Accumulated income paid to another charitable institution attracts the deeming rule and remains taxable despite project-based nomenclature.

Denial of a video-conference hearing did not vitiate the appellate proceedings because notices were issued, written submissions were filed and no specific prejudice was shown. Rectification under section 154 was upheld for taxing accumulated income paid to other charitable institutions, as the relevant facts were already on record and the omission was a mistake apparent from the record. The transfer of accumulated income to another registered charitable institution was held to attract section 11(3)(d), because the deeming provision applies to the fact of payment or credit and is not avoided by describing the payment as project expenditure or implementing-agency . Consequential interest was also upheld.

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Issues: (i) Whether denial of video-conference hearing before the appellate authority violated the principles of natural justice; (ii) whether rectification under section 154 could validly be invoked to tax amounts paid out of accumulated income to other charitable institutions; (iii) whether the payments made to the recipient institutions were hit by section 11(3)(d) of the Income-tax Act, 1961 and were taxable as income of the assessee; and (iv) whether consequential interest was chargeable.

Issue (i): Whether denial of video-conference hearing before the appellate authority violated the principles of natural justice.

Analysis: The appellate record showed issuance of notices and filing of detailed written submissions, which were considered by the appellate authority. No specific prejudice was demonstrated from the absence of a video-conference hearing. A procedural lapse, without prejudice, does not vitiate the proceedings.

Conclusion: The challenge on natural justice failed and was decided against the assessee.

Issue (ii): Whether rectification under section 154 could validly be invoked to tax amounts paid out of accumulated income to other charitable institutions.

Analysis: The relevant facts were already available on the assessment record. The Court held that section 11(3)(d) applies on the basis of the source of funds and the status of the recipient institution, and that the provision leaves no room for treating such payments as outside rectification merely because they were described as project expenditure or implementing-agency payments. The omission to tax the amount constituted a mistake apparent from the record.

Conclusion: Invocation of section 154 was upheld and was decided against the assessee.

Issue (iii): Whether the payments made to the recipient institutions were hit by section 11(3)(d) of the Income-tax Act, 1961 and were taxable as income of the assessee.

Analysis: The Court interpreted the expression "paid or credited" in section 11(3)(d) as broad and unqualified. It held that accumulated income under section 11(2) cannot be routed to another registered charitable institution without attracting the deeming fiction, and that no exception exists merely because the recipient acted as an implementing agency, raised invoices, or used the amounts for identified projects. The statutory scheme treats such transfers as prohibited utilisation of accumulated income.

Conclusion: The addition under section 11(3)(d) was sustained and was decided against the assessee.

Issue (iv): Whether consequential interest was chargeable.

Analysis: Interest under the relevant charging provisions was treated as mandatory and consequential, subject to recomputation while giving effect to the order.

Conclusion: The levy of consequential interest was upheld.

Final Conclusion: The appeals were rejected in their entirety, and the additions arising from the treatment of accumulated income paid to other charitable institutions were sustained along with consequential interest.

Ratio Decidendi: Accumulated income enjoyed under section 11(2) loses its exempt character when it is paid or credited to another charitable institution, and the deeming provision in section 11(3)(d) applies according to the statutory form of the transfer rather than the nomenclature or commercial character of the payment.

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