Matrusri Education Society, Hyderabad V. ADIT, Hyderabad

ITA 417/HYD/2009

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6523 (ITAT-HYDERABAD)
• Duration Of Justice: 9 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-07-2018
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J SIRI KUMAR
• Keywords: Charitable institution; Deemed to accrue or arise in india; Capital receipt; Benefit of exemption
• Section: 12A; 12AA; 12; 11

Judgement Text

ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 1 OF 18 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 417 TO 419/HYD/2009 (ASSESSMENT YEARS: 2003-04 TO 2005-06) MATRUSRI EDUCATION SOCIETY HYDERABAD PAN: AATAM2433P VS ASSTT./DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS) II HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI Y. RATNA KAR FOR REVENUE : SHRI J. SIRI KUMAR, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. ALL THE THREE APPEALS ARE FILED BY THE ASSESSEE AGA INST THE ORDER OF THE CIT (A)-IV, HYDERABAD, DATED 25/04 /2006 FOR THE A.YS 2003-04, 1004-05 AND 2005-06 RESPECTIVELY. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR A.Y 2003-04. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)IV, HYD. DT. 13-2-2009 IS CONTRARY TO L AW AND FACTS. 2. THE APPELLANT CONTENDS THAT IT IS ENTITLED TO EX EMPTION U/S 11 OF THE LT ACT AND NO PART OF ITS INCOME IS L IABLE TO BE TAXED FOR THE ASSESSMENT YEAR UNDER APPEAL. 3. THE APPELLANT CONTENDS THAT IT HAS COMPLIED WITH ALL THE PROVISIONS OF SECTIONS 11 TO 13 OF THE LT ACT A ND THEREFORE ANY SURPLUS REMAINING FOR THE YEAR IS NOT LIABLE TO TAX AS INCOME IN THE HANDS OF THE SOCIETY. DATE OF HEARING: 19.07.2018 DATE OF PRONOUNCEMENT: 3 1 . 0 7 .2018 ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 2 OF 18 4. IT IS CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)IV, HYD. ERRED IN COMING TO THE CONCLUSION THAT VOLUNTARY CONTRIBUTIONS IN THE FORM OF DEVELOPMENT FUND RECEIVED BY THE APPELLANT SOCIETY AMOUNTING TO RS.1,21,25,001 FOR THE ASSESSMENT YEAR 2003-04 SHOULD BE TREATED AS DONATIONS ~~ ~ COLLECT ED AS QUID PRO QUO FOR THE ADMISSION OF STUDENTS UNDER MANAGEMENT QUOTA. 5. IT IS CONTENDED THAT VOLUNTARY CONTRIBUTIONS REC EIVED ARE FOR THE CORPUS FUND AND CANNOT BE CALLED AS INC OME. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)IV, HYD. SHOULD HAVE SEEN THAT THE APPELLANT IN ANY EVE NT, HAS CONSIDERED THESE VOLUNTARY CONTRIBUTIONS AS INC OME FOR THE PURPOSE OF COMPUTATION OF INCOME. 6. IT IS CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)IV, HYD. ERRED IN NOT APPLYING THE DECISIONS OF THE SUPREME COURT IN C.LT VS. BIJILI C OTTON MILLS LTD. REPORTED IN 116 ITR P.60 AT PAGES (73 & 74) AND THAT OF THE A.P HIGH COURT IN THE CASE OF CHAIR MAN, A.P WELFARE FUND VS. C.LT REPORTED IN 143 ITR P.84 FOR THE PURPOSE OF CONSIDERING WHETHER THE CONTRIBUTION S ARE VOLUNTARY OR NOT. THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS)IV, HYD. FELL INTO ERROR IN ASSUMING TH AT THE ABOVE JUDGMENTS ARE INAPPLICABLE AND IN DISTINGUISH ING THEM. 7. IT IS CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)IV, HYD. ERRED IN CONSIDERING TH E VARIOUS STATEMENTS RECORDED FROM THE DONORS WITHOUT GIVING AN OPPORTUNITY OF CROSS EXAMINING THEM. THE SAID STATEMENTS COULD NOT HAVE BEEN LOOKED INTO BY THE LEARNED CIT(A)-IV HYDERABAD FOR DRAWING ANY ADVERSE INFERENCE. 8. IT IS CONTENDED THAT THE PAYMENT OF THE SAID A MOUNT IS VOLUNTARY ON THE PART OF THE DONORS. WITHOUT PRE JUDICE, IF IS FURTHER CONTENDED THAT EVEN IF THE SAID VOLUN TARY CONTRIBUTIONS ARE HELD TO BE NOT VOLUNTARY OR HELD TO BE QUID PRO QUO FOR GIVING ADMISSIONS UNDER THE MANAGEMENT QUOTA, YET IS DOES NOT DESTROY THE CHARI TABLE CHARACTER OF THE INSTITUTION. IT IS FURTHER CONTEND ED THAT THE CONTENTS OF PARA 4.4 OF THE ORDER OF CIT (A) IS ERRONEOUS AND IS DENIED. 9. 11 IS CONTENDED THAT TO THE LAST RUPEE OF AMOUNT S RECEIVED HAVE BEEN ACCOUNTED FOR AND NOT A SINGLE R UPEE IS SPENT FOR ANY PURPOSES OTHER THAN FOR THE OBJECT S OF THE EDUCATIONAL INSTITUTION. IN THE FACTS AND CIRCUMSTA NCES OF ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 3 OF 18 THE CASE, THE APPELLANT SHOULD HAVE BEEN GIVEN EXEMPTION OF ITS INCOME U/S 11 OF THE LT ACT. 10. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FAILED TO CORRECTLY APPREHEND THE CONTENTS OF CIRCU LAR NO.11 OF 2008 DT. 19-12-2008. IT IS SUBMITTED THAT EVEN IF THERE IS ANY PROFIT DERIVED IN THE COURSE OF ACHIEV ING THE OBJECTS VIZ. EDUCATION, IT DOES NOT RENDER INCOME L IABLE TO TAX IN AS MUCH AS SUCH PROFITS ARE MERELY INCIDENTA L. 11. IT IS CONTENDED THAT MERE RECEIPT OF DONATIONS DOES NOT DESTROY THE CHARITABLE CHARACTER OF THE INSTITU TION AND THE TEST SHOULD HAVE BEEN WHETHER THE MONEYS RECEIV ED HAVE BEEN APPLIED FOR THE OBJECTS OF THE SOCIETY. I N THE APPELLANT'S CASE THERE IS NO DENIAL THAT TO THE LAS T RUPEE OF FUNDS HAVE BEEN APPLIED ON THE OBJECTS OF THE APPELLANT SOCIETY AND THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)IV, HYD. SHOULD HAVE HELD THAT T HE INCOME OF THE APPELLANT SOCIETY IS NOT LIABLE TO TA X U/S 11 OF THE LT ACT. 12. THE APPELLANT CONTENDS THAT IT HAS NO KNOWLEDGE OF THE LETTER OF THE COMMISSIONER OF INCOME TAX(APPEAL S) DT. 25-4-2007 ADDRESSED TO THE ADDL. DIRECTOR OF INCOME TAX(EXEMPTIONS) (PARA 6 OF THE APPELLATE ORDER) AND THE REMAND REPORT DT. 31- 5- 2007 SENT BY THE ASSESSING OFFICER (PARA -6. I) ILL} I' AND SEVERAL LETTERS RE FERRED TO AT PARA 6.2 OF THE APPELLATE ORDER. ALL ENQUIRIES WERE MADE BEHIND THE BACK OF THE APPELLANT. AT NO STAGE THESE MATTERS WERE PUT TO THE APPELLANT FOR ITS OBJECTION S BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). 13. IT IS CONTENDED THAT THE INFERENCE DRAWN AT PAR A 8 IN RELATION TO ~~E REASONS WHY THE SECRETARY(HIGHER EDUCATION) OR A.C.I.T.E COULD NOT HAVE TAKEN ACTION , IS A FIGMENT OF IMAGINATION OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). HE HAS INDULGED IN WILD GUESS WORK AND INVOKED NON EXISTENT INFERENCES TO DRAW ADVERSE CONCLUSIONS. IT IS CONTENDED THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) MADE UP HIS MIN D FIRST NOT TO ALLOW THE APPEAL AND LATER WENT IN SEA RCH OF SOME REASONS WILLY NILLY TO DENY THE APPELLANT'S CL AIM TO JUSTIFY HIS ACTION. 14. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IV, HYD. ERRED IN RELYING ON THE DECISION OF THE HON'BL E TRIBUNAL IN VODITHALA EDUCATION SOCIETY IN ITA NO.1138/HYD.L2006 FOR THE ASSESSMENT YEAR 2003-04. IT IS CONTENDED THAT THE SAID ORDER OF THE HON'BLE TRI BUNAL IS INAPPLICABLE BECAUSE THE ISSUE THEREIN WAS WHETHER THERE WAS ANY VIOLATION OF PROVISIONS OF SECTION 13 (L)( C) ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 4 OF 18 OF THE I. T ACT FOR DENYING THE BENEFIT OF SECTION 11 OF THE I. T ACT AND NOT MERELY BECAUSE OF THE SOCIETY RECE IVED CONTRIBUTIONS I DONATIONS FROM ITS STUDENTS ADMITTE D UNDER THE MANAGEMENT QUOTA. EXCEPT FOR THE QUANTUM, THE GROUNDS OF APPEAL RAISE D FOR THE A.YS 2004-05 AND 2005-06 ARE THE SAME. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A SOCIETY REGISTERED U/S 12A OF THE I.T. ACT AND DURING THE R ELEVANT FINANCIAL, IT HAD COLLECTED DEVELOPMENT FUND TO THE TUNE OF RS.1,21,25,001 WHICH HAD BEEN DIRECTLY TAKEN TO THE BALANCE SHEET WITHOUT BEING ADMITTED AS INCOME IN THE INCOM E AND EXPENDITURE A/C. ON GOING THROUGH THE DETAILS AND T HE ADDRESSES OF THE ALLEGED DONORS, THEIR MODES OF PAYMENT, ALON G WITH THE NAMES OF THE STUDENTS ADMITTED DURING THE YEAR IN T HE FIRST YEAR INTO VARIOUS COURSES IN THE ENGINEERING STREAM AND THE NAMES AND ADDRESSES OF THE PARENTS, THE AO FOUND CLEAR NE XUS BETWEEN EACH STUDENT ADMITTED INTO THE ENGINEERING COURSE U NDER THE MANAGEMENT QUOTA AND A PARTICULAR GROUP OF DONORS WHO ARE SHOWN TO HAVE MADE VOLUNTARY CONTRIBUTIONS TO THE DEVELOPMENT FUND. IN ORDER TO VERIFY THE VERACITY OF THE SAID F UND, THE AO RECORDED THE STATEMENT OF SOME OF THE PARENTS WHO S TATED THAT THE DONATIONS WERE GIVEN BY THEIR CLOSE RELATIVES AND F RIENDS, THOUGH THEIR FINANCIAL POSITION DID NOT PERMIT THEM TO DON ATE VOLUNTARILY, FOR GETTING A SEAT IN THE ASSESSEES EDUCATIONAL IN STITUTION. 3. IN VIEW OF THE ABOVE STATEMENT, THE AO CONCLUDED THAT THE ASSESSEE HAD COLLECTED HUGE EXTRA CONSIDERATION OVER AND ABOVE THE OFFICIAL FEE AND THEREFORE, IT WAS THE CA PITATION FEE WHICH ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 5 OF 18 WAS BEING COLLECTED. HE THEREFORE, HELD THAT THE A SSESSEE IS NOT CARRYING ON CHARITABLE ACTIVITY AND ALSO FURTHER TH AT THE EXEMPTION U/S 10(23C)/11 IS AVAILABLE ONLY TO THOSE COLLEGES OR SOCIETIES WHICH ARE RUN SOLELY FOR EDUCATIONAL PURPOSES AND N OT FOR THE PURPOSE OF THE PROFIT. HE THEREFORE, DISALLOWED THE EXEMPTION U/S 11 AND ALSO U/S 10(23C)(VI) OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WHO CONFIRM ED THE ORDER OF THE AO BY FOLLOWING THE DECISION OF THE ITAT IN THE CASE OF VODITHALA EDUCATION SOCIETY IN ITA NO.1138/HYD/2006 FOR THE A.Y 2003-04. AGGRIEVED, THE ASSESSEE FILED APPEALS BEFORE THE TRIBUNAL. 4. SINCE THERE WERE VARYING DECISIONS OF VARIOUS BE NCHES OF THE TRIBUNAL ON THE ISSUE, THE CASE WAS REFERRED TO THE SPECIAL BENCH FOR A DECISION ON THE ISSUE AS TO WHETHER THE ASSESSEE WAS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. THE SPECI AL BENCH WAS HOWEVER, DISBANDED AFTER TAKING INTO CONSIDERATION, THE CONTENTIONS OF THE ASSESSEE THAT SIMILAR MATTER IS PENDING BEFORE THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND THAT T HE ITAT CHENNAI HAD ADJUDICATED THE ISSUE IN FAVOUR OF THE ASSESSEE. THEREFORE, THE MATTER IS AGAIN POSTED BEFORE THE DI VISION BENCH FOR ADJUDICATION. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, SHRI Y. RATNAKAR, WHILE REITERATING THE SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AUTHORITIES BELOW, HAS ALSO REFERRED TO THE WRITTEN SUBMISSIONS FILED BY HIM. HE SUBMITTED THAT THIS IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE CO ORDINATE BENCH ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 6 OF 18 OF THIS TRIBUNAL IN THE CASE OF VIGNANA JYOTHI IN I TA NO.1751/HYD/2014 DATED 26.04.2017 AND THEREFORE, TH E ISSUE NEEDS TO BE DECIDED IN ITS FAVOUR. COPY OF THE SAID ORDER IS FILED BEFORE US. 6. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT IN THE CASE OF VIGNAN JYOTH I (SUPRA), THE COORDINATE BENCH OF THIS TRIBUNAL AFTER CONSIDERIN G THE DECISIONS OF VARIOUS BENCHES OF THE TRIBUNAL AS WELL AS THE H ON'BLE HIGH COURTS AND ALSO AS TO WHETHER THE ASSESSEE THEREIN HAS VIOLATED THE PROVISIONS OF A.P. EDUCATIONAL INSTITUTIONS (RE GULATIONS OF ADMISSIONS AND PROHIBITION OF CAPITATION FEES) ACT, 1983, HAS OBSERVED THAT THE ASSESSEE THEREIN IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT AND ALSO U/S 10(23C)(VI) OF THE ACT. THE RELEVANT PARAS OF THE SAID ORDER REPRODUCED HEREUNDER FOR READY RE FERENCE: 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND SU BMISSIONS AND PERUSED DOCUMENTS PLACED ON RECORD. AS CAN BE SEEN FROM THE ORDER, THE LD.DIT(E) BASED HIS CONCLUSION ON THE BASIS OF ENQU IRY FROM FOUR PARENTS/RELATIONS IN ASSESSMENT PROCEEDINGS CONCLUD ED IN THE YEAR 2007 FOR AY. 2005-06 AND IN YEAR 2008 FOR AY. 2006-07. E VEN THOUGH THOSE FINDINGS IN ASSESSMENTS WERE NOT CONCLUSIVE AND MAT TERS WERE RESTORED TO AO FOR FURTHER ENQUIRY, NO SUCH ENQUIRY WAS MADE AS CAN BE SEEN FROM THE ORDERS PASSED AGAIN ON 31-03-2014 FOR THE ABOVE YEA RS. THESE ORDERS AT PRESENT ARE PENDING ADJUDICATION BEFORE CIT(A). THU S, THE ORDER OF DIT(E) IS BASED ON PREMATURE CONCLUSIONS AND THE CONTENTIO N OF LD.CIT-DR STATING THAT THE DEPARTMENT HAS 'CONCLUSIVELY PROVE D' THE COLLECTION OF CAPITATION FEE IS DEVOID OF ANY MERIT. 