DCIT, EXEMPTION CIRCLE, GHAZIABAD V. MAJOR SHIV DAYAL SINGH CHIKITSA TRUST, FARRUKHABAD

ITA 5849/DEL/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9671 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 13-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Charitable institution; Maximum Marginal Rate; Competent authority
• Section: 12AA; 201; 13; 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: E NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.5849/DEL/2017 ASSESSMENT YEAR: 2014-15 DCIT, EXEMPTION CIRCLE, GHAZIABAD VS. MAJOR SHIV DAYAL SINGH CHIKITSA TRUST, PHOOS BANGLA, CIVIL LINES, FATEHGARH, FARRUKHABAD PAN :AABTM7636F (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST ORD ER DATED 19/06/2017 PASSED BY THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS)-ALIGARH [IN SHORT THE LD. CIT(A)] FOR A SSESSMENT YEAR 2014-15, RAISING FOLLOWING GROUNDS: 1. THE LD. C1T(A) HAS ERRED IN LAW AND FACTS IN DE LETING ADDITION OF RS. 10,32,13,500/ MADE BY THE AO ON THE PLEA THAT I NCOME TAX DEPARTMENT CONCERNS ONLY WITH THE APPLICATION OF IN COME AND IT IS NOT SIGNIFICANT HOW THAT INCOME WAS EARNED. 2. THE ORDER OF LD. CIT(A) BE CANCELLED AND THE OR DER OF THE AO BE RESTORED. APPELLANT BY MS. PRAMITA M. BISWAS, CIT(DR) RESPONDENT BY SH. ABHINAV MALHOTRA, ADV. DATE OF HEARING 13.07.2021 DATE OF PRONOUNCEMENT 29.07.2021 2 ITA NO. 5849/DEL/2017 3. APPELLANT CRAVES LEAVE TO MODIFY/AMEND OR ADD A NY ONE OR MORE GROUNDS OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A SOCIETY REGISTERED WITH REGISTER OF SOCIETY, UTTAR PRADESH. THE SOCIETY WAS GRANTED REGISTRATION UNDER SECTION 12AA OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) BY THE CO MPETENT AUTHORITY VIDE ORDER DATED 16/12/2005. DURING THE S CRUTINY PROCEEDINGS, THE ASSESSING OFFICER OBSERVED THAT VA RIOUS FEES CHARGED TO STUDENTS BY THE MEDICAL COLLEGES ARE FIX ED BY THE STATE LEVEL FIXATION COMMITTEES, WHEREAS THE ASSESSEE HAS CHARGED FEES IN EXCESS, WHICH WAS CALCULATED BY THE ASSESSING OF FICER AS UNDER: COURSE NAME FEES COLLECTED PER STUDENT (A) NO OF STUDENTS (B) TOTAL FEES (A*B) FEES TO BE COLLECTED PER STUDENT (C) TOTAL FEES TO BE COLLECTED (C*B) EXCESS FEES COLLECTED (A-C)*B MBBS 1 YEAR 600000 99 59400000 407000 40293000 19107000 11 YEAR 650000 100 65000000 407000 40700000 24300000 III YEAR 715000 100 71500000 407000 40700000 30800000 BAMS 1 YEAR 75000 50 3750000 15000 750000 3000000 II YEAR 75000 50 3750000 15000 750000 ' 3000000 111 YEAR 150000 50 7500000 15000 750000 6750000 IV YEAR 150000 50 7500000 15000 750000 6750000 V YEAR 200000 50 10000000 15000 750000 9250000 PERAMEDICAL 37500 27 1012500 28000 756000 256500 TOTAL 103213500 2.1 IN VIEW OF THE ASSESSING OFFICER THE FEE CHARGED I N EXCESS OF THE PRESCRIBED BY FEE FIXATION COMMITTEE, WAS IN TH E NATURE OF THE CAPITATION FEE AND IT IS CHARGED WITH THE MOTIVE OF THE BUSINESS AND NOT CHARITY AND THUS SURPLUS GENERATED IS TAXAB LE AS BUSINESS INCOME OF THE ASSESSEE. THE RELEVANT FINDI NG OF THE ASSESSING OFFICER IS REPRODUCED AS UNDER: 3 ITA NO. 5849/DEL/2017 10. HENCE IT IS CLEAR THAT THE ANY EDUCATIONAL INS TITUTION CANNOT CHARGE FEES IN EXCESS OF THE AMOUNT FIXED BY THE AU THORITIES AND IF IT CHARGES THEN THE MOTIVE IS BUSINESS AND NOT CHARITY AND THE SURPLUS THUS GENERATED IS TAXABLE AS BUSINESS INCOME IN SEC 164(2). IN THE INSTANT CASE THE ASSESSEE CHARGED RS. 10,32,13,500 .00 AS EXCESS IN THE FORM OF BOOK BANK FEES, MEDICAL FEES. REG. FEE, PERSONALITY GROOMING, ADMISSION FEE, INDUSTRIAL VISIT FEE BEYON D THE PRESCRIBED AMOUNT OF FEES AS DECIDED BY THE GOVT. AUTHORITIES WHICH CLEARLY INDICATES THAT THE OBJECTS OF THE ASSESSEE ARE NOT CHARITABLE AND THAT THE MOTIVE WAS ENTIRELY THAT OF EARNING PROFIT THAT TOO A HUGE ONE. FURTHER INCURRING ADVERTISEMENT FAR BEYOND THE PRES CRIBED LIMIT ALSO SUPPORTS ITS MOTIVE. THE EXCESS INCOME HENCE EARNE D IS TO BE ASSESSED AS INCOME FROM BUSINESS AND ASSESSED ACCOR DINGLY. 2.2 THE ASSESSING OFFICER IN PARA-7 OF THE ORDERS, RELI ED ON THE FOLLOWING DECISIONS OF HONBLE SUPREME COURT: (I) MISS MOHINI JAIN VS STALE OF KARNATAKA AND ORS ON 30 JULY, 1992 (II) T.M.A. PAI FOUNDATION & ORS VS STATE OF KARNA TAKA & ORS ON 31 OCTOBER, 2002 (III) UNNI KRISHNAN J.P. V. STATE OF ANDHRA PRADESH , (1993) 1 SCO 645 (IV) PA INAMDAR V. SLATE OF MAHARASHTRA, (2005) 6 S CC 537 CASE IN 2005 (V) ISLAMIC ACADEMY OF EDUCATION V. STATE OF KARNAT AKA (2003) 6 SCC 697 2.3 THE ASSESSING OFFICER COMPUTED TAXABLE INCOME OF T HE ASSESSEE AS UNDER: PARTICULARS COMPUTATION EXCESS FEES CHARGED 10,32,13,500.00 PGBP U/S 164(2) 10,32,13,500.00 NET TAXABLE UNDER PGBP 10,32,13,500.00 (A) GROSS RECEIPTS CHARGED 27,02,54,348.23 BALANCE RECEIPTS AFTER DEDUCTING EXCESS FEES (B) 16,70,40,848.23 15% OF ABOVE (C ) 2,50,56,127.23 TO BE UTILISED B-C=D 14,19,84,721.00 UTILISED 28,59,66,154.00 LESS: DEPRECIATION ADDED BACK AS DISALLOWED AS DISCUSSED ABOVE 0.00 TOTAL UTILISED (E ) 28,59,66,154.00 SHORT UTILISATION (1)- E) 0.00 (F) TOTAL TAXABLE UNDER MMR (NO SET TO BE ALLOWED)= (A)+(F) 10,32,13,500.00 4 ITA NO. 5849/DEL/2017 2.4 THE LD. CIT(A) AFTER CONSIDERING DETAILED SUBMISSI ON OF THE ASSESSEE, DELETED THE ADDITION MAINLY ON THE GROUND THAT THERE WAS NO VIOLATION OF SECTION 11, 12 AND 13 OF THE AC T AND ASSESSING OFFICER IS CONCERNED WITH THE APPLICATION OF THE IN COME ONLY. THE RELEVANT FINDING OF THE LEANED CIT(A) HAS REPRODUCE D AS UNDER: IN THE ASSESSMENT ORDER, THE AO HAS ALLEGED THAT T HE APPELLANT SOCIETY HAS CHARGED FEES IN EXCESS OF THE FEES FIXED BY THE FIXATION COMMITTEE. HOWEVER, THE APPELLANT HAS EXPL AINED THAT THE ORDER OF THE FEE FIXATION COMMITTEE DATED 14.09.201 1 IS AN INTERIM ORDER WHICH IS APPLICABLE ONLY FOR THE ACADEMIC YEA R 2011-12 AND IS IRRELEVANT FOR THE YEAR UNDER CONSIDERATION. IT HAS BEEN CONTENDED THAT FOR THE RELEVANT YEAR NO FEE FIXATION ORDER WA S ISSUED ALSO IT HAS BEEN SUBMITTED THAT THE FEE FIXATION ORDER REFERRED BY THE AO FOR COMPUTING EXCESS FEE FOR BAMS COURSE IS APPLICABLE ONLY TO GOVERNMENT COLLEGES AND IS NOT RELEVANT FOR THE COL LEGE BEING RUN BY THE APPELLANT SOCIETY. FURTHER, IT HAS BEEN EXPLAIN ED THAT THE FEE FIXATION COMMITTEE MERELY PRESCRIBES TUITION FEES A ND THE SAME NEVER RESTRICTS OR PRESCRIBES THAT THE INSTITUTION WILL N OT BE ENTITLED TO CHARGE THE STUDENT FOR OTHER SERVICES AND ARTICLES SUPPLIED. IT HAS BEEN SUBMITTED THAT ONLY TUITION FEES HAS BEEN CHAR GED AND NO OTHER FEES LIKE REGISTRATION FEES, BOOK FEES, MEDICAL FEE S, ADMISSION FEES ETC. HAS BEEN CHARGED. THE APPELLANT HAS ALSO INTIM ATED THAT THERE IS SOME MISTAKE IN THE COMPUTATION OF THE AO AND THE A CTUAL FEES RECEIVED AS PER THE FINANCIAL STATEMENT IS ONLY RS. 20,12,22,500/- WHEREAS THE AO HAS TAKEN THIS FIGURE AS RS. 22,94,1 2,500/- THUS, IT HAS BEEN ALLEGED THAT THE AO HAS ADDED THE RECEIPTS OF RS. 2,82,10,000/- WHICH WERE NEVER RECEIVED BY THE APPE LLANT SOCIETY. FURTHER, IT HAS BEEN EXPLAINED THAT NO SURPLUS HAS BEEN EARNED BY THE APPELLANT AS THE TOTAL UTILIZATION WAS RS. 28,5 9,66,154/-AGAINST THE TOTAL RECEIPT OF RS. 27,02,54,348/- I HAVE CONSIDERED THE RIVAL ARGUMENTS AS SUMMARIZED ABOVE. IN MY OPINION, THERE IS NO REASON TO TAX THE EXCESS FEES ALLEGEDLY RECEIVED BY THE APPELLANT SOCIETY. IT IS TO BE NOTE D THAT THE SOCIETY IS REGISTERED U/S 12AA AND ITS INCOME WILL BE EXEMPT F ROM TAXATION AS LONG AS THE SAME IS APPLIED TOWARDS ITS OBJECTS IN ACCORDANCE WITH THE PROVISIONS AS CONTAINED IN SECTIONS 11, 12 AND 13 OF THE IT ACT. THERE IS NO FINDING THAT H APPELLANT HAS VIOLATED A NY OF SUCH PROVISIONS. FURTHER, ITS APPLICATION OF FUNDS IS MO RE THAN THE INCOME RECEIVED DURING THE YEAR AND THERE IS NO SURPLUS WH ICH CAN BE BROUGHT TO TAX. IT IS ALSO TO BE CONSIDERED THAT TH E COMMITTEE APPOINTED BY THE GOVERNMENT HAS NOT FIXED ANY FEE S TRUCTURE FOR THE RELEVANT PREVIOUS YEAR. IN ANY CASE, IF THERE WAS A NY A VIOLATION OF THE REGULATORY PROVISIONS WITH REGARD TO CHARGING O F FEES FROM THE 5 ITA NO. 5849/DEL/2017 STUDENTS THE ACTION WOULD LIE WITH THE REGULATORY A UTHORITY WHICH MAY HAVE BEEN EMPOWERED IN THIS REGARD BY THE LAW. UNDER THE IT ACT, NO ADVERSE VIEW CAN BE TAKEN WITH REGARD TO TH E QUANTUM OF FEES CHARGED FROM THE STUDENTS. UNDER THE IT ACT, W E ARE CONCERNED ONLY WITH THE APPLICATION OF INCOME AND IT IS NOT S IGNIFICANT HOW HAT INCOME WAS EARNED. AS NO VIOLATION OF IT ACT HAS BE EN INDICATED BY THE AO, O ADVERSE VIEW CAN BE TAKEN IN THE ASSESSME NT OF THE SOCIETYS INCOME. 3. BEFORE US, THE PARTIES APPEARED THROUGH VIDEO CONFE RENCING FACILITY. THE ASSESSEE FILED AN AFFIDAVIT BY THE TR USTEE DECLARING THAT NO FEE WAS FIXED BY THE FEE FIXATION COMMITTEE FOR THE ACADEMIC YEAR RELEVANT TO THE ASSESSMENT YEAR 2014- 15. 4. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF T HE ASSESSING OFFICER AND SUBMITTED THAT IN VIEW OF THE CAPITATION FEE RECEIVED, THE ASSESSEE WAS ENGAGED IN THE BUSINESS AND NOT CHARITY. THE LEARNED DR ALSO RELIED ON THE DECISION S CITED BY THE ASSESSING OFFICER. 5. ON THE CONTRARY, THE LEARNED COUNSEL OF THE ASSESS EE RELIED ON THE ORDER OF THE LD. CIT(A) AND DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF QUEENS EDUCATION SOCIE TY (2015) 55 TAXMANN.COM 255. 