Collecting Fee from Students not ‘ Uncharitable Activity ’: ITAT grants relief to Trust [Read Order]

Uncharitable Activity - Collecting Fee - Tax scan

In Rama Devi Memorial Society v. ACIT, the New Delhi bench of the Income Tax Appellate Tribunal ( ITAT ), held that the charitable nature of the Trust would not be destroyed if it collects Fee from students while imparting educational activities.

The Assessing Officer, relying on the Apex Court decision took a view that once the income of educational institution is exempt, it was on account of the fact that imparting education is matter of pure charity and educational institutions are not permitted to receive or recover the cost of charity by way of charging fee as according to him it would be uncharitable activity.

On appeal, the CIT (A) held the entire receipts as taxable and said that assessee is not entitled for the benefit of section 11 and 12 and its income has to be assessed as income from other source u/s 56 against which no deduction u/s 57 will be allowed.

Following the Tribunal decision in Adarsh Public School, the Judicial Member, ITAT held that benefit of section 11 and 12 cannot be denied to the Trust and it was further held that educational activity has been specifically treated as charitable purpose u/s 2(15).

Quashing the order of the first appellate authority, the Tribunal said that charging of fee would not amount to uncharitable activity.

“It is further held that judgments referred by Ld. CIT(A) have not been interpreted correctly and have been interpreted out of context. Fee charged from the students has been applied for the purpose of carrying out charitable activity. I also reverse the finding of Ld. CIT(A) that income by way of fee cannot be held to be derived from property held under trust. I also do not approve the order of Ld. CIT(A) that the entire receipts are liable to be taxed under the head income from other source in this case and this finding given by CIT(A) is set aside and it is directed that the Ld. A.O. should grant exemption u/s 11 and section 12 to the appellant as per the income & expenditure account submitted by the assessee,” the Tribunal said.

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