India: Capitation fees received by educational institution not eligible for exemption available to a charitable trust

Madras High Court decision

Madras High Court decision

The Madras High Court held that amounts collected as donations were in the nature of capitation fees and thus not eligible for the tax exemption available to a charitable trust.

The court found that the alleged donations were directly connected to the allotment of seats in the taxpayer’s engineering college. The amounts were not voluntary contributions and not applied for charitable purposes.

The case is: MAC Public Charitable Trust (MPCT)


Educational institutions and trusts accept donations from students and other parties in the course of providing education. Whether acceptance of such donations is a voluntary contribution and thus liable for exemption under Section 11 of the Income-tax Act, 1961 has been a matter of debate before the courts.

Institutions have been arguing that such donations are voluntary in nature, the application of the donated money is towards the object of the institution and the institutions are free to donate or take donations from any parties. However, the tax authority has been denying the claim observing that such donations are in the nature of capitation fees and not voluntary in nature.

Read a November 2022 report [PDF 316 KB] prepared by the KPMG member firm in India



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