TaxTMI 
TaxTMI 
2025 (9) TMI 796
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....ppeal against the order dated 30th March 2022, passed by the Commissioner of Income Tax (Appeals) [hereinafter "CIT(A)"]. 3. CIT(A) had allowed the appeal of the Respondent/Assessee, holding that the Assessee was a charitable institution, eligible for exemption under Section 11 and 12 of the IT Act, and deleted the addition of total income of Rs. 1,93,93,48,991/- made on account of disallowance under Section 11 and 12 of the IT Act. 4. Appeal had been preferred by the Respondent/Assessee against an assessment order dated 30th December 2018 passed by the Assessing Officer ('AO'), Assistant Commissioner of Income Tax, wherein, the Respondent/Assessee had filed its return of income for AY 2016-17, declaring 'Nil' income and had claimed exemption under Section 11 and 12 of the IT Act. Notice was issued under Section 143(2) of the IT Act and the assessment was completed on 30th December 2018 for a total income of Rs. 1,93,93,48,991/-. Factual background 5. Respondent/Assessee is a Trust registered under Section 12A of the IT Act. Upon filing its return for AY 2016-17 and disclosing 'Nil' income claiming exemption under Section 11 and 12 of the IT Act, the case was selected f....
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....rs without adequate rent, the legal fiction in subsection (2) of section 13 would come into play and the income or property of the institution shall, for the purpose of section 13(1)(d), be deemed to have been applied for the benefit of the prohibited category of persons under sub-section (3). Consequently, the benefit of exemption undersection 11 was lost by reason of section 13(1)(c)(ii). Thus, the exemption u/s 11 & 12 of the Act is denied to the assessee. 18. The utilization of land or building owned by the trust for the benefit of specified persons for consolidated lease rent of Rs. 90,000 per month cannot be treated as reasonable and hence the provisions of section 13(2)(b) are clearly attracted in the case of the assessee." (emphasis added) 6. The respondent/assessee filed an appeal before the CIT(A) and thereafter, a remand report on each ground of appeal was called. Counter comments were obtained from the respondent/assessee upon receiving the remand report. After introduction of the 'faceless scheme' w.e.f. from 25th September 2020, fresh notices were issued under Section 250 of the IT Act and subsequently, written submissions were furnished by the responde....
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....claims made before the Appellate Authorities otherwise than by Revised Return of Income. I find that there is plethora of decisions, ratio of which held that a fresh claim can be raised before the Appellate Authorities, even if it has not been raised before the Assessing Officer nor claimed in the Return of Income, the Appellate Authorities have wide powers to entertain it. The law developed, post Goetz (India)'s case, has made it abundantly clear that an assessee is entitled to make fresh claim for deduction or relief before the Appellate Authorities, during the course of the Appellate proceedings, irrespective of the claim not being made by revising the Return of Income before the Assessing Officer during the course of assessment proceedings. The decision in Goetze (India)'s case has not prohibited such claim before the Appellate Authorities further these judicial precedents cited and reproduced above make it amply clear that an assessee is otherwise eligible for a particular deduction/exemption then the same cannot be denied to him or it simply on the of the grounds that this claim was not made by the assessee in his return of income. In the instant case, at the....
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....therefore, the AO has to allow the assessee's claim following the principle of consistency as laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) and various other judicial precedents referred to below:- 1. Radhasoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) 2. Commissioner of Income-tax vs. Gopal Purohit [2010] 188 Taxman 140 (Bombay) 3. Principal Commissioner of Income-tax-8 v. Quest Investment Advisors (P.) Ltd. [2018] 96 taxmann.com 157 (Bombay) 4. Deputy Commissioner of Income Tax, Circle 17(1), New Delhi v. Moet Hennessy (I) (P.) Ltd [2020] 114 taxmann.com 733 (Delhi - Trib.) 5. NIIT Ltd. v. Deputy Commissioner of Income-tax, LTU, Central Circle-16(1), Now Delhi [2010] 112 taxmann.com 66 (Delhi-Trib) Moreover, in the case of Adarsh Public School vs. JCIT [2018] 90 taxmann.com 356 (Delhi - Trib), the Hon'ble Delhi ITAT Bench 'A' held that there is no disharmony between Section 10(23C) and section 11 and, thus, exemption of section 11 cannot be denied even when there is a specific provision of section 10(23C) Though in the said deci....
