HC junks IT wing claim that college received 'capitation fee'

S Shyam Prasad | NT

Bengaluru: The High Court has dismissed an appeal filed by the Income Tax Department against the Rashtreeya Sikshana Samithi Trust, RV Teachers College Building, Jayanagar, seeking tax on the Rs.27,23,55,000.

“Undisputed facts of this case in hand are, the exemption certificate was in force as on the date of issuance of notice. The Additional Commis - sioner has denied the benefit of exemption by holding that the assesse had received a sum of Rs.27,23,55,000 as capitation fee in the guise of voluntary contribution,” the HC said in its judgement dismissing the appeal.

The charitable Trust had filed returns of income for the year 2012-13 declaring income as nil. The Department selected it for scrutiny and issued notices. The Trust filed revised returns. The corpus donations which was exempted in the original returns was disclosed as ‘other income’ in the revised returns.

The Additional Commissioner passed an assessment order on March 30, 2015 holding that the income from other sources as income by the Trust. The ITAT reversed the order holding that the Trust was entitled for exemption.

Challenging this, the Department approached the High Court with an appeal in 2018. It was contended that the sum of Rs.27,23,55,000 was collected as donation by the Trust in violation of the Karnataka Educational Institutions (Prohibition of Capitation Fee) Act.

The Trust argued that as long as the exemption certificate was in force, the authorities were bound by the same.

There was also no action initiated against the Trust under the Act and therefore the question of violation of the Act does not arise.

The HC said that the alleged violation was an incorrect assumption by the Assessing Officer (AO).

“The AO had held that there was violation under the KEI (Prohibition of Capitation Fee) Act, and accordingly, brought the money collected by the assesse to tax. In challenge before the ITAT, the assesse has filed an affidavit stating that no action was initiated against the assesse by the State and that has remained uncontroverted,” the bench of Justice PS Dinesh Kumar and Justice TG Shivashankare Gowda said.

Further the HC said that “The resultant position is, the AO, based on assumption and surmise, has held that there was violation under the KEI Act by the assesse and that incorrect assumption has been rightly reversed by the ITAT.”

Dismissing the appeal, the HC said, “In the case on hand, we are not dealing with a situation where the IT Department was considering any application for granting exemption. On the other hand, the department had issued the exemption certificate and the AO on an incorrect assumption has treated the money collected by the assesse as capitation fee under the KEI Act. Therefore, the said authority does not lend any support to Revenue.” (ITA 554/2018)