6. WE HAVE HEARD RIVAL SUBMISSION OF THE PARTIES ON T HE ISSUE IN DISPUTE AND PERUSED THE RELEVANT MATERIAL ON REC ORD. WE FIND THAT THE SOCIETY IS REGISTERED UNDER SECTION 12AA O F THE ACT BY THE COMPETENT AUTHORITY FOR CHARITABLE ACTIVITY OF EDU CATION AND SAID REGISTRATION IS IN OPERATION DURING THE FINANC IAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. IN TERM S OF SECTION 2(15) OF THE ACT, THE ACTIVITY OF EDUCATION HAS B EEN INCLUDED IN CHARITABLE ACTIVITY. WE FIND THAT THE LEARNED ASSES SING OFFICER HAS ALLEGED THE ASSESSEE OF COLLECTING CAPITATION FEE, HOWEVER, NO ORDER OR FINDING OF ANY REGULATORY AUTHORITY DEALING WITH MEDICAL 6 ITA NO. 5849/DEL/2017 COLLEGES OF CHARGES OF COLLECTION OF CAPITAL FEE HA S BEEN POINTED OUT BY THE ASSESSING OFFICER. 6.1 IN THE CASE OF T.M.A. PAI FOUNDATION & ORS. VS. STA TE OF KARNATAKA & ORS. (DATED 31.10.2002), THE HONBLE SU PREME COURT DECIDED THE ISSUE, WHETHER UNNI KRISHNANS CASE REQ UIRE RECONSIDERATION, AS UNDER: 27. IN THE CASE OF MOHINI JAIN (MISS) V. STATE OF KARNATAKA AND ORS., THE CHALLENGE WAS TO A NOTIFICATION OF JUNE 1989, W HICH PROVIDED FOR A FEE STRUCTURE, WHEREBY FOR GOVERNMENT SEATS, THE TUITION FEE WAS RS. 2, 000 PER ANNUM, AND FOR STUDENTS FROM KARNATA KA, THE FEE WAS RS. 25,000 PER ANNUM, WHILE THE FEE FOR INDIAN STUDENTS FROM OUTSIDE KARNATAKA, UNDER THE PAYMENT CATEGORY, WAS RS. 60,000 PER ANNUM. IT HAD BEEN CONTENDED THAT CHARGING SUCH A DISCRIMINATORY AND HIGH FEE VIOLATED CONSTITUTIONAL GUARANTEES AND RIGHTS. THIS ATTACK WAS SUSTAINED, AND IT WAS HELD THAT THERE WAS A FUNDAMENTAL RIGHT TO EDUCATION IN EVERY CITIZEN, AN D THAT THE STATE WAS DUTY BOUND TO PROVIDE THE EDUCATION, AND THAT T HE PRIVATE INSTITUTIONS THAT DISCHARGE THE STATE'S DUTIES WERE EQUALLY BOUND NOT TO CHARGE A HIGHER FEE THAN THE GOVERNMENT INSTITUT IONS. THE COURT THEN HELD THAT ANY PRESCRIPTION OF FEE IN EXCESS OF WHAT WAS PAYABLE IN GOVERNMENT COLLEGES WAS A CAPITATION FEE AND WOU LD, THEREFORE, BE ILLEGAL. THE CORRECTNESS OF THIS DECISION WAS CHALL ENGED IN UNNI KRISHNAN'S CASE, WHERE IT WAS CONTENDED THAT IF MOH INI JAIN'S RATIO WAS APPLIED THE EDUCATIONAL INSTITUTIONS WOULD HAVE TO BE CLOSED DOWN, AS THEY WOULD BE WHOLLY UNVIABLE WITHOUT APPR OPRIATE FUNDS, BY WAY OF TUITION FEES, FROM THEIR STUDENTS. 28. WE WILL NOW EXAMINE THE DECISION IN UNNI KRISHN AN'S CASE. IN THIS CASE, THIS COURT CONSIDERED THE CONDITIONS AND REGULATIONS, IF ANY, WHICH THE STATE COULD IMPOSE IN THE RUNNING OF PRIVATE UNAIDED/AIDED RECOGNIZED OR AFFILIATED EDUCATIONAL INSTITUTIONS CONDUCTING PROFESSIONAL COURSES SUCH A MEDICINE, EN GINEERING, ETC. THE EXTENT TO WHICH THE FEE COULD BE CHARGED BY SUC H AN INSTITUTION, AND THE MANNER IN WHICH ADMISSIONS COULD BE GRANTED WAS ALSO CONSIDERED. THIS COURT HELD THAT PRIVATE UNAIDED RECOGNIZED/AFFILIATED EDUCATIONAL INSTITUTIONS RUNN ING PROFESSIONAL COURSES WERE ENTITLED TO CHARGE A FEE HIGHER THAN T HAT CHARGED BY GOVERNMENT INSTITUTIONS FOR SIMILAR COURSES, BUT TH AT SUCH A FEE COULD NOT EXCEED THE MAXIMUM LIMIT FIXED BY THE STATE. IT HELD THAT COMMERCIALIZATION OF EDUCTION WAS NOT PERMISSIBLE, AND 'WAS OPPOSED TO PUBLIC POLICY AND INDIAN TRADITION AND T HEREFORE CHARGING CAPITATION FEE WAS ILLEGAL.' WITH REGARD TO PRIVATE AIDED RECOGNIZED/AFFILIATED EDUCATIONAL INSTITUTIONS, THE COURT UPHELD THE 7 ITA NO. 5849/DEL/2017 POWER OF THE GOVERNMENT TO FRAME RULES AND REGULATI ONS IN MATTER OF ADMISSION AND FEES, AS WELL AS IN MATTERS SUCH A RE CRUITMENT AND CONDITIONS OF SERVICE OF TEACHERS AND STAFF. THOUGH A QUESTION WAS RAISED AS TO WHETHER THE SETTING UP OF AN EDUCATION AL INSTITUTION COULD BE REGARDED AS A BUSINESS, PROFESSION OR VOCA TION UNDER ARTICLE 19(1)(G), THIS QUESTION WAS NOT ANSWE RED. JEEVAN REDDY, J., HOWEVER, AT PAGE 751, PARA 197, OBSERVED AS FOLLOWS:- '.....WHILE WE DO NOT WISH TO EXPRESS ANY OPINION O N THE QUESTION WHETHER THE RIGHT TO ESTABLISH AN EDUCATIO NAL INSTITUTION CAN BE SAID TO BE CARRYING ON ANY 'OCCU PATION' WITHIN THE MEANING OF ARTICLE 19(1)(G), - PERHAPS, IT IS -- WE ARE CERTAINLY OF THE OPINION THAT SUCH ACTIVITY CAN NEI THER BE A TRADE OR BUSINESS NOR CAN IT BE A PROFESSION WITHIN THE MEANING OF ARTICLE 19(1)(G). TRADE OR BUSINESS NORM ALLY CONNOTES AN ACTIVITY CARRIED ON WITH A PROFIT MOTIV E. EDUCATION HAS NEVER BEEN COMMERCE IN THIS COUNTRY.....' 