10.1. AS CAN BE SEEN FROM THE FACTS, ONLY FOUR CASE S WERE EXAMINED AND ON THE BASIS OF THAT, ALL THE DONATIONS RECEIVED INCLU DING FROM MEMBERS OF SOCIETY WERE CONSIDERED AS CAPITATION FEES AND WERE BROUGHT TO TAX. ASSESSEE FILED THE LETTERS FROM THE ABOVE FOUR PERS ONS THAT THE DONATIONS ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 7 OF 18 ARE VOLUNTARY AND NO CAPITATION FEE WAS COLLECTED. NO FURTHER ENQUIRY WAS CONDUCTED IN SPITE OF REMITTING MATTER FOR EXAMINAT ION OF THE SAME. EVEN THOUGH THE MATTER IS PENDING ADJUDICATION BEFORE TH E LD.CIT(A) IN ASSESSMENT PROCEEDINGS, WE ARE OF THE OPINION THAT THESE FOUR ISOLATED INSTANCES WHICH WERE RELIED ON BY AO DOES NOT CONCL USIVELY ESTABLISH THAT THE SOCIETY HAS VIOLATED THE OBJECTS FOR WHICH IT W AS ESTABLISHED AND REGISTRATION FRAMED SO AS TO INVOKE PROVISIONS OF SECTION 12AA(3) TO CANCEL REGISTRATION. 11. BEFORE ADVERTING TO THE ISSUE OF CANCELLATION, IT WOULD BE BETTER TO ANALYSE THE CONCEPTS OF CHARITABLE PURPOSE, TAXABIL ITY OF VOLUNTARY CONTRIBUTIONS, CAPITATION FEE, WHETHER THE DONATION CAN BE CONSIDERED AS CAPITATION FEE AND PROFITS AND PROFITEERING - THE R EASONS GIVEN BY THE LD. DIT(E) WHILE CANCELLING THE REGISTRATION. THESE ARE ANALYSED HEREIN ONWARDS. 11.1. FIRST WE WILL CONSIDER THE MEANING OF 'CHARIT ABLE PURPOSE' UNDER THE INCOME TAX ACT . SECTION 2(15) OF THE ACT DEFINES 'CHARITABLE PURPOSE' AS UNDER: 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, ME DICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY (NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT)'. THE ITALICIZED WORDS IN THE ABOVE DEFINITION WERE D ELETED W.E.F. 1ST APRIL, 1984 BY THE FINANCE ACT 1983. IT CAN BE SEEN THAT THE ABOVE DEFINITION IS NOT EXHAUSTIVE OR EXCLUSIVE BUT IS AN INCLUSIVE DEF INITION. IT CLASSIFIES THE CHARITABLE ACTIVITIES UNDER THE FOLLOWING FOUR HEAD S: A) RELIEF OF THE POOR; B) EDUCATION; C) MEDICAL RELIEF; AND D) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL P UBLIC UTILITY. THE AMBIT AND SCOPE OF THE WORD 'EDUCATION' OCCURRI NG IN THE DEFINITION OF 'CHARITABLE PURPOSE' UNDER SECTION 2(15) OF THE I.T. ACT HAS BEEN EXAMINED BY THE HON'BLE APEX COURT IN THE CASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. CIT REPORTED IN 101 ITR 234(SC) WHEREIN THE HON'BLE SU PREME COURT HELD THAT THE WORD 'EDUCATION' USED IN THE DE FINITION WILL NOT ENCOMPASS EVERY ACQUISITION OF KNOWLEDGE AND GAVE A RESTRICTED MEANING TO THE WORD 'EDUCATION' BY CONFINING IT TO 'SCHOLAS TIC INSTRUCTION' AND 'NORMAL SCHOOLING'. 11.2. IN THE CASE BEFORE US, THE ASSESSEE SOCIETY E STABLISHED EDUCATIONAL INSTITUTION TO IMPART 'SCHOLASTIC INSTRUCTION' IN V ARIOUS STREAMS FOR GENERAL PUBLIC AND THUS SATISFIES THE CONDITION LAID DOWN B Y THE APEX COURT IN THE ABOVE CASE. THEREFORE, ASSESSEE'S ACTIVITIES CONSTI TUTES 'EDUCATION' AS CLASSIFIED IN 'CHARITABLE PURPOSES' U/S. 2(15) OF T HE I.T. ACT . THE FURTHER UNDISPUTED FACT THAT THE ASSESSEE HAS BEEN GRANTED THE REGISTRATION U/S.12 A ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 8 OF 18 OF THE I.T. ACT ALSO CONFIRMS THAT DEPARTMENT WAS ALSO SATISFIED T HAT THE OBJECTS AND ACTIVITIES OF THE ASSESSEE SOCIETY ARE CHARITABLE IN NATURE. 11.3. AS POINTED OUT IN THE ABOVE PARAGRAPH, PRIOR TO 1ST APRIL, 1984, THE DEFINITION OF 'CHARITABLE PURPOSE' U/S. 2(15) OF TH E ACT, ENDED WITH THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVIT IES FOR PROFIT' (EMPHASIS SUPPLIED BY US). THE HON'BLE SUPREME COURT IN THE C ASE OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST VS. CIT (CITED SUPRA) HAS HELD THAT THE OBJECT OF THE TRUST THEREIN WAS NOT 'EDUCATION' WITHIN THE MEANIN G OF SEC 2(15) BUT 'AN OBJECT OF GENERAL PUBLIC UTILITY'. THEREAFTER, WHIL E HOLDING THAT THE PUBLICATION OF NEWSPAPERS AND JOURNALS CARRIED ON B Y THE TRUST THEREIN INVOLVED THE CARRYING OF AN ACTIVITY FOR PROFIT, IT WAS HELD THAT THE INCOME OF THE TRUST THEREIN WAS NOT EXEMPT FROM TAX. IT WA S IN THIS CONTEXT THAT THE HON'BLE APEX COURT FURTHER HELD THAT IT IS NOT PERM ISSIBLE TO READ THE WORD 'PROFIT' IN THE EXPRESSION 'NOT INVOLVING THE CARRY ING ON OF AN ACTIVITY FOR PROFIT' AS 'PRIVATE PROFIT' AS THE WORDS 'GENERAL P UBLIC UTILITY' THEMSELVES EXCLUDE OBJECTS OF PRIVATE GAIN. THE RELEVANT PORTI ON OF THE JUDGMENT IS REPRODUCED HEREUNDER: 'IT HAS BEEN POINTED OUT IN THE EARLIER PART OF THE JUDGMENT THAT IN THE DEFINITION OF CHARITABLE PURPOSE AS GIVEN IN S. 2(1 5) OF THE ACT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' HAVE BEEN ADDED AT THE END OF THE DEFINITION AS IT WAS GIVEN IN S. 4(3) OF THE INDIAN IT ACT, 1922. THE POSITION AS IT EXISTED UNDER THE ACT OF 1 922 WAS THAT ONCE THE PURPOSE OF THE TRUST WAS RELIEF OF THE POOR, EDUCAT ION, MEDICAL RELIEF OR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY, THE TRUST WAS CONSIDERED TO BE FOR A CHARITABLE PURPOSE. AS A RES ULT OF THE ADDITION OF THE WORD 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' AT THE END OF THE DEFINITION IN S. 2(15) OF THE ACT, EVEN IF THE PURPOSE OF TRUST IS 'ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY', IT WOULD NOT BE CONSIDERED TO BE 'CHARITABLE PURPOSE' UNLESS IT IS SHOWN THAT THE ABOVE PURPOSE DOES NOT INVOLVE THE CARRYING ON OF ANY ACT IVITY FOR PROFIT. THE RESULT THUS OF THE CHANGE IN THE DEFINITION IS THAT IN ORDER TO BRING A CASE WITHIN THE FOURTH CATEGORY OF CHARITABLE PURPOSE, I T WOULD BE NECESSARY TO SHOW THAT : (1) THE PURPOSE OF THE TRUST IS ADVANCE MENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY, AND (2) THE ABOVE PURPOS E DOES NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. BOTH THE AB OVE CONDITIONS MUST BE FULFILLED BEFORE THE PURPOSE OF THE TRUST CAN BE HE LD TO BE CHARITABLE PURPOSE. IT IS NOT NECESSARY FOR THE DECISION OF TH E CASE, AS ALREADY MENTIONED ABOVE, TO GO INTO THE QUESTION AS TO WHET HER THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T' ALSO QUALIFY THE FIRST THREE CATEGORIES OF CHARITABLE PURPOSE, NAMELY, REL IEF OF THE POOR, EDUCATION AND MEDICAL RELIEF. THUS, IT IS CLEAR THAT THE REFERENCE TO 'PROFIT' NO T MEANING 'PRIVATE PROFIT' BY THE APEX COURT WAS IN REFERENCE TO THE FOURTH CATEG ORY OF CHARITABLE ACTIVITY AND NOT TO THE FIRST THREE CATEGORIES. 