TCA.Nos.303/2021 etc batch           Today, in a batch of tax case appeals filed by the Revenue, relating to the issue, whether the collection of monies contrary to the provisions of law, can be termed as “voluntary contributions” / “donations” or “capitation fee”, a Division Bench consisting of the Hon’ble Mr. Justice R.Mahadevan and the Hon’ble Mr. Justice Mohammed Shaffiq answered the issue in favour of the Revenue, by holding that the amounts collected by the assessees are capitation fees in quid pro qua for allotment of seats in deviation of the Tamil Nadu Educational Institutions

TCA.Nos.303/2021 etc batch

Today, in a batch of tax case appeals filed by the Revenue, relating to the issue, whether the collection of monies contrary to the provisions of law, can be termed as “voluntary contributions” / “donations” or “capitation fee”, a Division Bench consisting of the Hon’ble Mr. Justice R.Mahadevan and the Hon’ble Mr. Justice Mohammed Shaffiq answered the issue in favour of the Revenue, by holding that the amounts collected by the assessees are capitation fees in quid pro qua for allotment of seats in deviation of the Tamil Nadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992 and the same are neither a voluntary contribution nor to be treated as applied for charitable purpose and hence, the impugned orders of the CIT(A) as well as the Tribunal are absolutely perverse in nature. Accordingly, the Division Bench reversed the concurrent findings of the appellate authorities and confirmed the orders of assessment passed by the assessing officer that the amount of non-voluntary contributiion i.e. capitation fees received is treated as income not eligible for exemption under section 11 and is liable to be taxed. Consequently, the Division Bench directed the assessing officer to proceed further on the basis of the orders of assessment, cancel the registration certificate issued to the Assessees/trusts under Section 12A of the Act, and to reopen the previous assessments, if permissible by law, based on tangible materials relating to collection of capitation fee, since it is illegal and is punishable. That apart, the Division Bench, taking note of the fact that the States are unable to comply with the directions enshrined in the constitution to thrive for education for all, which would encompass within it the access to all sections of the society by providing equal opportunity; there are state laws making it penal to collect capitation fee; and various courts including the apex court time and again held that menace of capitation fee could not be curtailed; and privitization of education aids in collection of capitation fee, the Division Bench directed the State Government to set up a web portal, wherein, any information about the private colleges charging capitation fees can be furnished by the students or their parents or any one having first hand information in this regard.

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