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.... agree with the contention of the appellant trust. It is seen that there were no benefit to any individual or trustees, question of using or applying any part of income or any property of the trust directly or indirectly for the benefit or any persons referred to in sub section (3) would not arise in this case. The facts as mentioned above make it absolutely clear that the appellant trust has not provided any benefit to the trustee and there is no violation of section 13(2) of the Act. In view of the facts discussed above and judicial precedents supra, it is held that the no undue benefits passed on from the assessee trust to the trustee and as such there is no violation of sec. 13(2)/13(3) as alleged by the AO. However, since I have already held that the appellant trust is eligible for exemption u/s. 10(23C)(iv), which is its main plea, therefore, grounds/plea raised by the appellant regarding this issue become academic in nature." (emphasis added) 8. In the appeal filed before the ITAT, two grounds were taken by the appellant/Revenue, which are extracted as under: "1. Whether on the facts and in the circumstances of the case, Ld CIT(A) has erred in allowin....
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....the following submissions: 11.1 Respondent/Assessee claimed exemption under Section 10(23C)(iv) of the IT Act, for the first time before the CIT(A), denoting that the AO did not have an occasion to decide the legitimacy of their claim on this ground. The AO had essentially looked at the issue of violation of provisions of Section 13(2)(b) read with Section 13(3)(b) of the IT Act and thereafter, denied the benefit of exemption under Section 11 and 12 of the IT Act. 11.2 In this scenario, CIT(A) should have remanded the matter back to AO for consideration of Respondent's/Assessee's claim under Section 10(23C)(iv) of the IT Act, or exercised co-terminus powers and investigated the matter as an AO and arrived at a fresh fact finding. 11.3 CIT(A) merely called for the remand report, which is a limited fact-finding aid and cannot substitute the statutory duty of the Appellate Authority under Section 254 of the IT Act, to conduct an independent and comprehensive examination of the matter. Therefore, circumstantially, there was no material before the CIT(A) while setting aside the AO's decision. 11.4 Reliance for this purpose was placed on a decision of the Supreme Court in Jut....
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.... 7 SCC 489 which cited Jute Corporation (supra) with approval and held as under: "5. In the case of Jute Corporation of India Ltd. v. C.I.T. this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appellate....
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....ondent/assessee, herein. Reliance placed by CIT(A) on the preceding three assessment years of AY 2013-14, 2014-15 and 2015-16, where exemptions were granted under Section 10(23C)(iv) of the IT Act, could not be made applicable for a different assessment year. Submissions on behalf of the Respondent/Assessee 12. Mr. Madhur Aggarwal, Senior Counsel appearing for the Respondent/Assessee made the following submissions: 12.1 The respondent/assessee is a Trust constituted under its own Trust Deed dated 28th August 1948, whereby the partners of a business known as "Hamdard Dawakhana" dedicated the said business to charity. The partnership was engaged in the business of manufacture and sale of indigenous medicines. To carry out its charitable activities, Hamdard had created a Special Purpose Vehicle ('SPV'), a registered society for philanthropic purposes, viz. Hamdard National Foundation ('HNF') on 12th May 1964, which continued to enjoy exemption under Section 11 of the IT Act, since then. The Respondent/Assessee had, therefore, derived the benefit of tax exemption consistently for the last few decades, about 70 years, both under the IT Act of 1922 and thereafter, under the IT A....
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....a mask or a device to conceal any income generated from any of its activities." 12.6 It was vehemently stressed by the Senior Counsel for the respondent/assessee that the appellant/Revenue has to abide by the principles of consistency and for this reliance was placed on CIT v. Excel Industries Ltd., (2014) 13 SCC 459, Radhasoami Satsang, Saomi Bagh, Agra v. CIT, (1992) 1 SCC 659 and Berger Paints India Ltd. v. CIT, (2004) 12 SCC 42. 12.7 Reliance was also placed on judgment of CIT (Exemption) v. Hamdard National Foundation (2022) 4 HCC (Del) 428 for AY 2007-2008 to AY 2010-2011, where this Court had dealt with issues raised under Section 13(2)(b) of the IT Act and held that that the burden of showing that the rent charged was not adequate was on the Revenue. The Court held as under: "21. Under section 13(2)(b), the burden of showing that the rent charged by the respondent/assessee was not 'adequate' is on the revenue. Unless the price/rent was such as to shock the conscience of the Court and to hold that it cannot be the reasonable consideration at all, it would not be possible to hold that the transaction is otherwise bereft of adequate consideration. It is ....
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....onuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year. Section 10. Incomes not included in total income. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included- ....... ....
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....al or medical institution or an educational institution, to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13, shall be deemed to be income of such trust or institution derived from property held under trust wholly for charitable or religious purposes during the previous year in which such services are so provided and shall be chargeable to income-tax notwithstanding the pro-visions of sub-section (1) of section 11. Explanation- For the purposes of this sub-section, the expression "value" shall be the value of any benefit or facility granted or provided free of cost or at concessional rate to any person referred to in clause (a) or clause (b) or clause (c) or clause (cc) or clause (d) of sub-section (3) of section 13. (3) Notwithstanding anything contained in section 11, any amount of donation received by the trust or institution in terms of clause (d) of sub-section (2) of section 80G in respect of which accounts of income and expenditure have not been rendered to the authority prescribed under clause (v) of sub-section (5C) of that section, in the manner specified in that clause, or whi....
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....r (by whatever name called) of the institution;........." 14. The appellant/Revenue has raised the following issues: (a) status of the respondent/assessee as a charitable institution; (b) eligibility for exemption under Section 11 and 12 of the IT Act; and (c) additional claim for exemption under Section 10(23C)(iv) of the IT Act. 15. The respondent/assessee filed its return of income for the AY 2016-2017 declaring 'Nil' income and claimed exemption under Section 11 and 12 of the IT Act. However, its plea was rejected by the AO and income for which exemption was being sought, had been added. The basis of this addition was the provision of two properties owned / leased by the respondent/assessee, given to the trustees and their families on a lease/rental basis. 16. The AO then applied conditions given under Section 13(2)(b) read with Section 13(3)(b) of the IT Act. The issue went up in appeal by the respondent/assessee before the CIT(A) who entertained the appeal on two counts: firstly, that the respondent/assessee had consistently been granted benefit of exemption under Section 10(23C)(iv) of the IT Act, including in three immediate preceding AYs 2013-2014 to 2015-2016 and....
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....haritable nature of the trust. Hamdard National Foundation (HNF) was therefore a mechanism, having the same objects as that of Hamdard Laboratories/assessee, and grant of donation by one charitable institution to another for the purposes of carrying charitable activities, amounts to an application of income for charitable purposes. The Court assessed the nature of Hamdard Laboratories/assessee's objects relying upon the decision of Hamdard Dawakhana (Wakf) (supra). The Court noted that the clauses enumerating objects of Hamdard Laboratories/assessee continued to remain the same. Since the definition of 'charitable purpose' applicable prior to 2009 was identical to one considered in Hamdard Dawakhana (Wakf) (supra), the issue concerning charitable nature of the organisation prior to 2009, was no longer res integra. The Court then went on to examine the charitable nature of the organisation from 1st April 2009 onwards. 22. After a detailed examination of the objects of Hamdard Laboratories/assessee, the Court in Hamdard Laboratories (supra) noted as under: "67. Hamdard had been carrying out its since charitable activities through HNF since the latter was set up, and HNF e....
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....poses and not for purposes of profit, as there is no findings in this regard found recorded in the assessment order. It is a fact that the appellant has derived the benefit of exemption under the relevant provisions of the Income Tax Act 1922 and thereafter continuously u/s 10(23C)(iv) of the Act including the three immediately preceding assessment years i.e. 2013-14 to 2015-16. Despite all these facts the AO failed to follow the principle of consistency. Since there was no change in facts, therefore, the AO has to allow the assessee's claim following the principle of consistency as laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 60 Taxman 248/193 ITR 321 (SC) and various other judicial precedents .. ...In view of the above facts and judicial precedents cited supra, I am of the considered view that unless and until the grant of exemption u/s. 10(23C) (iv) of the Act is not withdrawn by the prescribed authority, the same cannot be denied by the AO. Accordingly, the AO is directed to entertain the appellant's claim of exemption u/s. 10(23C)(iv) and allow it accordingly. Effectively on all the grounds raised in para 2 above, ....
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.... "8. ...An important detail which cannot be overlooked by the Court is that in all past periods and even subsequent periods, similar income reported by the assessee was accepted by the Revenue as short-term capital gain. In the scrutiny assessment under Section 143 (3) accepted the sum of Rs. 1.02 crores as short-term capital gain. In the circumstances, it was all the more necessary for the Revenue to point to some unique feature or distinctive material to differentiate the assessee's activities for the subject assessment year, since they fundamentally remained the same and unchanged." (emphasis added) 30. In Radhasoami Satsang, Saomi Bagh, Agra v. CIT, reported as 247 (1993) ITR 321 SC, the Supreme Court had an occasion to consider the 'rule of consistency' in context of Radhasoami Satsang which was seeking exemption as a religious trust and had been applying its donations and offerings of various properties, which were vested in Central Council. It was held as under: "16. We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one yea....
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....ITO [1977] 106 ITR 1, the Supreme Court observed as under: "15. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity." (emphasis added) 33. Additionally, the Supreme Court in Berger Paints India Ltd. v. CIT, reported as 266 ITR 99 held as under: "12. In view of the judgments of this court in Union of India v. Kaumudini Narayan Dalal [2001] 249 ITR 219; CIT v. Narendra Doshi [2002] 254 ITR 606 and CIT v. Shivsagar Estate [2002] 257 ITR 59, the principle established is that if the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assessees, without just cause." (emphasis added) 34. In the opinion of this Court, the 'rule of consistency' would be squarely applicable in this case, as has ....
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....ng an additional ground, and then entertaining that additional ground, provided that the ground raised is bona fide and it had not been raised earlier for good reasons. The discretion lies with the Appellate Commissioner with respect to permitting or not permitting the respondent/assessee from raising an additional ground. 38. A perusal of the CIT(A) order dated 30th March 2022 would incontrovertibly bear out that CIT(A) not only assessed the grounds which had been raised relating to Section 13(2) of the IT Act, but also dealt with the claim for exemption under Section 10(23C)(iv) of the IT Act by the respondent/assessee. Relevant paragraph where the CIT(A) dealt with this, is extracted herein below: "Without prejudice to the submissions made on the other grounds and supporting the main argument that the assessee is entitled to the benefit of exemption u/s 10(23-C)(iv) for that matter proceeding to sections 11 and 12 wrongly invoked, the AO could not have denied the benefit on the entire surplus/income, but should have restricted it to the income which had forfeited exemption for a proved violation." 39. CIT(A) had also sought the remand report from the AO, which was....
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.... this Court and no question of law to that effect has been proposed in the appeal. 41. The limited grounds which have been taken up relate to application of Section 13(2)(b) read with Section 13(3) and other aspects in that context. Considering that appellant/Revenue did not raise these grounds in their appeal before us, the Court would not normally deliberate on the question, considering, that the issue has been settled through decisions inter alia Jute Corporation (supra) and NTPC (supra) as noted earlier. Further, this view taken by CIT(A) has been upheld by the ITAT. In this support, reference may be made to decision of Division Bench of this Court in International Tractors Ltd. v. Dy. CIT (LTU) & Anr. 2021 435 ITR 85 where the Court was dealing with a plea for remand and opined that "in any event, we are of the view that if claim is otherwise sustainable in law, and the appellate authority has power to entertain the same" and "fresh claims made by the assessee, as allowed by the CIT(A) will have to be sustained". In this case, the ITAT had directed a remand and the ITAT's order was set aside by the Court. 42. To our mind, this issue does not require any further deliberat....
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....t apart, if the finding of fact arrived at by the Tribunal were to be set aside, a specific question regarding a perverse finding of fact ought to have been framed by the High Court. The Revenue did not seek the framing of any such question." (emphasis added) 45. As regards the issue of residential accommodation for trustees and the family members for nominal rent, the respondent/assessee claimed through its reply that the institution's own residential property had been given to the senior trustee on rent as per terms of his employment with Hamdard Laboratories (India) and a license fee of Rs. 45,000/- per month was being charged. It was stated that "due to his seniority in the institution's employment, for the last more than 40 years, and the services being rendered by him, the usage of a portion of the company's property on a rent of Rs. 45,000/- is fully justified". The respondent/assessee further certified that the residential accommodation was provided to the two trustees namely, Mr. Hammad Ahmed and Mr. Abdul Mueed Sahib, in accordance to the service rules of the respondent/assessee and the license fee recovered from them during the year is about Rs. 5....
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....13(3) of the IT Act as no undue benefits were passed on to the specified persons under Section 13(3) of the IT Act. CIT(A) stated that the facts as mentioned, make it clear that the trust is not providing any benefit to the trustees and there is no violation of Section 13(2) of the IT Act, in this regard. It noted the submission of the respondent/assessee that trustees are functioning in a dual capacity, i.e. as trustees and also as employees and their educational, technical qualifications and experience help the respondent/assessee in achieving a good turnover over a period of time. The respondent/assessee also submitted that the properties shown by the appellant in the screenshot were furnished or semi-furnished and were either independent houses or independent floors with covered area much larger than the covered area of the property at 25 Kautilya Marg and the comparison was not justified. 49. Respondent/Assessee further contended that the family members of the erstwhile Chief Mutawalli, late Abdul Mueed Sahib, occupied a part of the premises at 25 Kautilya Marg, i.e. ground floor, with a covered area of 401.12 sq.mt. free of rent, entirely on compassionate grounds. As regar....
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....g reasons for a departure from the said position, the proceedings should not be allowed to be reopened, unless, the AO is able to justify taking a different view of the matter. The Court further stated that the burden of showing that the rent charged by the respondent/assessee was not "adequate" was on the appellant/Revenue, unless the price/rent was such as to shock the conscience of the Court and to hold that it cannot be a reasonable consideration, it would not be possible to hold that the transaction is bereft of adequate consideration. Relevant paragraph in this context is extracted under for ease of reference: "20.2 Under section 13(2)(b), the burden of showing that the rent charged by the respondent/assessee was not 'adequate' is on the revenue. Unless the price/rent was such as to shock the conscience of the Court and to hold that it cannot be the reasonable consideration at all, it would not be possible to hold that the transaction is otherwise bereft of adequate consideration. It is necessary for the Assessing Officer to show that the property has been made available for the use of any person referred to in sub-section (3) of section 13 otherwise than for....