29. RELIANCE WAS PLACED ON A DECISION OF THIS COURT IN BANGALORE WATER SUPPLY AND SEWERAGE BOARD V. A. RAJAPPA AND O RS., WHEREIN IT HAD BEEN HELD THAT EDUCATIONAL INSTITUTIONS WOUL D COME WITHIN THE EXPRESSION 'INDUSTRY' IN THE INDUSTRIAL DISPUTES AC T, AND THAT, THEREFORE, EDUCATION WOULD COME UNDER ARTICLE 19(1) (G). BUT THE APPLICABILITY OF THIS DECISION WAS DISTINGUISHED BY JEEVAN REDDY, J., OBSERVING THAT 'WE DO NOT THINK THE SAID OBSERVATIO N (THAT EDUCATION AS INDUSTRY) IN A DIFFERENT CONTEXT HAS ANY APPLICA TION HERE'. WHILE HOLDING, ON AN INTERPRETATION OF ARTICLES 21, 41, 4 5 AND 46, THAT A CITIZEN WHO HAD NOT COMPLETED THE AGE OF 14 YEARS H AD A RIGHT TO FREE EDUCATION, IT WAS HELD THAT SUCH A RIGHT WAS NOT AV AILABLE TO CITIZENS WHO WERE BEYOND THE AGE OF 14 YEARS. IT WAS FURTHER HELD THAT PRIVATE EDUCATIONAL INSTITUTIONS MERELY SUPPLEMENTE D THE EFFORT OF THE STATE IN EDUCATING THE PEOPLE. NO PRIVATE EDUCATION AL INSTITUTION COULD SURVIVE OR SUBSIST WITHOUT RECOGNITION AND/OR AFFILIATION GRANTED BY BODIES THAT WERE THE AUTHORITIES OF THE STATE. IN SUCH A SITUATION, THE COURT HELD THAT IT WAS OBLIGATORY UP ON THE AUTHORITY GRANTING RECOGNITION/AFFILIATION TO INSIST UPON SUC H CONDITIONS AS WERE APPROPRIATE TO ENSURE NOT ONLY AN EDUCATION OF REQUISITE STANDARD, BUT ALSO FAIRNESS AND EQUAL TREATMENT IN MATTER OF ADMISSION OF STUDENTS. THE COURT THEN FORMULATED A SCHEME AND DIRECTED EVERY AUTHORITY GRANTING RECOGNITION/AFFIL IATION TO IMPOSE THAT SCHEME UPON INSTITUTIONS SEEKING RECOGNITION/A FFILIATION, EVEN IF THEY WERE UNAIDED INSTITUTIONS. THE SCHEME THAT WAS FRAMED, INTER ALIA, POSTULATED (A) THAT A PROFESSIONAL COLLEGE SHOULD BE ESTABLISH ED AND/OR ADMINISTERED ONLY BY A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860, OR THE CORRESPONDING ACT OF A STATE, OR BY A PUBLIC TRUST REGISTERED UNDER THE TRUSTS ACT, OR UN DER THE WAKFS ACT, 8 ITA NO. 5849/DEL/2017 AND THAT NO INDIVIDUAL, FIRM, COMPANY OR OTHER BODY OF INDIVIDUALS WOULD BE PERMITTED TO ESTABLISH AND/OR ADMINISTER A PROFESSIONAL COLLEGE (B) THAT 50% OF THE SEATS IN EVERY PROFESSI ONAL COLLEGE SHOULD BE FILED BY THE NOMINEES OF THE GOVERNMENT OR UNIVE RSITY, SELECTED ON THE BASIS OF MERIT DETERMINED BY A COMMON ENTRAN CE EXAMINATION, WHICH WILL BE REFERRED TO AS 'FREE SEA TS'; THE REMAINING 50% SEATS ('PAYMENT SEATS') SHOULD BE FILLED BY THO SE CANDIDATES WHO PAY THE FEE PRESCRIBED THEREFORE, AND THE ALLOT MENT OF STUDENTS AGAINST PAYMENT SEATS SHOULD BE DONE ON THE BASIS O F INTER SE MERIT DETERMINED ON THE SAME BASIS AS IN THE CASE OF FREE SEATS (C) THAT THERE SHOULD BE NO QUOTA RESERVED FOR THE MANAGEMEN T OR FOR ANY FAMILY, CASTE OR COMMUNITY, WHICH MAY HAVE ESTABLIS HED SUCH A COLLEGE (D) THAT IT SHOULD BE OPEN TO THE PROFESSIO NAL COLLEGE TO PROVIDE FOR RESERVATION OF SETS FOR CONSTITUTIONALL Y PERMISSIBLE CLASSES WITH THE APPROVAL OF THE AFFILIATING UNIVER SITY (E) THAT THE FEE CHARGEABLE IN EACH PROFESSIONAL COLLEGE SHOULD BE S UBJECT TO SUCH A CEILING AS MAY BE PRESCRIBED BY THE APPROPRIATE AUT HORITY OR BY A COMPETENT COURT (F) THAT EVERY STATE GOVERNMENT SHO ULD CONSTITUTE A COMMITTEE TO FIX THE CEILING ON THE FEES CHARGEABLE BY A PROFESSIONAL COLLEGE OR CLASS OF PROFESSIONAL COLLEGES, AS THE C ASE MAY BE. THIS COMMITTEE SHOULD, AFTER HEARING THE PROFESSIONAL CO LLEGES, FIX THE FEE ONCE EVERY THREE YEARS OR AT SUCH LONGER INTERVALS, AS IT MAY THINK APPROPRIATE(G) THAT IT WOULD BE APPROPRIATE FOR THE UNIVERSITY GRANTS COMMISSION TO FRAME REGULATORS UNDER ITS ACT REGULA TING THE FEES THAT THE AFFILIATED COLLEGES OPERATING ON A NO GRAN T-IN-AID BASIS WERE ENTITLED TO CHARGE. THE AICTE, THE INDIAN MEDICAL C OUNCIL AND THE CENTRAL GOVERNMENT WERE ALSO GIVEN SIMILAR ADVICE. THE MANNER IN WHICH THE SEATS TO BE FILLED ON THE BASIS OF THE CO MMON ENTRANCE TEST WAS ALSO INDICATED. 30. THE COUNSEL FOR THE MINORITY INSTITUTIONS, AS W ELL AS THE SOLICITOR GENERAL, HAVE CONTENDED THAT THE SCHEME FRAMED BY T HIS COURT IN UNNI KRISHNAN'S CASE WAS NOT WARRANTED. IT WAS REPR ESENTED TO US THAT THE COST INCURRED ON EDUCATING A STUDENT IN AN UNAIDED PROFESSIONAL COLLEGE WAS MORE THAN THE TOTAL FEE, W HICH IS REALIZED ON THE BASIS OF THE FORMULA FIXED IN THE SCHEME. THIS HAD RESULTED IN REVENUE SHORTFALLS. THIS COURT, BY INTERIM ORDERS S UBSEQUENT TO THE DECISION IN UNNI KRISHNAN'S CASE, HAD PERMITTED, WI THIN THE PAYMENT SEATS, SOME PERCENTAGE OF SEATS TO BE ALLOTTED TO N ON- RESIDENT INDIANS, AGAINST PAYMENT OF A HIGHER AMOUNT AS DETE RMINED BY THE AUTHORITIES. EVEN THEREAFTER, SUFFICIENT FUNDS WERE NOT AVAILABLE FOR THE DEVELOPMENT OF THOSE EDUCATIONAL INSTITUTIONS. ANOTHER INFIRMITY WHICH WAS POINTED OUT WAS THAT EXPERIENCE HAS SHOWN THAT MOST OF THE 'FREE SEATS' WERE GENERALLY OCCUPIED BY STUDENT S FROM AFFLUENT FAMILIES, WHILE STUDENTS FROM LESS AFFLUENT FAMILIE S WERE REQUIRED TO PAY MUCH MORE TO SECURE ADMISSION TO 'PAYMENT SEATS '. THIS WAS FOR THE REASON THAT STUDENTS FROM AFFLUENT FAMILIES HAD HAD BETTER SCHOOL EDUCATION AND THE BENEFIT OF PROFESSIONAL CO ACHING