Section 11 of the Income-tax Act, 1961—Charitable or religious trust— Denial of exemption under section 11 of the entire income is not sustainable as department has not made out a case of collection of capitation fee under the guise of donation and it has not established a case of involuntary nature of donations.

Facts: The issue relates to rejection of exemption claimed by the assessee u/s 11. AO held that the assessee has collected Capitation fee under the garb of Development fee.

and added the development fees collected by the assessee to the total income, it was stated that the AO has rectified the same by his rectification order passed u/s 154 on noticing that assessee itself has offered the development fee collections as its income. The question that remains is whether the development fees collected by the assessee would partake the character of capitation fee?

Held, that based on the loose sheets and cash seized, which have been held as irrelevant to the present issue, it cannot be held that for all the assessment years the assessee received capitation fee for admission of students in the management quota. This is a perverse inference. Without conducting any enquiry in this regard to make allegation is unsustainable. The information obtained from the Public Information Officer to a query raised under the Right to Information Act to the effect that "There is no any complaint received from any student/parent regarding capitation fee charged by the above institutions so far" also tilts the balance in favour of the assessee. It disproves the department's allegation of involuntary collection of amounts. That apart, the order passed under Section 264 for the assessment years 1998-1999 to 2001-2002 clearly states that the donation received from students or the parents is not compulsory in nature and, therefore, the same is not capitation fee. There is no material to controvert this fact which is to the knowledge of the department. No endeavour is made to sustain the allegation of involuntary donation. The department has not made out a case of collection of capitation fee under the guise of donation and it has not established a case of involuntary nature of donations. Therefore, the questions of law are answered against the revenue . Therefore, the denial of exemption under section 11 of the entire income is not sustainable. - SRI SRINIVASA EDUCATIONAL & CHARITABLE TRUST V/s ASSTT. CIT - [2020] 182 ITD 554 (ITAT-BANGALORE)