CIT Vs Anand Social And Education Trust (Karnataka High Court)
Karnataka HC Upholds Deletion of Additions for Alleged Capitation/Unaccounted Medical College Fees – Revenue’s Appeals Dismissed
The Karnataka High Court dismissed the Revenue’s appeals concerning AY 2008-09, arising from the ITAT’s order which had granted relief to the assessee-trust in respect of additions relating to alleged unaccounted/capitation fees collected for UG and PG medical seats and other related receipts.
The Revenue questioned the ITAT’s deletion of additions towards alleged unaccounted fees for UG and PG seats, contending that the Tribunal had ignored seized material and evidence relied upon by the Assessing Officer. It was also contended that capitation fees were not voluntary contributions and could partake the character of income for purposes of Sections 2(24)(iia) and 12(1).
The Revenue further challenged deletion of additions relating to fees allegedly collected for Management/NRI quota MBBS seats, PG courses and seats filled after COMED-K cancellations, as well as the consequential issue concerning denial of exemption under Sections 11 and 12.
The High Court, however, noted that on the same issues for AY 2009-10, it had already delivered judgment on 29 July 2026 in ITA No.112/2022 and connected matter, answering the substantial questions of law in favour of the assessee and against the Revenue. The Court held that the said judgment was squarely applicable to the present appeals concerning AY 2008-09 as well.
Accordingly, Questions Nos. 1 and 2 were answered in favour of the assessee and against the Revenue. However, the Court expressly left Question No. 3 open, which concerned deletion of specific additions relating to Management/NRI quota, PG fees and COMED-K cancellation seats and the connected denial of exemption under Sections 11 and 12. Both Revenue appeals were consequently dismissed.
Key takeaway: The Karnataka High Court sustained the ITAT’s relief concerning alleged unaccounted/capitation fees of the medical educational trust, following its own judgment for the immediately succeeding year. Importantly, however, the Court did not finally decide the broader Question No. 3 concerning the specific fee additions and Sections 11–12 exemption; that question was expressly left open.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
These Income Tax Appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) are filed by the Revenue, aggrieved by the Order of the Income Tax Appellate Tribunal “C” Bench, Bangalore (hereinafter referred to as ‘the Tribunal’) dated 29.05.2020, by which, the Tribunal dismissed the appeals filed by the Revenue in ITA Nos.2654-2660(B)2017 for the assessment years (hereinafter referred to as ‘AY’) 2008-09 to 2014-15 and allowed the appeals filed by the assessee in ITA Nos.2542-2548(B)/2017 for the AYs 2008-09 to 2014-15. These appeals have been filed by the Revenue, aggrieved by the Order of dismissal of the appeal filed by the Revenue and aggrieved by the Order of the Tribunal allowing the appeal filed by the assessee for the AY 2008-09.
2. ITA No.108/2022 was admitted on 15.02.2022 to examine the following substantial questions of law:
1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the addition’s made by assessing authority towards unaccounted fees charged for UG and PG seats ignoring evidence brought on record by assessing authority and when collection of capitation fee by assessee is not voluntary which can partake character of income for purpose of section 2(24)(iia) of the Act and section 12(1) as well?
2. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in allowing appeals preferred by assessee and in dismissing Revenue’s appeal by completely ignoring seized materials and findings given by assessing authority for making additions which were based on seized materials?
3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting additions made towards fee charged for seats under Management/NRI Quota for undergraduate MBBS Programme, unaccounted fees received from PG Courses, Unaccounted income on account of fee charged for seats filled up against COEMED-K cancellation as per management quota fees and setting aside denial of exemption under section 11 and 12 of the Act ignoring seized materials and intention of legislature in granting exemption under section 11 and 12 of the Act to educational institutions?
3. ITA No. 164/2022 was admitted on 02.03.2022 to examine the following substantial questions of law.
1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting the addition’s made by the assessing authority towards unaccounted fees charged for UG and PG seats ignoring evidence brought on record by assessing authority and when collection of capitation fee by assessee is not voluntary which can partake character of income for purpose of section 2(24)(iia) of the Act and section 12(1) as well?
2. Whether on the facts and in the circumstances of the case, the Tribunal’s order can be said as perverse in nature as relief to assessee is granted by deleting all additions made by assessing authority?
3. Whether on the facts and in the circumstances of the case, the Tribunal is right in law in deleting additions made towards fee charged for seats under Management/NRI Quota for undergraduate MBBs Programme, unaccounted fees received from PG Courses, Unaccounted income on account of fee charged for seats filled up against COEMED-K cancellation as per management quota fees and setting aside denial of exemption under section 11 and 12 of the Act ignoring seized materials and intention of legislature in granting exemption under Section 11 and 12 of the Act to educational institutions?
4. Vide judgment dated 29.07.2026, this Court in ITA No.112/2022 and connected matter has answered the substantial questions of law raised in those appeals in favor of the assessee and against the Revenue for the AY 2009-10. The said judgment would be aptly applicable to these appeals as well.
5. Thus, in terms of judgment dated 29.07.2026 in ITA No.112/2022 and connected matter, the substantial questions of law No.1 and 2 raised in both these appeals are answered in favor of the assessee and against the Revenue. The substantial question of law No.3 in both these appeals is left open. Both these appeals stand dismissed accordingly.