FACILITIES 9 ITA NO. 5849/DEL/2017 AND WERE, THEREFORE, ABLE TO SECURE HIGHER MERIT PO SITIONS IN THE COMMON ENTRANCE TEST, AND THEREBY SECURED THE FREE SEATS. THE EDUCATION OF THESE MORE AFFLUENT STUDENTS WAS IN A WAY BEING CROSS- SUBSIDIZED BY THE FINANCIALLY POORER STUDENTS WHO B ECAUSE OF THEIR LOWER POSITION IN THE MERIT LIST, COULD SECURE ONLY 'PAYMENT SEATS'. IT WAS ALSO SUBMITTED BY THE COUNSEL FOR THE MINORITY INSTITUTIONS THAT UNNI KRISHNAN'S CASE WAS NOT APPLICABLE TO THE MINO RITY INSTITUTIONS, BUT THAT NOTWITHSTANDING THIS, THE SCHEME TO EVOLVE D HAD BEEN MADE APPLICABLE TO THEM AS WELL. 31. COUNSEL FOR THE INSTITUTIONS, AS WELL AS THE SO LICITOR GENERAL, SUBMITTED THAT THE DECISION IN UNNI KRISHNAN'S CASE , INSOFAR AS IT HAD FRAMED THE SCHEME RELATING TO THE GRANT OF ADMI SSION AND THE FIXING OF THE FEE, WAS UNREASONABLE AND INVALID. HO WEVER, ITS CONCLUSION THAT CHILDREN BELOW THE AGE OF 14 HAD A FUNDAMENTAL RIGHT TO FREE EDUCATION DID NOT CALL FOR ANY INTERF ERENCE. 32. IT HAS BEEN SUBMITTED BY THE LEARNED COUNSEL FO R THE PARTIES THAT THE IMPLEMENTATION OF THE SCHEME BY THE STATES, WHI CH HAVE AMENDED THEIR RULES AND REGULATIONS, HAS SHOWN A NU MBER OF ANOMALIES. AS ALREADY NOTICED, 50% OF THE SEATS ARE TO BE GIVEN ON THE BASIS OF MERIT DETERMINED AFTER THE CONDUCT OF A COMMON ENTRANCE TEST, THE RATE OF FEE BEING MINIMAL. THE ' PAYMENT SEATS' WHICH REPRESENT THE BALANCE NUMBER, THEREFORE, CROS S- SUBSIDIZE THE 'FREE SEATS'. THE EXPERIENCE OF THE EDUCATIONAL INS TITUTIONS HAS BEEN THAT STUDENTS WHO COME FROM PRIVATE SCHOOLS, AND WH O BELONG TO MORE AFFLUENT FAMILIES, ARE ABLE TO SECURE HIGHER P OSITIONS IN THE MERIT LIST OF THE COMMON ENTRANCE TEST, AND ARE THU S ABLE TO SEEK ADMISSION TO THE 'FREE SEATS'. PARADOXICALLY, IT IS THE STUDENTS WHO COME FROM LESS AFFLUENT FAMILIES, WHO ARE NORMALLY ABLE TO SECURE, ON THE BASIS OF THE MERIT LIST PREPARED AFTER THE COMM ON ENTRANCE TEST, ONLY 'PAYMENT SEATS'. 33. IT WAS CONTENDED BY PETITIONED COUNSEL THAT THE IMPLEMENTATION OF THE UNNI KRISHNAN SCHEME HAS IN FACT (1) HELPED THE PRIVILEGED FROM RICHER URBAN FAMILIES, EVEN AFTER THEY CEASED TO BE COMPARATIVELY MERITORIOUS, AND (2) RESULTED IN ECON OMIC LOSSES FOR THE EDUCATIONAL INSTITUTIONS CONCERNED, AND MADE TH EM FINANCIALLY UNVIABLE. DATA IN SUPPORT OF THIS CONTENTION WAS PL ACED ON RECORD IN AN EFFORT TO PERSUADE THIS COURT TO HOLD THAT THE S CHEME HAD FAILED TO ACHIEVE ITS OBJECT. 34. MATERIAL HAS ALSO BEEN PLACED ON THE RECORD IN AN EFFORT TO SHOW THAT THE TOTAL FEE REALIZED FROM THE FEE FIXED FOR 'FREE SEATS' AND THE 'PAYMENT SEATS' IS ACTUALLY LESS THAN THE AMOUNT OF EXPENSE THAT IS INCURRED ON EACH STUDENT ADMITTED TO THE PROFESSION AL COLLEGE. IT IS BECAUSE THERE WAS A REVENUE SHORTFALL THAT THIS COU RT HAD PERMITTED IN NRI QUOTA TO BE CARVED OUT OF THE 50% PAYMENT SE ATS FOR WHICH 10 ITA NO. 5849/DEL/2017 CHARGING HIGHER FEE WAS PERMITTED. DIRECTIONS WERE GIVEN TO UGC, AICTE, MEDICAL COUNCIL OF INDIA AND CENTRAL AND STA TE GOVERNMENTS TO REGULATE OR FIX A CEILING ON FEES, AND TO ENFORC E THE SAME BY IMPOSING CONDITIONS OF AFFILIATION/PERMISSION TO ES TABLISH AND RUN THE INSTITUTIONS. 35. IT APPEARS TO US THAT THE SCHEME FRAMED BY THIS COURT AND THEREAFTER FOLLOWED BY THE GOVERNMENTS WAS ONE THAT CANNOT BE CALLED A REASONABLE RESTRICTION UNDER ARTICLE 19(6) OF THE CONSTITUTION. NORMALLY, THE REASON FOR ESTABLISHING AN EDUCATIONA L INSTITUTION IS TO IMPART EDUCATION. THE INSTITUTION THUS NEEDS QUALIF IED AND EXPERIENCED TEACHERS AND PROPER FACILITIES AND EQUI PMENT, ALL OF WHICH REQUIRE CAPITAL INVESTMENT. THE TEACHERS ARE REQUIRED TO BE PAID PROPERLY. AS POINTED OUT ABOVE, THE RESTRICTIO NS IMPOSED BY THE SCHEME, IN UNNI KRISHNAN'S CASE, MADE IT DIFFICULT, IF NOT IMPOSSIBLE, FOR THE EDUCATIONAL INSTITUTIONS TO RUN EFFICIENTLY . THUS, SUCH RESTRICTIONS CANNOT BE SAID TO BE REASONABLE RESTRI CTIONS. 36. THE PRIVATE UNAIDED EDUCATIONAL INSTITUTIONS IM PART EDUCATION, AND THAT CANNOT BE THE REASON TO TAKE AWAY THEIR CH OICE IN MATTERS, INTER ALIA, OF SELECTION OF STUDENTS AND FIXATION O F FEES. AFFILIATION AND RECOGNITION HAS TO BE AVAILABLE TO EVERY INSTITUTIO N THAT FULFILLS THE CONDITIONS FOR GRANT OF SUCH AFFILIATION AND RECOGN ITION. THE PRIVATE INSTITUTIONS ARE RIGHT IN SUBMITTING THAT IT IS NOT OPEN TO THE COURT TO INSIST THAT STATUTORY AUTHORITIES SHOULD IMPOSE THE TERMS OF THE SCHEME AS A CONDITION FOR GRANT OF AFFILIATION OR R ECOGNITION; THIS COMPLETELY DESTROYS THE INSTITUTIONAL AUTONOMY AND THE VERY OBJECTIVE OF ESTABLISHMENT OF THE INSTITUTION. 