Maharishi Markandeshwar Trust Vs ACIT (ITAT Delhi)
Held that the development fees received from students for acquisition of Fixed Assets and utilized for acquisition of Capital Assets, taken directly to corpus fund, is allowed as capital receipt
Facts-
The assessee has been running various Educational Institutes in various fields such as medical, engineering, law, management etc. Annual fees, charges and Development funds are collected by the Institutions under the Trust. AO observed that the appellant has received a development fee in addition to tuition fees from all the students on a compulsory basis. AO held that the Development fee was a part of the fee structure which was to be paid by the students to the institutes.
The appellant has shown the tuition fee as a part of the income and expenditure statement as income whereas the development fee has been taken directly to the balance sheet as a corpus fund. AO was of the opinion that such development fee was not on account of voluntary corpus fund and therefore the same should have been included in the revenue expenditure in the income and expenditure statement.
CIT(A) held that the development fee is in nature of revenue receipts having nexus with its main activities carried out in the regular course of running the institutes imparting educational activities and are incidental to the same and thus affirmed the action of the Assessing Officer. Being aggrieved, the assessee filed present appeal.
Conclusion-
Held that the tuition fee is meant to incurring revenue expenditure, the development fee is aimed at the requirement of equipment and acquisition of capital assets.
Further the Co-ordinate Bench of ITAT Bangalore in the case of Sadvidya Educational Institution vs. ACIT in ITA No. 604/Bang/2011 has held that Development Fees received from students as per Policy of Government for acquisition of Fixed Assets and utilized for acquisition of Capital Assets will fall within the definition of section 11 (1)(d).
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeals have been filed by the assessee against the orders of the ld. CIT(A)-3, Gurgaon dated 26.10.2021.
2. Since, the issues involved in all these appeals are identical, they were heard together and being adjudicated by a common order.
3. The first issue before us is to determine whether the development funds given and collected by the institution are akin to the tuition fees collected or not. Whether the development fund collected partakes the character of revenue receipt or corpus donation u/s 11(1)(d) of the Income Tax Act, 1961 and capital receipt in nature.
4. The second issue being what should be the “quantum” eligible as per the Section 11(1)(a).
5. The relevant facts required for adjudication of the case are as under:
