The Chennai Income Tax Appellate Tribunal (ITAT) held that voluntary donations received by an educational charitable trust cannot be added as income in its hands. Accordingly, the Tribunal deleted the additions made in the hands of the appellant educational trust under Section 115BBC of the Income Tax Act.
The Tribunal noted from perusal of the letters submitted by the donors that corroborated the voluntary character of the donations, that the Revenue Department failed to bring any material evidence on record to justify that the donations were compulsory or collected as capitation fees.
The Tribunal further found that the total donations of Rs. 31.60 lacs were received from 808 students/parents, which works out to an average of Rs. 3,911 per person, which is a too-small amount to be categorised as a capitation fee or a mandatory contribution linked to admission.
The Tribunal also noted that donations were received from students who were studying for many years in the school run by the appellant trust, and thereby inference could be drawn that the donations were not linked to the grant of admission but a voluntary contribution for the building fund.
A Single Bench of George George K (Vice President) observed from the declaration appearing in the application form for admission, that the same is of a general nature and cannot be interpreted as forming part of the admission procedure or as a condition precedent for securing admission in the school.
The Bench went on to add that the opinions of the FAA that donations were collected every year are factually incorrect and devoid of any basis, when the appellant had produced a year-wise list of donations along with the corresponding audited financial statements.
The Bench also found that the FAA has not carried out any independent enquiry or verification to ascertain whether donations received by the appellant educational trust are voluntary or not, and its findings appear to rest on presumptions, surmises, and conjectures, rather than on any concrete material or evidence. In fact, the appellant itself has filed sample donor documents and letters, which indicate that the donations were voluntary in nature.
Briefly, the appellant, an educational institution registered under Section 12AA of the Income Tax Act, filed its ITR showing a sum of Rs. 49.03 lacs as surplus over expenses and claimed the same as exempt under Section 11. The AO, finding that the appellant trust had received a donation of Rs. 31.60 lacs in cash, directed for submission of the details, which were not furnished, resulting in the treatment of that donation as anonymous, and taxing the same under Section 115BBC.
On appeal, the FAA accepted the fact that the donations were not anonymous; however, it treated them as non-voluntary donations since it was part of the procedure for admission to schools. Accordingly, the FAA confirmed the disallowance of exemption under Section 11 of Rs. 31.60 lacs.
Appearances:
CA S.R. Srikrishna, for the Appellant/ Taxpayer
Additional CIT V. Supraja, for the Respondent/ Revenue