37. THE UNNI KRISHNAN JUDGMENT HAS CREATED CERTAIN PROBLEMS, AND RAISED THORNY ISSUES. IN ITS ANXIETY TO CHECK THE C OMMERCIALIZATION OF EDUCATION, A SCHEME OF 'FREE' AND 'PAYMENT' SEATS W AS EVOLVED ON THE ASSUMPTION THAT THE ECONOMIC CAPACITY OF FIRST 50% OF ADMITTED STUDENTS WOULD BE GREATER THAN THE REMAINING 50%, W HEREAS THE CONVERSE HAS PROVED TO BE THE REALITY. IN THIS SCHE ME, THE 'PAYMENT SEAT' STUDENT WOULD NOT ONLY PAY FOR HIS OWN SEAT, BUT ALSO FINANCE THE COST OF A 'FREE SEAT' CLASSMATE. WHEN ONE CONSI DERS THE CONSTITUTION BENCH'S EARLIER STATEMENT THAT HIGHER EDUCATION IS NOT A FUNDAMENTAL RIGHT, IT SEEMS UNREASONABLE TO COMPEL A CITIZEN TO PAY FOR THE EDUCATION OF ANOTHER, MORE SO IN THE UNREAL ISTIC WORLD OF COMPETITIVE EXAMINATIONS WHICH ASSESS THE MERIT FOR THE PURPOSE OF ADMISSION SOLELY ON THE BASIS OF THE MARKS OBTAINED , WHERE THE URBAN STUDENTS ALWAYS HAVE AN EDGE OVER THE RURAL S TUDENTS. IN PRACTICE, IT HAS BEEN THE CASE OF THE MARGINALLY LE SS MERITED RURAL OR POOR STUDENT BEARING THE BURDEN OF A RICH AND WELL- EXPOSED URBAN STUDENT. 11 ITA NO. 5849/DEL/2017 38. THE SCHEME IN UNNI KRISHNAN'S CASE HAS THE EFFE CT OF NATIONALIZING EDUCATION IN RESPECT OF IMPORTANT FEA TURES, VIZ., THE RIGHT OF A PRIVATE UNAIDED INSTITUTION TO GIVE ADMI SSION AND TO FIX THE FEE. BY FRAMING THIS SCHEME, WHICH HAS LED TO THE S TATE GOVERNMENTS LEGISLATING IN CONFORMITY WITH THE SCHE ME THE PRIVATE INSTITUTIONS ARE UNDISTINGUISHABLE FROM THE GOVERNM ENT INSTITUTIONS; CURTAILING ALL THE ESSENTIAL FEATURES OF THE RIGHT OF ADMINISTRATION OF A PRIVATE UNAIDED EDUCATIONAL INSTITUTION CAN NEITHER BE CALLED FAIR OR REASONABLE. EVEN IN THE DECISION IN UNNI KRISHNAN'S CASE, IT HAS BEEN OBSERVED BY JEEVAN REDDY, J., AT PAGE 749, PAR A 194, AS FOLLOWS: 'THE HARD REALITY THAT EMERGES IS THAT PRIVATE EDUC ATIONAL INSTITUTIONS ARE A NECESSITY IN THE PRESENT DAY CON TEXT. IT IS NOT POSSIBLE TO DO WITHOUT THEM BECAUSE THE GOVERNMENTS ARE IN NO POSITION TO MEET THE DEMAND - PARTICULARLY IN THE S ECTOR OF MEDICAL AND TECHNICAL EDUCATION WHICH CALL FOR SUBSTANTIAL OUTLAYS. WHILE EDUCATION IS ONE OF THE MOST IMPORTANT FUNCTIONS OF THE INDIAN STATE IT HAS NO MONOPOLY THEREIN. PRIVATE EDUCATIONAL INS TITUTIONS - INCLUDING MINORITY EDUCATIONAL INSTITUTIONS - TOO H AVE A ROLE TO PLAY.' 39. THAT PRIVATE EDUCATIONAL INSTRUCTIONS ARE A NEC ESSITY BECOMES EVIDENT FROM THE FACT THAT THE NUMBER OF GOVERNMENT -MAINTAINED PROFESSIONAL COLLEGES HAS MORE OR LESS REMAINED STA TIONARY, WHILE MORE PRIVATE INSTITUTIONS HAVE BEEN ESTABLISHED. FO R EXAMPLE, IN THE STATE OF KARNATAKA THERE ARE 19 MEDICAL COLLEGES OU T OF WHICH THERE ARE ONLY 4 GOVERNMENT- MAINTAINED MEDICAL COLLEGES. SIMILARLY, OUT OF 14 DENTAL COLLEGES IN KARNATAKA, ONLY ONE HAS BEEN ESTABLISHED BY THE GOVERNMENT, WHILE IN THE SAME STATE, OUT OF 51 ENGINEERING COLLEGES, ONLY 12 HAVE BEEN ESTABLISHED BY THE GOVE RNMENT. THE AFORESAID FIGURES CLEARLY INDICATE THE IMPORTANT RO LE PLAYED BY PRIVATE UNAIDED EDUCATIONAL INSTITUTIONS, BOTH MINO RITY AND NON- MINORITY, WHICH CATER TO THE NEEDS OF STUDENTS SEEK ING PROFESSIONAL EDUCATION. 40. ANY SYSTEM OF STUDENT SELECTION WOULD BE UNREAS ONABLE IF IT DEPRIVES THE PRIVATE UNAIDED INSTITUTION OF THE RIG HT OF RATIONAL SELECTION, WHICH IT DEVISED FOR ITSELF, SUBJECT TO THE MINIMUM QUALIFICATION THAT MAY BE PRESCRIBED AND TO SOME SY STEM OF COMPUTING THE EQUIVALENCE BETWEEN DIFFERENT KINDS O F QUALIFICATIONS, LIKE A COMMON ENTRANCE TEST. SUCH A SYSTEM OF SELEC TION CAN INVOLVE BOTH WRITTEN AND ORAL TESTS FOR SELECTION, BASED ON PRINCIPLE OF FAIRNESS. 41. SURRENDERING THE TOTAL PROCESS OF SELECTION TO THE STATE IS UNREASONABLE, AS WAS SOUGHT TO BE DONE IN THE UNNI KRISHNAN SCHEME. APART FROM THE DECISION IN ST. STEPHEN'S CO LLEGE V. UNIVERSITY OF DELHI, WHICH RECOGNIZED AND UPHELD TH E RIGHT OF A 12 ITA NO. 5849/DEL/2017 MINORITY AIDED INSTITUTION TO HAVE A RATIONAL ADMIS SION PROCEDURE OF ITS OWN, EARLIER CONSTITUTION BENCH DECISION OF THI S COURT HAVE, IN EFFECT, UPHELD SUCH A RIGHT OF AN INSTITUTION DEVIS ING A RATIONAL MANNER OF SELECTING AND ADMITTING STUDENTS. 42. IN R. CHITRALEKHA AND ANR. V. STATE OF MYSORE A ND ORS., WHILE CONSIDERING THE VALIDITY OF A VIVA-VOCE TEST FOR AD MISSION TO A GOVERNMENT MEDICAL COLLEGE, IT WAS OBSERVED AT PAGE 380 THAT COLLEGES RUN BY THE GOVERNMENT, HAVING REGARD TO FI NANCIAL COMMITMENTS AND OTHER RELEVANT CONSIDERATIONS, WOUL D ONLY ADMIT A SPECIFIC NUMBER OF STUDENTS. IT HAD DEVISED A METHO D FOR SCREENING THE APPLICANTS FOR ADMISSION. WHILE UPHOLDING THE O RDER SO ISSUED, IT WAS OBSERVED THAT 'ONCE IT IS CONCEDED, AND IT IS N OT DISPUTED BEFORE US, THAT THE STATE GOVERNMENT CAN RUN MEDICAL AND E NGINEERING COLLEGES, IT CANNOT BE DENIED THE POWER TO ADMIT SU CH QUALIFIED STUDENTS AS PASS THE REASONABLE TESTS LAID DOWN BY IT. THIS IS A POWER WHICH EVERY PRIVATE OWNER OF A COLLEGE WILL H AVE, AND THE GOVERNMENT WHICH RUNS ITS OWN COLLEGES CANNOT BE DE NIED THAT POWER.' (EMPHASIS ADDED). 