11.4. THE HON'BLE SUPREME COURT, FURTHER, IN THE CA SE OF DHARMADEEPTI V. CIT, KERALA REPORTED IN 114 ITR 454(SC) HAS CONSIDERED THE MEA NING OF THE DEFINITION OF 'CHARITABLE PURPOSE' AS EXISTING PRIOR TO 1ST APRIL, 1984 AND HAS HELD THAT THESE WORDS WHICH RESTRICT THE EX EMPTION COVERS ONLY THE ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 9 OF 18 FOURTH HEAD OF 'OBJECT OF GENERAL PUBLIC UTILITY' A ND DO NOT REFER TO THE FIRST THREE HEADS OF 'CHARITABLE PURPOSE'. THE RELEVANT P ORTION OF THE JUDGMENT READS AS UNDER: 'APPARENTLY, WHEN FRAMING THE INCOME TAX ACT, 1961, PARLIAMENT CONSIDERED IT APPROPRIATE TO CUT DOWN THE WIDE SCOP E OF THESE WORDS BY QUALIFYING THEM WITH THE RESTRICTIVE WORDS 'NOT INV OLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT'. THIS WAS DONE TO EMPHA SIZE THAT THE RESIDUAL GENERAL HEAD WAS TO BE CONFINED TO OBJECTS WHICH WE RE ESSENTIALLY CHARITABLE IN NATURE. IT IS, THEREFORE, CLEAR THAT THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT' GOVERN THE WORDS 'THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' AND NOT THE WORDS' RELIEF OF THE POOR, EDUCATION AND MEDICAL RELIEF' IN SEC 2(15 ). THE HEADS 'RELIEF OF THE POOR, EDUCATION, AND MEDICAL RELIEF' REMAINED U NQUALIFIED BY ANY EXPRESS STATUTORY RESTRICTION, AND INCOME ARISING F ROM A PROFIT-MAKING ACTIVITY LINKED WITH THOSE HEADS ENJOYED EXEMPTION WITHOUT EXPRESS LIMITATION UNTIL SECTION 13(1)(BB) WAS INSERTED IN THE ACT BY THE TAXATION LAWS (AMENDMENT) ACT , 1975, WITH EFFECT FROM APRIL 1, 1977.' 11.5. THE ABOVE JUDGMENT REFERS TO THE LIMITATION P LACED BY SEC.13(1)(BB) OF THE ACT INSERTED BY THE TAXATION LAWS (AMENDMENT) ACT , 1975. LET US NOW EXAMINE THE SCOPE OF LIMITATION PLACED BY CLAUS E (BB) TO SECTION 13(1) INSERTED WITH EFFECT FROM APRIL 1, 1977. IT READS AS UNDER: ' (BB) IN THE CASE OF A CHARITABLE TRUST OR INSTITU TION FOR THE RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIEF, WHICH CARRIES ON BUSINESS, UNLESS THE BUSINESS IS CARRIED ON IN THE COURSE OF THE ACTUAL CARRYING ON OF A PRIMARY PURPOSE OF THE TRUST OR INSTITUTION.' HOWEVER, THIS PROVISION HAS BEEN OMITTED BY THE FINANCE ACT , 1983 (W.E.F.1-4-1984) IN VIEW OF THE NEW PROVISION MADE IN SUB-SECTION (4A) OF SECTION 11 . THE PROVISIONS OF SUB-SECTION (4A) AS INSERTED BY THE FINANCE ACT , 1983 (W.E.F.1-4-1984) READ AS UNDER: '(4A). SUB-SECTION (1), OR SUB-SECTION (2) OR SUB-S ECTION (3) OR SUB- SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME, BEI NG PROFITS AND GAINS OF BUSINESS, UNLESS (A) THE BUSINESS IS CARRIED ON BY A TRUST WHOLLY FO R PUBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRINTING AND PUBLICATI ON OF BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY TH E CENTRAL GOVERNMENT IN THIS BEHALF IN THE OFFICIAL GAZETTE: OR (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WH OLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINE SS IS MAINLY CARRIED ON BY THE BENEFICIARIES OF THE INSTITUTION. AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS' SUB-SEC.(4A) HAS BEEN SUBSTITUTED BY THE FOLLOWING BY THE FINANCE ACT ,1991 W.E.F. 1-4-1991. ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 10 OF 18 (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECT ION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUS INESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS TH E CASE MAY BE, INSTITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUC H TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. DEPARTMENT CIRCULAR NO.642 DATED 11-12-1992 HAS EXP LAINED THAT SUB- SECTION (4A) HAS THUS BEEN AMENDED TO PERMIT TRUSTS AND INSTITUTIONS TO CARRY ON BUSINESS ACTIVITIES IF THE BUSINESS ACTIVI TIES ARE INCIDENTAL TO THE ATTAINMENT OF ITS OBJECTIVE AND THE CHARITABLE OR R ELIGIOUS TRUST WILL NO LONGER LOSE COMPLETE EXEMPTION FROM INCOME TAX, BUT HOWEVER, THE PROFITS AND GAINS FROM SUCH BUSINESS ACTIVITY WILL BE SUBJE CT TO TAX. 11.6. FURTHER, THE LARGER BENCH OF THE APEX COURT I N A SUBSEQUENT JUDGMENT IN THE CASE OF CIT V. SURAT ART CLOTH MANUFACTURERS ASSOCIATION REPORTED IN 121 ITR 1 (SC) HAS LAID DOWN THE FOLLO WING PRINCIPLES:- (I). THE WORDS 'NOT INVOLVING THE CARRYING ON OF AN Y ACTIVITY FOR PROFIT' GOVERN THE WORDS 'OBJECTS OF GENERAL PUBLIC UTILITY ', AND NOT THE WORD 'ADVANCEMENT' AS WRONGLY HELD IN THE INDIAN CHAMBER OF COMMERCE CASE. IT IS THE OBJECT AND NOT ITS ACCOMPLISHMENT WHICH S HOULD INVOLVE THE CARRYING ON OF AN ACTIVITY FOR PROFIT. (II) TO SATISFY THE ABOVE QUOTED WORDS, IT IS NOT A T ALL NECESSARY THAT THERE SHOULD BE A PROVISION IN THE CONSTITUTION OF THE TR UST OR INSTITUTION THAT THE ACTIVITY SHALL BE CONDUCTED ON A NO PROFIT NO LOSS BASIS OR THAT NO PROFIT SHALL BE PRESCRIBED. (III) THE DEFINITION OF 'CHARITABLE PURPOSE' WOULD NOT BE SATISFIED (A) WHERE AN ACTIVITY FOR PROFIT IS ACTUALLY CARRIED ON AS AN INTEGRAL PART OF THE PURPOSE OR IN ORDER TO ADVANCE THE PURPOSE, OR (B) WHERE THE TRUST DEED EXPRESSLY PROVIDES THAT THE PURPOSE SHALL BE CARRIE D OUT BY ENGAGING IN AN ACTIVITY WHICH HAS PREDOMINANT PROFIT MOTIVE, IN WH ICH CASE IT WOULD BE NON- CHARITABLE EVEN IF NO ACTIVITY FOR PROFIT IS A CTUALLY CARRIED ON. (IV) 'ACTIVITY FOR PROFIT' CONNOTES THAT THE PREDOM INANT OBJECT OF THE ACTIVITY MUST BE THE MAKING OF PROFIT: IT IS NOT EN OUGH THAT AS A MATTER OF FACT THE ACTIVITY RESULTS IN PROFIT. BHAGWATI J SAI D, 'WHERE AN ACTIVITY IS NOT PERVADED BY PROFIT MOTIVE BUT IS CARRIED ON PRIMARI LY FOR SERVING THE CHARITABLE PURPOSE, IT WOULD NOT BE CORRECT TO DESC RIBE IT AS AN ACTIVITY FOR PROFIT MERELY BECAUSE PROFIT ACCRUES.' PATHAK J OBS ERVED, 'I AM UNABLE TO ACCEPT THE PROPOSITION THAT IF THE PURPOSE IS TRULY CHARITABLE, THE ATTAINMENT OF THE PURPOSE MUST RIGOROUSLY EXCLUDE ANY ACTIVITY FOR PROFIT' (V) ON THE OTHER HAND, WHERE PROFIT MAKING IS THE P REDOMINANT OBJECT OF THE ACTIVITY, THE PURPOSE, THOUGH IT MAY AIM AT ADV ANCING AN OBJECT OF GENERAL PUBLIC UTILITY, WOULD CEASE TO BE A CHARITA BLE PURPOSE UNDER S.2(15). THUS, WHERE THE PROFIT EARNED BY A CHARITABLE INSTI TUTION IS NOT PURSUANT ITS OBJECTIVES BUT IS INCIDENTAL TO ITS ACTIVITIES, SUC H AN INSTITUTION WILL STILL BE ELIGIBLE FOR EXEMPTION FROM INCOME TAX U/SEC.11 OF THE ACT, BUT THE ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 11 OF 18 INCIDENTAL PROFIT