The Supreme Court stayed the Income Tax Proceedings against the public charitable trust as donation voluntarily paid to the educational trust does not amount to a capitation fee. The Special Leave Petition(SLP) arose out of the impugned final judgment and order passed by the High Court of Judicature at Madras. Sri Venkateswara Educational and Health Trust is an Assessee on the file of the Deputy Commissioner of Income Tax (Exemption), Chennai. They had registered themselves as Charitable Trust under Section 12A (a) of the Income Tax Act, 1961 (in short, “the Act”) vide order bearing C.No.1146III (58)/84 dated 02.08.1984.
They had filed their return of income admitting ‘nil’ income for the assessment year 2011-12 on 28.09.2011. On verification of the return of income and other details during scrutiny, it unfolded that Rs.9,90,50,000/- was received by the Assessee as a corpus donation from M/s. MAC Charities, M/s. MAC Public Charitable Trust and M/s. Spic Educational Foundation etc. This amount was received by the Assessee as donations from several persons. To verify the same, an elaborate exercise was undertaken by the Assessing Officer by issuing summons to various persons and their sworn statements were recorded.
The High Court held that “the amounts collected by the assessees are capitation fee in quid pro quo for allotment of seat in deviation of the Tamil Nadu Educational Institutions (Prohibition of Collection of Capitation Fee) Act, 1992 and the same is neither a voluntary contribution nor to be treated as applied for charitable purpose, the orders of the Appellate Authority as well as the Tribunal, which are impugned in these appeals, are absolutely perverse and therefore, they are set aside. Accordingly, all the substantial questions of law are answered in favour of the Revenue and against the Assessees.” A two-judge bench of Justice B V Nagarathna and Justice Ujjal Bhuyan held that “following the order dated 24.11.2023 passed in SLP (C) arising from the same batch of cases disposed of by the Madras High Court, there shall be an interim stay of further proceedings of the impugned judgment and order in these matters also.”