43. AGAIN, IN MINOR P. RAJENDRAN V. STATE OF MADRAS AND ORS., IT WAS OBSERVED AT PAGE 795 THAT 'SO FAR AS ADMISSION IS C ONCERNED, IT HAS TO BE MADE BY THOSE WHO ARE IN CONTROL OF THE COLLE GES, AND IN THIS CASE THE GOVERNMENT, BECAUSE THE MEDICAL COLLEGES A RE GOVERNMENT COLLEGES AFFILIATED TO THE UNIVERSITY. IN THESE CIR CUMSTANCES, THE GOVERNMENT WAS ENTITLED TO FRAME RULES FOR ADMISSIO N TO MEDICAL COLLEGES CONTROLLED BY IT SUBJECT TO THE RULES OF T HE UNIVERSITY AS TO ELIGIBILITY AND QUALIFICATIONS.' THE AFORESAID OBSE RVATIONS CLEARLY UNDERSCORE THE RIGHT OF THE COLLEGES TO FRAME RULES FOR ADMISSION AND TO ADMIT STUDENTS. THE ONLY REQUIREMENT OR CONTROL IS THAT THE RULES FOR ADMISSION MUST BE SUBJECT TO THE RULES OF THE U NIVERSITY AS TO ELIGIBILITY AND QUALIFICATIONS. THE COURT DID NOT S AY THAT THE UNIVERSITY COULD PROVIDE THE MANNER IN WHICH THE ST UDENTS WERE TO BE SELECTED. 44. IN KUMARI CHITRA GHOSH AND ANR. V. UNION OF IND IA AND ORS., DEALING WITH A GOVERNMENT RUN MEDICAL COLLEGE AT PA GES 232-33, PARA 9, IT WAS OBSERVED AS FOLLOWS: 'IT IS THE CENTRAL GOVERNMENT WHICH BEARS THE FINAN CIAL BURDEN OF RUNNING THE MEDICAL COLLEGE. IT IS FOR IT TO LAY DOWN THE CRITERIA FOR ELIGIBILITY.....' 45. IN VIEW OF THE DISCUSSION HEREINABOVE, WE HOLD THAT THE DECISION IN UNNI KRISHNAN'S CASE, INSOFAR AS IT FRAMED THE S CHEME RELATING TO THE GRANT OF ADMISSION AND THE FIXING OF THE FEE, W AS NOT CORRECT, AND TO THAT EXTENT, THE SAID DECISION AND THE CONSEQUEN T DIRECTION GIVEN 13 ITA NO. 5849/DEL/2017 TO UGC, AICTE, MEDICAL COUNCIL OF INDIA, CENTRAL AN D STATE GOVERNMENT, ETC., ARE OVERRULED. 6.1.1 THE HONBLE SUPREME COURT FRAMED 11 QUESTIONS AND MAJORITY OF JUDGES ANSWERED THE QUESTION NO. 9 THAT THERE SHOULD NOT BE CAPITATION FEE OR PROFITEERING, BUT REASONAB LE SURPLUS TO MEET COST OF EXPANSION AND AUGMENTATION OF FACILITI ES DOES NOT, HOWEVER, AMOUNTED TO PROFITEERING. 6.1.2 IN THE CASE OF ISLAMIC ACADEMY (SUPRA) ALSO HELD THAT EACH INSTITUTE MUST HAVE THE FREEDOM TO FIX ITS OWN FEE STRUCTURE TAKING INTO CONSIDERATION THE NEEDS TO GENERATE FUNDS TO R UN THE INSTITUTION AND TO PROVIDE FACILITIES NECESSARY FOR THE BENEFIT OF THE STUDENTS, HOWEVER, THERE CAN BE NO PROFITEERING AND CHARGING OF CAPITATION FEES. 6.1.3 IN P.A. INAMDAR (SUPRA), THE SUPREME COURT WHILE ANSWERING QUESTION NO. 3 HELD THAT EVERY INSTITUTIO N IS FREE TO DEVISE ITS OWN FEE STRUCTURE BUT THE SAME CAN BE RE GULATED IN THE INTEREST OF PREVENTING PROFITEERING. NO CAPITATION FEE CAN BE CHARGED. LEVERAGE WAS ALLOWED TO EDUCATIONAL INSTIT UTIONS TO GENERATE REASONABLE SURPLUS TO MEET COST OF EXPANSI ON AND AUGMENTATION OF FACILITIES WHICH WOULD NOT AMOUNT T O PROFITEERING. THE COURT UPHELD THE TWO COMMITTEES FOR MONITORING ADMISSION PROCEDURE AND DETERMINING FEE STRUCTURE AS HELD IN ISLAMIC ACADEMY WAS PERMISSIBLE AS REGULATORY MEASURES AIME D AT PROTECTING THE INTEREST OF THE STUDENT COMMUNITY AS A WHOLE AS ALSO THE MINORITIES 6.2 BEFORE THE LEARNED CIT(A), THE ASSESSEE HAS SUBMIT TED THAT PURSUANT TO SUPREME COURT DECISIONS MENTIONED ABOV E, THE STATE GOVERNMENT OF UTTAR PRADESH ENACTED THE UTTAR PRAD ESH PRIVATE 14 ITA NO. 5849/DEL/2017 PROFESSIONAL EDUCATIONAL INSTITUTION (REGULATION OF ADMISSION AND FIXATION OF FEES) ACT, 2006 AND FEE FIXATION COMMIT WAS CONSTITUTED ON 27.06.2008. AS REGARD TO FEES, THE A SSESSEE SUBMITTED BEFORE THE LD. CIT(A) AS UNDER: 13. PURSUANT TO SUPREME COURT/GOVT. OF U.P. ORDER, THE COMMITTEE FIXED PROVISIONAL FEE FOR ACADEMIC YEAR 2011-12 AT RS. 4.07 LACS VIDE G.O. NO. 3392/71-2-11-W- 64/2007 DATED 14.09.2 011. COMMITTEE ALSO DECIDED TO FIX FINAL FEE AND ALSO FE E FOR ACADEMIC YEAR 2012-13 AND 2013-14 LATER ON. CONSEQUENTLY, TH E COMMITTEE WAS REQUIRED TO FIX THE FINAL FEE FOR SESSION 2011- 12 AND THEREAFTER. THIS HAS NOT BEEN DONE IN THE INSTANT CASE, IN FACT THE ASSESSEE HAS GONE ON RECORD TO MAKE A REQUEST TO THIS EFFECT. IN THE G.O. IT IS ALSO MENTIONED THAT FINAL FEE WILL BE FIXED LATER ON AND IF THE COLLEGE HAS TAKEN EXCESS FEE, THE SAME WILL BE REFUNDED TO STUD ENTS OR ADJUSTED AGAINST FUTURE DUES. IF FEE PAID BY STUDENT IS LESS THAN FIXED, THE COLLEGE WILL COLLECT THE DIFFERENCE FROM STUDENT. 14. THE FEE FIXATION ORDER CAME ON 14.09.201, TILL THEN THE ADMISSIONS FOR ACADEMIC YEAR 2011-12 WERE ALMOST CO MPLETED AND FEE, AS DECIDED BY THE COLLEGE COMMITTEE, WAS DEPOS ITED BY STUDENTS. SINCE THE FINAL FEE WAS NEVER FIXED BY TH E GOVERNMENT, THERE WAS NO QUESTION OF REFUND/COLLECTION OF DIFFE RENT OF FEE. 15. THE FACTS OF THE INSTANT CASE WOULD REVEAL THAT THERE IS NO SURPLUS AT ALL, THAT IS EARNED BY THE ASSESSEE. LD. ASSESSING OFFICER HAS HERSELF ACCEPTED THAT TOTAL UTILIZATION OF INCO ME WAS RS. 28,59,66,154/- AND TOTAL RECEIPTS WAS RS. 27,02,54, 348.23 AS PER PARA 13 OF ASSESSMENT ORDER. 16. THAT LD. ASSESSING OFFICER HAVE NOT REFERRED TO ANY FEE FIXATION ORDER IN THE ASSESSEMENT ORDER BUT MERELY MENTIONED THAT THE FEE FIXATION COMMITTEE ORDER HAS BEEN BROUGHT ON RECORD S BY THE ASSESSEE OR THE FEE FIXATION ORDER IS AVAILABLE IN PUBLIC DOMAIN. THERE AFTER NEITHER FINAL FEE FOR ACADEMIC YEAR 201 1-12 NOR FEE FOR NEXT ACADEMIC YEARS, AS MENTIONED IN PARA-3, HAS BE EN FIXED BY GOVT./DGME. IT MEANS NO FEE HAS BEEN FIXED BY THE C OMPETENT AUTHORITY FOR ACADEMIC SESSION 2013-14 RELEVANT TO A.Y.2014-15 UNDER CONSIDERATION. AS REGARDS FEE FOR BAMS COURSE, THE GOVT./DGME/FEE FIXATION COMMITTEE HAS FIXED FEE FOR GOVT. UNANI, AURVEDIC A ND HOMEOPATHIC MEDICAL COLLEGES ONLY WHICH IS CLEARLY MENTIONED IN THE ORDER AND HAS NO APPLICATION ON THE PRIVATE AYURVEDIC MEDICAL COLLEGES. 15 ITA NO. 5849/DEL/2017 AS REGARDS FEE FOR PARAMEDICAL COURSES, IT IS SUBMI TTED THAT UTTAR PRADESH STATE MEDICAL FACULTY, U.P. HAD GRANTED PER MISSION TO START THE PARAMEDICAL COURSES VIDE LETTER NO. 3461/12 DAT ED 23.05.2012. AS PER POINT 3 OF THE AFORESAID LETTER THE COLLEGE IS PERMITTED TO CHARGE TUTION FEE OF RS. 36000/- PER STUDENT. THE A SSESSEE COLLEGE HAS CHARGED THE TOTAL FEE OF RS. 37500/- WHICH INCL UDES TUTION FEE RS. 36000/- AND EXAMINATION FEE RS. 1500/-. THUS TH E ASSESSEE HAS NOT CHARGED ANY EXCESS FEE THAN FIXED BY THE AU THORITIES. LD. AO HAS TAKEN THE FEE FIXED AT RS. 28000/- AS PER OWN I MAGINATION. THE COPY OF LETTER OF U.P. STATE MEDICAL FACULTY IS ENC LOSED AND MARKED AS ANNEXURE-G. IN VIEW OF THE DISCUSSION AND FACTS STATED ABOVE IT IS VERY CLEAR THAT NO FEE HAS BEEN FIXED BY THE GOVT, OR AND OTHER COM PETENT AUTHORITY FOR MBBS AND BAMS COURSES RUN BY THE ASSESSEE, FOR THE ACADEMIC SESSION 2013-14 (RELEVANT TO A.Y. 2014-15). 19. THAT WITH REGARDS TO QUESTION NO 2 AS TO WHETHE R ASSESSEE HAS CHARGED FEE IN EXCESS OF FEE FIXED BY THE FEE FIXAT ION AUTHORITY, THE QUESTION HAS NO RELEVANCY FOR MBBS AND BAMS COURSES BECAUSE, AS DISCUSSED IN PARA 18 ABOVE, NO FEE HAS BEEN FIXED B Y THE AUTHORITY FOR F.Y. 2013-14 (RELEVANT TO A.Y. 2014-15) FOR THE SE COURSES, HENCE THERE IS NO QUESTION OF CHARGING/COLLECTING FEE IN EXCESS OF FEE FIXED. AS REGARDS PARAMEDICAL COURSES THE ASSESSEE HAS CHA RGED THE FEE AS PERMITTED BY UTTAR PRADESH STATE MEDICAL FACULTY AND NO EXCESS FEE HAS BEEN CHARGED. 6.3 ON PERUSAL OF SUBMISSION OF THE ASSESSEE, IT IS CL EAR THAT ONLY EXTRA FEE OF RS.1,500/- WAS CHARGED AND THAT T OO WAS FOR EXAMINATION FEE. IN SUCH CIRCUMSTANCES, IT CANNOT B E SAID THAT ANY CAPITATION FEE HAS BEEN CHARGED FROM THE STUDEN TS. MOREOVER, THERE IS NO SURPLUS HAS BEEN GENERATED IN THE YEAR UNDER CONSIDERATION AND THE ASSESSEE CANNOT BE ALLEGED FO R ENGAGED IN PROFITEERING ALSO. 6.4 THE ASSESSEE HAS CONTESTED THAT NO FEE WAS FIXED B Y THE STATE LEVEL FEE FIXATION COMMITTEE FOR THE YEAR UND ER CONSIDERATION AND, THEREFORE, COMPUTATION OF THE EXCESS FEE BY TH E ASSESSING OFFICER, IS BASED ON PRESUMPTION AND WITHOUT ANY DO CUMENTARY EVIDENCE IN SUPPORT. THE DECISIONS RELIED UPON BY T HE ASSESSING 16 ITA NO. 5849/DEL/2017 OFFICER ARE IN RESPECT OF THE CAPITATION FEE AND IN ABSENCE OF ANY SUCH EVIDENCE OF COLLECTION OF CAPITATION FEE, THE DECISIONS RELIED UPON ARE NOT APPLICABLE OVER THE FACTS OF THE ASSES SEE. THE LD. CIT(A) HAS CORRECTLY HELD THAT ONCE THE ASSESSEE IS REGISTERED UNDER SECTION 12AA OF THE ACT, THE ASSESSING OFFICE R HAS TO EXAMINE APPLICABILITY OF SECTION 11, 12 AND 13 OF T HE ACT. NO SUCH VIOLATION HAS BEEN POINTED OUT BY THE LEARNED ASSES SING OFFICER OF SECTION 11, 12 AND 13 OF THE ACT. THE SECTION 11 PR ESCRIBE APPLICATION OF THE INCOME TOWARD CHARITABLE PURPOSE S, WHICH IN THE CASE OF THE ASSESSEE IS FOR EDUCATION AND THE A SSESSEE HAS DULY APPLIED ITS INCOME FOR SAID PURPOSES AS PER TH E RULES SPECIFIED IN THE ACT. IN VIEW OF THE ABOVE FACTS AN D CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CI T(A) ON THE ISSUE IN DISPUTE AND, ACCORDINGLY, WE UPHOLD THE SAME. TH E GROUND OF THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2021. SD/- SD/- (KUL BHARAT) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 TH JULY, 2021. RK/- (DTDC) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI