Educational institution

Capitation fee by educational institution against law and public order, no tax exemption: ITAT

A bench of the Income Tax Appeals Tribunal (ITAT) has ruled that the practice of levying poll tax is contrary to law and public order. Therefore, an educational institution will not qualify for the income tax exemption on the collection of capitation fees.

The term “capitation fee” has no fixed meaning. The Educational Institutions of Tamil Nadu (Prohibition of levying capitation fees) Act 1992 gave a definition which states that “capitation fees means any amount, however called, called, paid or collected directly or indirectly in addition to the fees prescribed in Article 4 (of the law).”

Last month, the Supreme Court expressed concern about poll tax collection and suggested a mechanism to curb it. Interestingly, there is legislation in the states of Karnataka, Tamil Nadu, Maharashtra and Andhra Pradesh to combat this threat. However, the practice is widespread in educational institutions, especially those that provide professional courses in medicine or engineering.

Stop of the ITA

Having a bunch of appeals filed by the Pune-based Sinhagad Technical Education Society and a cross-appeal filed by the Income Tax Department, the Pune bench of ITAT said, “It is established in law that the amount of capitation fees received in excess of that prescribed under the provisions of the Maharashtra Educational Institutions (Prohibition of Capitation Fees) Act 1987 is not eligible for exemption u /s 11 as the practice of levying capitation fees is contrary to the law established by the Supreme Court in the case of Islamic Academy of Education and Others v. State of Karnataka and others and also against the public order and contrary to the provisions of the Maharashtra Educational Institutions (Prohibition of Capitation Fees) Act 1987.

“The assessment officer had rightly brought (the collection) to the tax,” the bench said in a recent decision.

The bench also noted that capitation fees were collected in cash.

“The president of the appellant company had adopted a modus operandi by forming a non-legal organization whose purpose was to collect the capitation tax for admissions under the management quota for the benefit of the persons managing the appellant company. Therefore, it can be safely concluded that the appellant company was formed for personal gain, and it cannot be said to be an association formed for charitable purposes,” he said. he declares.

Some Suggestions

In Rashtreeya Sikshana Samithi Trust Etc v Committee for Fixing Fee Structure of Private Vocational Colleges and Others. Etc, the Apex Court accepted the suggestions of amicus curiae and state governments and issued guidelines accordingly.

These suggestions include a web portal under the aegis of the Supreme Court to be set up where any information on private medical schools charging capitation fees can be provided by students.

While setting the timetable for the admission process, the National Medical Commission and the Dental Council of India must ensure that the counseling for all cycles including the wandering vacancy cycle is completed at least two weeks before the last admission date.

It has also been suggested that the names of students who are recommended by the authority for admission into the wandering vacancy cycle should be made public along with their assigned rank in the NEET exam.

“The management of private medical schools is strictly prohibited from accepting payment of fees in cash to avoid charging a capitation fee,” he said.

Published on

June 11, 2022