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.