SO EARNED WOULD BE LIABLE TO INCO ME TAX UNLESS IT IS APPLIED FOR THE OBJECTS OF THE CHARITABLE INSTITUTI ON. 11.7. IN THE SCHEME OF THE ACT AND PROVISIONS, A CH ARITABLE INSTITUTION IS ELIGIBLE FOR EXEMPTION U/S.11 OF THE ACT, PROVIDED IT FULFILS THE CONDITIONS PRESCRIBED U/S.11 TO 13 OF THE IT ACT . SEC.11(1) LAYS DOWN CERTAIN CONDITIONS REGARDING APPLICATION OF INCOME BY THE T RUST ON CHARITABLE OBJECTS WHICH SHOULD BE FULFILLED BEFORE CLAIMING E XEMPTION UNDER THAT SECTION. THEREFORE, THE EXEMPTION U/S11 IS NOT AUTO MATIC AND THE AO IS REQUIRED TO EXAMINE THE FULFILLMENT OF THE CONDITIO NS SPECIFIED UNDER SECTIONS 11 TO 13 DURING THE ASSESSMENT PROCEEDINGS OF THE RELEVANT ASSESSMENT YEARS. THE FIRST AND FOREMOST BASIC REQU IREMENT FOR CLAIMING THE BENEFIT OF EXEMPTION UNDER S.11 IS REGISTRATION U/S.12A/ 12AA OF THE ACT AND WITHOUT THE SAME, EXEMPTION UNDER S.11 WOULD NO T BE AVAILABLE AT ALL. SECTION 12 SPECIFIES THE INCOME WHICH IS TO BE DEEMED TO BE T HE INCOME OF THE CHARITABLE INSTITUTION, WHILE SEC.12A PRESCR IBES THE CONDITIONS FOR APPLICABILITY OF SECTIONS 11 AND 12 AND SECTION 12AA PRESCRIBES THE PROCEDURE FOR REGISTRATION. SECTION 13 SPECIFIES THE CONDITIONS UNDER WHICH SECTION 11 IS NOT APPLICABLE. 11.8. AS SET OUT EARLIER, THE EXEMPTION U/S. 11 IS AVAILABLE TO AN ASSESSEE ON THE BASIS OF ITS CHARACTER, I.E., EXEMPTION U/S.11 IS AVAILABLE TO AN ASSESSEE WHOSE ACTIVITIES ARE WHOLLY FOR CHARITABLE OR RELIG IOUS PURPOSES. CLAUSE (A) OF SUB-SEC.(1) PROVIDES THAT THE INCOME DERIVED FRO M PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES I S UNCONDITIONALLY EXEMPT TO THE EXTENT IT IS APPLIED TO SUCH PURPOSES IN IND IA OR IS ALLOWED TO BE ACCUMULATED FOR SUCH PURPOSES. THUS, THOUGH THE PRO PERTY MAY BE HELD WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES, THE WH OLE OR A PART OF THE INCOME MAY STILL BE DISENTITLED TO EXEMPTION IN A P ARTICULAR YEAR ON THE GROUND THAT: I. THE INCOME IS APPLIED TO PURPOSES OTHER THAN CHA RITABLE OR RELIGIOUS; II. THE INCOME IS APPLIED TO ANY PURPOSE OUTSIDE IN DIA; III. THE INCOME ACCUMULATED IS IN EXCESS OF THE PER MISSIBLE LIMIT OF ACCUMULATION; IV. THE INCOME SHOWN IN THE ACCOUNTS OF A BUSINESS UNDERTAKING HELD UPON TRUST IS LESS THAN THE INCOME COMPUTED IN ACCORDANC E WITH THE PROVISIONS OF THE ACT; V. THE ACCOUNTS ARE NOT AUDITED; OR VI. THE FUNDS ARE NOT INVESTED OR DEPOSITED ACCORDI NG TO STATUTORY REQUIREMENTS. THUS, THE PORTION OF THE TRUST-INCOME ENTITLED TO E XEMPTION MAY VARY FROM YEAR TO YEAR AND THEREFORE THE AO HAS TO EXAMINE TH E ISSUE YEAR AFTER YEAR AND SECTION 11 CAN HAVE NO APPLICATION UNLESS THE SOURCE OF THE I NCOME IS SOME PROPERTY, AND THE PROPERTY IS HELD UNDER TRUST OR OTHER LEGAL OBLIGATION WHOLLY OR IN PART FOR A RELIGIOUS OR CHA RITABLE PURPOSES. ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 12 OF 18 11.9. CLAUSE (D) OF SUB-SEC(1) OF SEC.11 PROVIDES T HAT VOLUNTARY CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT T HEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION SHALL NOT BE INC LUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE I NCOME. ON THE OTHER HAND, SECTION 2(24)(IIA) DEFINES 'INCOME' TO INCLUDE VOLUNTARY CONTRIBUTION S RECEIVED BY A TRUST CREATED WHOLLY OR PARTLY FOR CH ARITABLE OR RELIGIOUS PURPOSES BY AN INSTITUTION ESTABLISHED WHOLLY OR PA RTLY FOR SUCH PURPOSES[.....]. SUB-SEC.(1) OF SECTION 12 ALSO PROVIDES THAT ANY VOLUNTARY CONTRIBUTIONS RECEIVED BY A TRUST CREATED WHOLLY FO R CHARITABLE OR RELIGIOUS PURPOSES OR BY AN INSTITUTION ESTABLISHED WHOLLY FO R SUCH PURPOSES (NOT BEING CONTRIBUTIONS MADE WITH A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUST OR INSTITUTION) SHALL, F OR THE PURPOSES OF SEC.11, BE DEEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDE R TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES. THUS, THE INCOME REFERRED TO UNDER 11(1)(D) IS CONSIDERED TO BE CAPITAL RECEIPT AND EX CLUDED FROM THE FROM THE 'DEEMED INCOME' UNDER SEC.12(1) OF THE ACT. THEREFO RE, UNLESS THE DONATIONS RECEIVED BY THE ASSESSEE FALLS UNDER THE CATEGORY OF 'VOLUNTARY CONTRIBUTION' U/S 11(1)(D) OF THE ACT, IT WOULD BE INCOME OR DEEMED INCOME OF THE ASSESSEE. 11.10. THE TEST OF THE NATURE OF CONTRIBUTIONS BEIN G VOLUNTARY OR COMPULSORY AND WHETHER IT IS FOR THE CORPUS, OR NOT INTENDED FOR CORPUS, IS ONLY LIMITED FOR THE PURPOSE OF CONSIDERING WHETHER SUCH CONTRIBUTIONS HAVE TO BE TAKEN AS INCOME OR NOT. THE IT ACT NOWHERE STATES THAT IF THE CONTRIBUTION IS COMPULSORY (OR NOT VOLUNTARY) THE R ECIPIENT CEASES TO BE CHARITABLE IN NATURE OR THAT THE BENEFIT OF SECTION 11 OF THE IT ACT SHOULD BE DENIED. SUPPORT CAN BE TAKEN FROM THE FOLLOWING DEC ISIONS: (A) SHRI BELIMATHA MAHA SAMSTHANA SOCIO CULTURAL & EDUCATIONAL TRUST REPORTED IN (2010) 46 DTR JUDGMENT 290(KAR) (B) DCIT VS. VELLORE INSTITUTE OF TECHNOLOGY 46 SOT 224 (C) KARANDHAI TAMIL SANGHAM, THANJAVUR VS. CIT IN I TA. NO. 960/MAD/2011 DT.9-8-2011. EVEN IF THE DONATIONS ARE HELD TO BE NOT VOLUNTARY AND ARE LINKED TO ADMISSIONS, IT STILL DOES NOT DESTROY THE CHARITABL E CHARACTER OF THE ASSESSEE. THUS, IN OUR OPINION COLLECTING DONATIONS VOLUNTARILY OR COMPULSORILY MAY HAVE AN EFFECT IN COMPUTATION OF I NCOME BUT NOT TO THE NATURE OF THE ACTIVITIES OF THE TRUST-SOCIETY. 