED UPON THE ORDER OF THE AO. ON T HE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT THE REGISTRATION U/S. 12AA IS IN FORCE IN FAVOUR OF THE ASSESSEE AND THE CORPUS AMOUNT WAS RECEIVED WHICH I S EXEMPT U/S. 11(D) OF THE IT ACT. IN ALTERNATE CONTENTION, IT WAS SUBMITTED THAT IF THE AMOUNT IN QUESTION IS ADDED TOWARDS INCOME OF THE ASSESSEE, THE ASSESSEE HAS SPENT MORE THAN 85%. THEREFORE, THE APPEAL OF THE REVENUE MAY BE DISMISS ED. ITA NO. 225/AGRA/2011 6 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE LD. CIT(A) HAS GIVEN SPE CIFIC FINDING OF FACT IN FAVOUR OF THE ASSESSEE THAT DEVELOPMENT FUND IS AKIN TO CO RPUS DONATIONS WITH SPECIFIC DIRECTIONS. THEREFORE, THE AMOUNT RECEIVED BY THE A SSESSEE IN THE NAME OF DEVELOPMENT FUND WAS RECEIVED AS VOLUNTARY CONTRIBU TION TOWARDS CORPUS OF THE TRUST. SAME IS, THEREFORE, EXEMPT U/S. 11(D) OF THE IT ACT. FINDINGS OF FACT HAVE NOT BEEN REBUTTED THROUGH ANY MATERIAL ON RECORD. FURTH ER, THE ASSESSEES ALTERNATIVE CONTENTION IS ALSO ACCEPTED BY THE LD. CIT(A) THAT EVEN IF THE AMOUNT IN QUESTION IS ADDED, THE ASSESSEE HAS ALREADY UTILIZED MORE THAN 85% FOR ACHIEVING THE OBJECTS OF THE ASSESSEE TRUST. THE LD. CIT(A) WAS, THEREFORE, JUSTIFIED IN ACCEPTING THE ALTERNATE CONTENTION OF THE ASSESSEE AS WELL. IT IS NOT A DEN YING FACT THAT THE ASSESSEE STILL ENJOYS REGISTRATION U/S. 12AA OF THE IT ACT. THEREF ORE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- ITA NO. 225/AGRA/2011 7 COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY