Educational trust

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CA Hitesh Popat (Querist)
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13 April 2015 I would like to know whether university registered as trust for educational purpose, can charge lumpsum fees from its group colleges affiliated (for e.g. 10% of annual fees). Also can colleges claim it as expenditure and university as income? University helps these group colleges for capital or routine expenses as required by extending money. Though both are exempt from income tax but from accounting/auditing point of view.

Thanks in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 April 2015 It can be charged as development fees. Since both are exempt from income tax no problem.

CA Hitesh Popat

CA Hitesh Popat (Querist)
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13 April 2015 Thanks Seetharaman,

I agree but anyway income of trust is exempt so i dont think there is a concern with name, but if i debit to college pnl a/c those fees and credit to university pnl, is it a valid entry from accounting/auditing/IT perspective?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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13 April 2015 If such fees is approved by the management of such entities it is a valid entry for accounting/auditing/IT.

CA Hitesh Popat

CA Hitesh Popat (Querist)
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17 April 2015 Thanks Seetharaman Sir,

But I would like to further discuss its implications. Educational institutions covered by 10 (23c) vi (above 1 crore of receipts), have to apply 85% of the receipts/income towards educational purposes and 15% can be accumulated (which has to be used in ways mentioned in Section 11(5). Development fees as suggested by you will fall in?

If it falls in 85% will it be considered as used for educational purposes? If it falls in 15%, it has to be used in investments specified in 11(5).

Kindly share your views.

Thanks in advance, for your kind guidance.

CA Hitesh Popat

CA Hitesh Popat (Querist)
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25 April 2015 Extending my query; if development fees are a valid entry (approved by management), and treated as an expense for individual colleges, would it be treated as an income in the hands of University? or it goes to balance sheet of University, as a development fund?

Thanks in advance!

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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25 April 2015 It can be treated as corpus fund.
See the link for more details.
https://www.caclubindia.com/articles/defination-of-corpus-fund-in-practical-view-11645.asp#.VTtHltKqqko

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