Misappropriation of fund cannot be ground for cancellation of Trust registration

Whether the assessee has violated the rules and regulations of the government of Andhra Pradesh 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 Institutions (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, date 11-06-2003 issued by the government of Andhra Pradesh to implement the judgement of the apex court in the case of T.M.A. Pai Foundation (supra) by framing the rules and regulations for admission of students into 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 assessee has collected any fee in excess of such prescribed amount. In addition to the above fee notified, the assessee has also collected the donations 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 Prohibition of Capitation Fee) Act, 1983 is to be examined. The reliance of the Revenue has been only on the rules framed vide G.O.Ms. 33 (supra) in which there is no mention of donations and contributions to the educational institutions. The rules have prescribed only the fee to be collected from the students and have prohibited the collection of the fee of any kind other than those mentioned in the rules. But Sec.6 of the Andhra Pradesh Educational Institutions (Regulation of Admission and Prohibition of Capitation Fee) Act, 1983 permits the receipt of voluntary donations. For the sake of easy reference the relevant provision is reproduced here under:

Sec.6. (1) Any donation of money to any educational institution, shall be made only in such manner as may be prescribed and not otherwise.

(2) All moneys received by any educational institution by way of voluntary donations shall be deposited in the account of the institution, in any scheduled Bank and shall be applied and expended for the improvement of the institution and the development of the educational facilities and for such other related purposes as may be prescribed.

Thus, it can be seen that the Andhra Pradesh Educational Institutions (Regulation of Admission and Prohibition of Capitation Fee) Act, 1983 does not prohibit the receipt of voluntary donations or contributions, but the limitation placed is on the manner of payment of such donation and the purpose of the donation to be for the improvement and development of the institution. In the case before us, the assessee has received the donations by way of D.Ds/ cheques which are duly accounted for 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 Admission and Prohibition of Capitation Fee) Act, 1983.

2. Thus, it can be seen that the contentions of the Revenue cannot be supported fully on the parameters set- out above. However, these issues will arise in an assessment completed in a trust case under the provisions of Section 11 and 13 of the Act. In the present case, it is not the issue of assessment but issue of cancellation of registration already granted. Most of the issues discussed above are academic in nature but those are to be discussed as Ld. DIT(E) has relied on the findings on the assessment order, to resort to cancellation of registration. The provisions of Section 12AA(3) which empowers the Ld. DIT(E) to cancel the registration are as under:

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