Rashtreeya Sikshana Samithi Trust Vs ACIT (ITAT Bangalore)
Bangalore ITAT Upholds Section 11 Exemption Despite Alleged Capitation Fee Collections
The Bangalore ITAT held that Rashtreeya Sikshana Samithi Trust is entitled to exemption under Sections 11 and 12, rejecting the Revenue’s contention that collection of “development fees” amounted to capitation fees and reflected a profit-making motive. The Tribunal noted that an identical issue in the assessee’s own case for AY 2012-13 had already been decided in its favour and subsequently affirmed by the Karnataka High Court. The High Court had specifically observed that the allegation of violation of the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act was based merely on assumptions, as no action had ever been initiated against the trust under that Act. Consequently, the Tribunal held that the Revenue could not deny charitable status under Section 2(15) merely on the basis of large surpluses or development fee collections.
The Tribunal further observed that once an institution is recognized as charitable and registered under Section 12A, exemption under Sections 11 and 12 can be denied only upon establishing violations of the specific provisions governing application or accumulation of income. The Assessing Officer had not demonstrated any breach of Sections 11, 12 or 13. The Tribunal also emphasized that capital expenditure incurred for educational infrastructure constitutes application of income, and therefore the AO’s computation of surplus by considering only revenue expenditure was fundamentally flawed. Revenue’s appeals for AYs 2014-15 to 2016-17 were accordingly dismissed.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
These appeals are filed by the assessee and the Revenue against the order passed under section 250 of the Income Tax 1961 pertaining to A.Ys. 2014-15 to 2016-17 at National Faceless Appeal Centre-NFAC, Delhi.