11.11. THE NEXT ISSUE FOR CONSIDERATION IS WHETHER THE 'DONATIONS' RECEIVED/COLLECTED BY THE ASSESSEE CAN BE TERMED AS 'CAPITATION FEE'? WHETHER COLLECTION OF 'DONATIONS' CAN BE CONSIDERED AS 'PROFITEERING' BY THE ASSESSEE? TO ANSWER THIS QUESTION, IT IS NECESS ARY TO UNDERSTAND THE MEANING OF THE WORD 'CAPITATION FEE'. THE INCOME TAX ACT HAS NOT DEFINED 'CAPITATION FEE' AND THEREFORE IT IS NECESSARY TO L OOK AT THE MEANING GIVEN TO THIS WORD IN OTHER RELATED ACTS AND THE JUDICIAL PRONOUNCEMENTS THEREON. THE RIGHT OF CHILDREN TO FREE & COMPULSORY EDUCATIO N ACT, 2009 DEFINES 'CAPITATION FEE' IN SECTION 2(B) AS FOLLOWS: ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 13 OF 18 'CAPITATION FEE' MEANS ANY KIND OF DONATION OR CONT RIBUTION OR PAYMENT OTHER THAN THE FEE NOTIFIED BY THE SCHOOL. ' THUS, THE TERM 'CAPITATION FEE' INCLUDES ALL AMOUNT S OF MONEY BY WHATEVER NAME IT IS CALLED OR MAY BE CALLED BY VARIOUS NAMES VIZ., DONATION/SECURITY DEPOSIT FEE/MAINTENANCE FEE/ACTIVITY FEE/DEVELOPMEN T FEE/ENTERTAINMENT FEE ETC. LD DIT PLACED RELIANCE UPON THE JUDGMENT OF TH E HON'BLE APEX COURT IN THE CASE OF MISS MOHINI JAIN V. STATE OF KARNATAKA [1992] 2 SCC 666 AND ALSO THE DECISION OF THE ITAT IN THE CASE OF RA JAH SIR ANNAMALAI CHETTIAR FOUNDATION V. DIT(E) (2011) 48 SOT 502/15 TAXMANN.COM 313, IN SUPPORT OF HIS DECISION THAT COLLECTION OF CAPIT AL FEE FOR ADMISSION AMOUNTS TO SALE OF EDUCATION AND HENCE IS NO LONGER A CHARITABLE ACTIVITY, BUT IS AN ACTIVITY RUN WITH A PROFIT MOTIVE AND IS NOT BEING RUN WHOLLY FOR CHARITABLE PURPOSES AS REQUIRED U/S 12(1). 11.12. WE FIND THAT THE AO IN THE ASSESSMENTS HAS R ELIED UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F TMA PAI FOUNDATION & OTHERS IN WRIT PETITION (CIVIL) 317 OF 1993 DATED 31- 10- 2002 WHEREIN IT HAS BEEN HELD THAT CHARGING OF CAPI TATION FEE IS AGAINST PUBLIC POLICY AND PROFITEERING IS NOT PERMISSIBLE I N THE FIELD OF EDUCATION. HOWEVER, HON'BLE SUPREME COURT ALSO CONSIDERED THAT RECEIVING DONATIONS BY AN EDUCATIONAL INSTITUTION, UNCONNECTED WITH ADM ISSION OF STUDENTS, COULD NOT OBVIOUSLY BE TREATED AS AN EQUIVALENT OF COLLECTION OF CAPITATION FEE. FROM THE DECISION OF THE HON'BLE SUPREME COURT , IT IS CLEAR THAT PRIVATE UNAIDED INSTITUTIONS ARE PROHIBITED FROM CO LLECTING CAPITATION FEE AND PROFITEERING, BUT NOT FROM MAKING PROFIT. DIFFE RENT INSTITUTIONS ARE ENTITLED TO NOTIFY DIFFERENT FEE FOR THE SAME COURS E AND THE SAME INSTITUTION MAY NOTIFY DIFFERENT FEES STRUCTURE FOR DIFFERENT C OURSES. IN SUCH CASES, THE FEE NOTIFIED BY THE INSTITUTION WOULD NOT BE CONSID ERED AS CAPITATION FEE. WE FURTHER FIND THAT IN THE SUBSEQUENT JUDGMENT IN THE CASE OF ACTION COMMITTEE, UNAIDED PRIVATE SCHOOLS AND OTHERS VS. D IRECTOR OF EDUCATION REPORTED IN 2009 11 SCALE- P.11(SC), THE HON'BLE SU PREME COURT CONSIDERED ITS SUBSEQUENT JUDGMENTS IN THE CASES OF P.A.INAMDAR AND ISLAMIC ACADEMY OF EDUCATION AND HAS CONSIDERED THE QUESTION AS TO WHETHER ADMISSION PROCEDURE AND FEE STRUCTURE OF AN UNAIDED MINORITY AND NON-MINORITY INSTITUTIONS IMPARTING PROFESSIONAL ED UCATION CAN BE REGULATED OR TAKEN OVER BY THE COMMITTEES ORDERED T O BE CONSTITUTED BY 'ISLAMIC ACADEMY OF EDUCATION'. IT TOOK NOTE OF THE FOLLOWING FINDINGS OF THE COURT IN THE CASE OF P.A. INAMDAR : 129. ......................STATE REGULATION SHOULD BE MINIMAL AND ONLY WITH A VIEW TO MAINTAIN FAIRNESS AND TRANSPARENCY IN ADMISSION PROCEDURE AND TO CHECK EXPLOITATION OF THE STUDENTS BY CHARGING EXORBITANT MONEY OR CAPITATION FEES. 139. TO SET UP A REASONABLE FEE STRUCTURE IS ALSO A COMPONENT OF THE 'RIGHT TO ESTABLISH AND ADMINISTER AN INSTITUTION' WITHIN THE MEANING OF ARTICLE 30(1) OF THE CONSTITUTION, AS PER THE LAW DECLARED IN PA I FOUNDATION. EVERY INSTITUTION IS FREE TO DEVISE ITS OWN FEE STRUCTURE SUBJECT TO THE LIMITATION THAT THERE CAN BE NO PROFITEERING AND NO CAPITATION FEE CAN BE CHARGED DIRECTLY OR INDIRECTLY, OR IN ANY FORM. ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 14 OF 18 AT PARA 29 OF ITS ORDER IN THE CASE OF ACTION COMMI TTEE, UNAIDED PRIVATE SCHOOLS(CITED SUPRA) , THE HON'BLE APEX COURT HELD AS UNDER: 29. I, IN VIEW OF THE STATEMENT OF LAW LAID DOWN IN P.A.INAMDAR(SUPRA), AM OF THE OPINION THAT THE AUTHORITIES OF ALL THE SCHO OLS, PARTICULARLY, UNAIDED SCHOOLS, MAY LAY DOWN ITS OWN FEE CRITERIA. IMPOSIT ION OF REGULATION, HOWEVER, ONLY IS PERMISSIBLE FOR THE PURPOSE OF EXE RCISING CONTROL OVER PROFITEERING AND NOT EARNING OF A PROFIT WHICH WOUL D INCLUDE REASONABLE RETURN OF THE INVESTMENT MADE. I SAY SO BECAUSE IN T.M.A. PAI FOUNDATION, THIS COURT ITSELF HELD: 11.13. REVENUE HAS PLACED RELIANCE IN THE CASE OF M OHINI JAIN'S CASE (CITED SUPRA), WHEREAS THERE HAS BEEN A CHANGE IN APPROACH THEREAFTER IN SUBSEQUENT JUDGMENTS OF THE HON'BLE APEX COURT. IN MOHINI JAIN'S CASE, THE APEX COURT HAD HELD THAT ANY PRESCRIPTION OF FE E IN EXCESS OF WHAT WAS PAYABLE IN GOVERNMENT COLLEGES WAS A 'CAPITATION FE E' AND WOULD THEREFORE BE ILLEGAL. SUBSEQUENTLY, IN THE CASE OF UNNIKRISHN AN VS. STATE OF ANDHRA PRADESH [(1993) 4 SCC 697] (SUPRA), THE HON'BLE COU RT HELD THAT PRIVATE UNAIDED EDUCATIONAL INSTITUTIONS RUNNING PROFESSION AL COURSE WERE ENTITLED TO CHARGE A FEE HIGHER THAN THAT CHARGED BY GOVERNM ENT INSTITUTIONS FOR SIMILAR COURSES BUT THAT SUCH A FEE COULD NOT EXCEE D THE MAXIMUM LIMIT FIXED BY THE STATE. THE COURT THEN FORMULATED A SCH EME AND DIRECTED EVERY AUTHORITY GRANTING RECOGNITION/AFFILIATION TO IMPOS E THAT SCHEME UPON INSTITUTIONS SEEKING RECOGNITION/AFFILIATION, EVEN IF THEY WERE UNAIDED INSTITUTIONS. IN TMA PAI'S CASE, THE HON'BLE COURT RECONSIDERED ITS VERDICT IN THE UNNI KRISHNAN'S CASE AND HELD THAT THE SCHEM E FRAMED BY THE COURT AND THEREAFTER FOLLOWED BY THE GOVERNMENTS CANNOT B E CALLED A REASONABLE RESTRICTION UNDER ARTICLE 19(6) OF THE CONSTITUTION. IT WAS HELD THAT THE DECISION ON THE FEE TO BE CHARGED MUST NECESSARILY BE LEFT TO THE PRIVATE UNAIDED EDUCATIONAL INSTITUTIONS. IT WAS FURTHER HE LD THAT SINCE THE OBJECT OF SETTING UP AN EDUCATIONAL INSTITUTION IS BY DEFINIT ION 'CHARITABLE', IT IS CLEAR THAT AN EDUCATIONAL INSTITUTION CANNOT CHARGE SUCH A FEE AS IS NOT REQUIRED FOR THE PURPOSE OF FULFILLING THE OBJECT OF DEVELOP MENT OF EDUCATION AND EXPANSION OF THE INSTITUTION. IT WAS FURTHER DIRECT ED THAT A RATIONAL FEE STRUCTURE SHOULD BE ADOPTED BY THE MANAGEMENT, WHIC H WOULD NOT BE ENTITLED TO CHARGE A CAPITATION FEE AND APPROPRIATE MACHINERY CAN BE DEVISED BY THE STATE OR UNIVERSITY TO ENSURE THAT N O CAPITATION FEE IS CHARGED AND THAT THERE IS NO PROFITEERING THOUGH A REASONABLE SURPLUS FOR THE FURTHERANCE OF EDUCATION IS HELD TO BE PERMISSI BLE. THE DECISION OF THE ELEVEN JUDGE BENCH IN THE CASE OF TMA PAI (SUPRA) W AS EXPLAINED BY THE APEX COURT IN IT SUBSEQUENT JUDGMENTS. IN ALL THE J UDGMENTS, THE APEX COURT HAS, HOWEVER, DEPRECATED COLLECTION OF CAPITA TION FEE AND PROFITEERING BY THE EDUCATIONAL INSTITUTIONS, BUT D ID NOT PROHIBIT COLLECTION OF FUNDS FOR THE PURPOSE OF ACHIEVING ITS OBJECTS. 11.14. IT IS THUS SEEN THAT THE PRIVATE UNAIDED PRO FESSIONAL COLLEGES ARE ENTITLED TO FIX THEIR OWN FEE STRUCTURE SUBJECT TO THE LIMITATION THAT THERE CANNOT BE PROFITEERING AND COLLECTION OF CAPITATION FEE. ONLY THE PAYMENTS, OTHER THAN FEE NOTIFIED BY THE EDUCATIONAL INSTITUT ION, ARE CALLED AS CAPITATION FEE. IN THE CASE BEFORE US, THE ASSESSEE IS ALLEGED TO HAVE COLLECTED 'DONATIONS' IN ADDITION TO THE PRESCRIBED FEE ONLY FROM THE STUDENTS ADMITTED UNDER THE MANAGEMENT QUOTA. THE S TAND OF THE AO HAS BEEN THAT THE ASSESSEE HAS COLLECTED 'DONATIONS', I T IS IN FACT, PAYMENT FOR ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 15 OF 18 ADMISSION AND HENCE 'CAPITATION FEE'. IN VIEW OF TH IS STAND OF THE REVENUE, IT IS, THEREFORE, NECESSARY TO EXAMINE IF THE 'DONA TIONS' IS 'QUID PRO QUO' FOR A SEAT IN A COLLEGE. G.O. MS.NO.33 DATED 11-6- 2003 ISSUED BY THE GOVT. OF ANDHRA PRADESH TO IMPLEMENT THE JUDGMENT OF THE HON 'BLE SUPREME COURT IN THE CASE OF TMA PAI (CITED SUPRA), HAS NOTIFIED RULES AND REGULATIONS FOR ADMISSIONS INTO UNDER GRADUATE PROFESSIONAL COURSES THROUGH COMMON ENTRANCE TEST. THE RULES ARE APPLICABLE TO ALL THE UNAIDED NON-MINORITY PROFESSIONAL INSTITUTIONS IMPARTING UNDER-GRADUATE PROFESSIONAL COURSES IN VARIOUS STREAMS STATED THEREIN. THE EAMCET IS THE B ASIS FOR ADMISSION OF STUDENTS INTO VARIOUS UNAIDED NON-MINORITY PROFESSI ONAL INSTITUTIONS IN THE STATE OF ANDHRA PRADESH (AT THE RELEVANT POINT OF T IME). 'MANAGEMENT SEATS' ARE DEFINED AS THE SEATS EARMARKED FROM OUT OF THE SANCTIONED INTAKE OF SEATS IN EACH COURSE TO BE FILLED BY THE MANAGEM ENT OF THE UNAIDED NON-MINORITY PROFESSIONAL INSTITUTIONS. RULE 4 OF T HE ABOVE RULES PROVIDES THAT THE MANAGEMENT SEATS SHALL BE FILLED EITHER ON THE BASIS OF RANK OBTAINED IN EAMCET CONDUCTED BY THE STATE SCORING N OT LESS THAN 50% MARKS IN AGGREGATE OR IN GROUP SUBJECTS IN THE QUAL IFYING EXAMINATION. RULE 5(C) PROVIDES THAT 15% OF THE TOTAL INTAKE OF SEATS OF EACH COURSE SHALL BE EARMARKED AS MANAGEMENT SEATS. RULE 6(B) PROVIDE S THAT THE MANAGEMENTS SEATS SHALL BE FILLED BY THE MANAGEMENT OF THE CONCERNED PROFESSIONAL COLLEGE BY ENSURING MERIT AND TRANSPAR ENCY. RULE 7(B) PROVIDES THAT THE MANAGEMENT SEATS SHALL BE FILLED BY THE MANAGEMENT OF THE INSTITUTION KEEPING THEM OPEN TO ALL THE ELIGIB LE CANDIDATES. RULE 9(2) PROVIDES THAT THE MANAGEMENT MAY CHARGE UP TO A FEE OF RS.75,000/- PER STUDENT PER ANNUM FOR THE 15% SEATS UNDER MANAGEMEN T QUOTA WHILE RULE 9(3) PROVIDES THAT THE MANAGEMENT SHALL NOT COLLECT ANY OTHER FEES IN THE NAME OF DEVELOPMENT FEE, BUILDING FEE, INFRASTRUCTU RE DEVELOPMENT FEE ETC., EXCEPT REFUNDABLE DEPOSITS LIKE LIBRARY DEPOS IT, LABORATORY DEPOSIT ETC., AND SHALL NOT CHARGE ANY CAPITATION FEES OR R ESORT TO PROFITEERING IN ACCORDANCE WITH THE JUDGMENT OF THE SUPREME COURT I N THE TMA PAI'S CASE. FROM THE ABOVE RULES, IT IS EVIDENT THAT COLLECTION OF CAPITATION FEE AND PROFITEERING IS PROHIBITED, BUT NOT RECEIPT OF ANY CONTRIBUTION. FEE IS THE SUM CHARGED FOR SERVICES RENDERED WHILE DONATION IS A SUM SET APART FOR A SPECIFIC PURPOSE. THEN THE QUESTION THAT ARISES IS WHERE THE 'DONATION' IS LINKED TO THE ADMISSION OF A STUDENT, IS IT TO BE C ONSIDERED AS A 'FEE' AND IF IT IS OVER AND ABOVE THE PRESCRIBED FEE THEN IS IT IN THE NATURE OF 'CAPITATION FEE'? THE HON'BLE APEX COURT IN THE CASE REFERRED T O ABOVE HAS HELD THAT THE MANAGEMENTS OF PRIVATE UN-AIDED PROFESSIONAL CO LLEGES CAN PRESCRIBE THEIR OWN FEE STRUCTURE IN ORDER TO MAINTAIN AND IM PROVE THE INSTITUTION. AS SEEN FROM THE RULES FRAMED ABOVE, 85% OF THE SEATS ARE TO BE FILLED BY THE CONVENER AND THE MANAGEMENT HAS NO ROLE OR DISCRETI ON WHAT-SO-EVER EITHER IN THE ADMISSION PROCESS OR IN COLLECTION OF FEE AS REGARDS THESE SEATS. AS REGARDS THE BALANCE 15% OF THE SEATS UNDE R THE MANAGEMENT QUOTA ALSO, ADMISSION CRITERIA IS ALREADY FIXED BY THE RULES AND THE DISCRETION OF THE MANAGEMENT IS LIMITED. IN SUCH CI RCUMSTANCES, CAN IT BE SAID THAT THE ASSESSEE IS INVOLVED IN 'PROFITEERING ' OR COLLECTION OF CAPITATION FEE? 11.15. WE HAVE ALREADY BROUGHT OUT ABOVE, THE OBSER VATIONS OF THE APEX COURT THAT IN VIEW OF THE MAJORITY JUDGMENT IN THE CASE OF TMA PAI, DIFFERENT INSTITUTIONS MAY NOTIFY DIFFERENT FEE FOR DIFFERENT COURSES AND THE SAME INSTITUTION IS ALSO ENTITLED TO FIX DIFFERENT FEE FOR DIFFERENT COURSES. ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 16 OF 18 THEREFORE, IF THE INSTITUTION HAS FIXED DIFFERENT S UMS FOR DIFFERENT COURSES, THEY ARE PERFECTLY ENTITLED TO DO SO BUT THEY MUST NOTIFY THE SAME. TO OUR UNDERSTANDING, THE REQUIREMENT OF NOTIFYING THE FEE IS TO ENSURE TRANSPARENCY AND ACCOUNTABILITY AND TO PREVENT MISU SE OF FUNDS. IN THE CASE BEFORE US, IT IS THE STAND OF THE ASSESSEE THA T THESE ARE VOLUNTARY CONTRIBUTIONS NOT CONNECTED TO THE ADMISSION OF STU DENTS. HOWEVER, FROM THE STATEMENTS OF THE PARENTS BEFORE THE AO WHEN EN QUIRED INITIALLY, THE CONTRIBUTIONS ARE STATED TO BE LINKED TO THE ADMISS ION OF STUDENTS, EVEN THOUGH THEY HAVE FILED AFFIDAVITS SUBSEQUENTLY DENY ING THE SAME. WE ALSO FIND THAT THE INSTITUTION HAS RECEIVED THE FUND THR OUGH D.DS/ CHEQUES AND HAS ISSUED RECEIPTS FOR THE SAME AND HAS ALSO ACCOU NTED FOR THE SAME. THEREFORE, THERE IS TRANSPARENCY IN ACCOUNTING THE RECEIPTS. THE HON'BLE APEX COURT HAS FURTHER HELD THAT THE PRIVATE UNAIDE D INSTITUTIONS ARE ENTITLED TO COLLECT FUNDS FOR THE MAINTENANCE AND I MPROVEMENT OF THE INSTITUTION. HOWEVER, THE OBJECTIVE OF THE COLLECTI ON OF FUNDS MUST BE THE IMPARTING OF STANDARD EDUCATION TO THE PUBLIC AT LA RGE. IN THE CASE BEFORE US, THERE IS NO ALLEGATION THAT THE FUNDS COLLECTED BY THE ASSESSEE SOCIETY ARE FOR ANY OTHER PURPOSE OR THAT THE PROFITS HAVE BEEN DISTRIBUTED TO ANY PERSON OR PERSONS. THEREFORE THE COLLECTION OF THE DONATIONS BY THE ASSESSEE INSTITUTION CANNOT BE REGARDED AS CAPITATI ON FEE. 11.16. NOW ISSUE ARISES ABOUT PROFITEERING? PROFITE ERING REFERS TO TAKING ADVANTAGE OF UNUSUAL OR EXCEPTIONAL CIRCUMSTANCES T O MAKE EXCESSIVE PROFITS. IT IS THE GENERATION OF DISPROPORTIONATE O R UNFAIR PROFIT THROUGH MANIPULATION OF PRICES, ABUSE OF DOMINANT POSITION, OR BY EXPLOITING A BAD OR UNUSUAL SITUATION SUCH AS TEMPORARY SCARCITY. US UALLY, THERE IS NO GOVERNMENTAL CONTROL OVER PROFITEERING UNLESS IT IN VOLVES ANY ILLEGAL MEANS. SALE OF SCARCE GOODS AT INFLATED PRICE DURIN G WAR IS AN EXAMPLE FOR PROFITEERING. BUT IN THE CASE BEFORE US, THERE IS N O CASE OF UNUSUAL OR EXCEPTIONAL CIRCUMSTANCES TO MAKE EXCESSIVE PROFITS . IT IS NOT THE CASE THAT ENGINEERING INSTITUTIONS IN THE STATE OF ANDHRA PRA DESH ARE ONLY A FEW AND THEREFORE THERE WAS SCARCITY OF SEATS AND THE ASSES SEE HAS EXPLOITED SUCH A SITUATION TO MAKE EXCESSIVE PROFITS. IN THE STATE O F ANDHRA PRADESH, DURING THE RELEVANT PERIOD, THERE WERE A NUMBER OF ENGINEE RING COLLEGES AND THERE WAS NO SCARCITY OF SEATS FOR THE ASPIRANT STUDENTS. IN FACT, THERE WERE NEWSPAPER REPORTS THAT MANY COLLEGES COULD NOT GET THE PERMITTED NUMBER OF STUDENTS. THE REASONS FOR NOT GETTING THE STUDEN TS MAY BE MANY SUCH LACK INFRASTRUCTURE, OR FACULTY OR STANDARD OF EDUCATION . THE ASSESSEE INSTITUTION MAY BE COMMANDING GOOD REPUTATION AND MAY ALSO BE A SOUGHT AFTER INSTITUTION DUE TO WHICH THE PARENTS AND THE STUDEN TS MAY BE WILLING TO CONTRIBUTE TO THE DEVELOPMENT OF THE INSTITUTION BU T THAT WOULD NOT AMOUNT TO PROFITEERING BY THE INSTITUTION. 12. THAT LEADS US TO THE QUESTION WHETHER THE ASSES SEE HAS VIOLATED THE RULES AND REGULATIONS OF THE GOVERNMENT OF ANDHRA P RADESH FRAMED FOR THE PURPOSE OF PROHIBITING THE COLLECTION OF CAPITATION FEES? ONE OF THE GROUNDS ON WHICH THE REVENUE HAS RELIED IS THAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF THE ANDHRA PRADESH EDUCATIONAL IN STITUTIONS (REGULATION OF ADMISSION AND PROHIBITION OF CAPITATION FEE) ACT , 1983 WHICH PROHIBITED COLLECTION OF ANY FEE OTHER THAN THE FEE FIXED BY THE GOVT. THE LD DR HAS PLACED BEFORE US THE COPY OF THE G.O.MS.33, DT.11-06-2003 ISSUED BY THE GOVERNMENT OF ANDHRA PRADESH TO IMPLEMENT TH E JUDGMENT OF THE ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 17 OF 18 APEX COURT IN THE CASE OF T.M.A. PAI FOUNDATION (SU PRA) BY FRAMING THE RULES AND REGULATIONS FOR ADMISSION OF STUDENTS INT O PROFESSIONAL COLLEGES. AS PER THESE RULES, THE FEE PRESCRIBED PER STUDENT ADMITTED TO AN ENGINEERING COLLEGE UNDER THE MANAGEMENT QUOTA WAS UP TO A SUM OF RS.75,000/ PER ANNUM. THERE IS NO ALLEGATION THAT A SSESSEE HAS COLLECTED ANY FEE IN EXCESS OF SUCH PRESCRIBED AMOUNT. IN ADD ITION TO THE ABOVE FEE NOTIFIED, THE ASSESSEE HAS ALSO COLLECTED THE DONAT IONS NOT ONLY FROM SOME PARENTS/ RELATIVES BIT ALSO FROM MEMBERS OF SOCIETY . WHETHER SUCH COLLECTION OF DONATION IS PROHIBITED BY THE ANDHRA PRADESH EDUCATIONAL INSTITUTIONS (REGULATION OF ADMISSION AND PROHIBITI ON OF CAPITATION FEE) ACT, 1983 IS TO BE EXAMINED. THE RELIANCE OF THE RE VENUE HAS BEEN ONLY ON THE RULES FRAMED VIDE G.O.MS.33(SUPRA) IN WHICH THE RE IS NO MENTION OF DONATIONS AND CONTRIBUTIONS TO THE EDUCATIONAL INST ITUTIONS. THE RULES HAVE PRESCRIBED ONLY THE FEE TO BE COLLECTED FROM THE ST UDENTS AND HAVE PROHIBITED THE COLLECTION OF THE FEE OF ANY KIND OT HER THAN THOSE MENTIONED IN THE RULES. BUT SEC.6 OF THE ANDHRA PRADESH EDUCA TIONAL INSTITUTIONS (REGULATION OF ADMISSION AND PROHIBITION OF CAPITAT ION FEE) ACT, 1983 PERMITS THE RECEIPT OF VOLUNTARY DONATIONS. FOR THE SAKE OF EASY REFERENCE THE RELEVANT PROVISION IS REPRODUCED HEREUNDER: SEC.6. (1) ANY DONATION OF MONEY TO ANY EDUCATIONAL INSTITUTION, SHALL BE MADE ONLY IN SUCH MANNER AS MAY BE PRESCRIBED AND N OT OTHERWISE. (2) ALL MONEYS RECEIVED BY ANY EDUCATIONAL INSTITUT ION BY WAY OF VOLUNTARY DONATIONS SHALL BE DEPOSITED IN THE ACCOUNT OF THE INSTITUTION, IN ANY SCHEDULED BANK AND SHALL BE APPLIED AND EXPENDED FO R THE IMPROVEMENT OF THE INSTITUTION AND THE DEVELOPMENT OF THE EDUCATIO NAL FACILITIES AND FOR SUCH OTHER RELATED PURPOSES AS MAY BE PRESCRIBED. THUS, IT CAN BE SEEN THAT THE ANDHRA PRADESH EDUCAT IONAL INSTITUTIONS (REGULATION OF ADMISSION AND PROHIBITION OF CAPITAT ION FEE) ACT, 1983 DOES NOT PROHIBIT THE RECEIPT OF VOLUNTARY DONATION S OR CONTRIBUTIONS, BUT THE LIMITATION PLACED IS ON THE MANNER OF PAYMENT O F SUCH DONATION AND THE PURPOSE OF THE DONATION TO BE FOR THE IMPROVEMENT A ND DEVELOPMENT OF THE INSTITUTION. IN THE CASE BEFORE US, THE ASSESSEE HA S RECEIVED THE DONATIONS BY WAY OF D.DS/ CHEQUES WHICH ARE DULY ACCOUNTED FO R IN ITS BOOKS OF ACCOUNT AND HAS ALSO BEEN APPLIED FOR THE PURPOSES OF THE EDUCATION ONLY. THEREFORE, IN OUR OPINION, THERE IS NO VIOLATION OF THE PROVISIONS OF ANDHRA PRADESH EDUCATIONAL INSTITUTIONS (REGULATION OF ADM ISSION AND PROHIBITION OF CAPITATION FEE) ACT, 1983 . 8. FURTHER, THE DECISION RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE I.E. THE CHIEF COMMISSIONE R OF INCOME TAX VS. ST. PETERS EDUCATIONAL SOCIETY REPORTED IN (2016) 385 ITR 66 (S.C) ALSO CONFIRM THE VIEW THAT THE ULTIMATE TE ST IS WHETHER ON AN OVERALL VIEW OF THE MATTER IN THE CONCERNED A.Y, THE OBJECT IS TO ITA NOS 417 TO 419 OF 2009 MATRUSRI EDU CATION SOCIETY HYDERABAD. PAGE 18 OF 18 MAKE PROFIT AS OPPOSED TO EDUCATING PERSONS. IN THE CASE OF QUEENS EDUCATIONAL SOCIETY VS. CIT REPORTED IN (20 15) 372 ITR 699 (S.C), THE HON'BLE SUPREME COURT HAS FOLLOWED I TS DECISION THE CASE OF ST. PETERS EDUCATIONAL SOCIETY (SUPRA) TO HOLD THAT THE ASSESSEE THERE IN IS ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT. RESPECTFULLY FOLLOWING THE ABOVE DECISIONS, THE ASS ESSEES APPEALS ARE TREATED AS ALLOWED. 9. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST JULY 2018. VINODAN/SPS COPY TO: 1 MATRUSRI EDUCATION SOCIETY, NO.16-1-486, SAIFABAD , HYDERABAD 500059 2 ASSTT/DY. DIRECTOR OF INCOME TAX (EXEMPTIONS) - II, HYDERABAD 3 CIT (A)-IV HYDERABAD 4 DIRECTOR OF INCOME TAX (EXEMPTIONS) HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER