The Income Tax Appellate Tribunal (ITAT) Chennai bench held that corpus donations collected from the parents of the students admitted to the school are voluntary in nature. Thus, the bench allowed the exemption claimed by the assessee under Section 11 of the Income Tax Act, 1961.
The assessee, Sindhi Educational Society, is a society registered under the Society Registration Act, 1860, in the year 1974, with the main objective of imparting education. The object of the Society is to provide quality education to all those who require such education, irrespective of any discrimination. The Society is registered under Section 12AA of the Income Tax Act.
The Society has established two schools and one College of Arts & Science. The first school, Sindhi Model Senior Secondary School, Kellys, Chennai, is affiliated to CBSE. The second school, Sindhi Model Matriculation Higher Secondary School, Chetpet, Chennai, is affiliated with the State Board curriculum.
While filing the return of income, the assessee claimed exemption under Section 11 & 12 of the Act. Subsequently, a survey was conducted at the premises of the assessee Society. During the course of the survey, it was noticed that the Society is collecting donations in lieu of new admissions and claimed that those donations are voluntary in nature.
During the assessment proceedings, the AO denied that corpus donations collected from the parents of the students are not of a voluntary nature, considering them as capital fees, hence denying the exemption claimed by the assessee under Section 11 of the Income Tax Act.
Aggrieved, the assessee preferred an appeal before CIT(A), who allowed the appeal of the assessee. Therefore, the revenue filed a second appeal before the tribunal.
Before the tribunal, S. Sridhar, Assessee Representative (AR), submitted that the assessee has collected ‘corpus donation’ from parents of students admitted to Schools, but such donations are voluntary in nature. P. Sajit Kumar, department representative (DR), submitted that the assessee is collecting ‘Capitation Fees’ in the form of ‘corpus donations’ from parents of students admitted to schools and issued pre-printed forms.
Furthermore, the counsel for DR argued that the amount collected as donations was returned back to parents in some cases, where admissions were rejected. This shows that the donations are not voluntary in nature but represent ‘Capitation Fees’ for getting admissions to the schools run by the assessee society.
The tribunal, while considering the appeal, observed that evidence available on record clearly shows that donations are voluntary in nature, which forms part of the corpus of the Trust. Also, such donations are not compulsory payments by the parents of students.
After reviewing the contentions of both parties, the two-member bench of Manjunatha. G (Accountant Member) and V. Durga Rao (Judicial Member) held that corpus donations collected from the parents of the students admitted to the school are voluntary in nature; therefore, exemption under Section 11 of the Income Tax Act should not be denied.
Therefore, the bench dismissed the appeal filed by the revenue.
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