TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 796
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....issioner 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 for scrutiny by the AO and statutory notices were issued. Submissions were....
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....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 respondent/assessee. The CIT(A) held that respondent/assessee is a charitable institution, eligible for exemption under Section 10(23C....
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....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 outset, the appellant has been claiming that it is duly eligible for exemption as per provisions of section 10(23C)(iv) of the Act. In the remand re....
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....) 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 decision, allowability of sec. 11 was in dispute but ratio of this judgment holds goods in the instant case also. 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....
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....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 allowing the appeal of the assessee by ignoring the fact that assessee has offered substantial concession in rent to person specified u/s13(3), which is a clear violation of Section 13(2)(b) of the Act, 1961 and hence assessee is not eligible for exemption u/s 11/12 of the Act, 1961. 2. Whether Ld. CIT(A) in the facts and circumstances of the case was correct in allow....
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....nied 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 Jute Corporation of India v. Commissioner of Income Tax & Anr., 1991 Suppl. (2) SCC 744, in particular, paragraph 3 which is extracted as under: "3. Section 251 of the Income Tax Act (hereinafter referred to as the 'Act') prescribes power of the Appellate Authority hearing appeal against the order of Income Tax Officer. Clause (a) of Section 251(1) confers power on the Appellate Authority namely the....
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....tatutory 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 Assistant Commissioner should exercise his discretion in permitting or not permitting the assessee to raise an additional ground in accordance with law and reason. The same observations would apply to appeals before the Tribunal also. 6. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income-tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal....
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.... 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 Act of 1961, initially under Section 11 of the IT Act of 1961 and thereafter under Section 10 (23C)(iv) of the IT Act of 1961. 12.2 In the appeal preferred before this Court, the Appellant/Revenue did not propose a question of law, with respect to the findings of the ITAT/CIT(A), regarding the claim of exemption granted to the Respondent/Assessee under Section 10(23C)(iv) of the IT Act. This appeal is therefore, academic in nature. 12.3 In the immedia....
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.... 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 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 adequate consideration. In order to determine the same, the context of the facts of the particular case needs to be appreciated. For determining "Adequate" consideration/rent, however, market rent or rate is not the sole yardstick; other circumstances of the case also need to be considered. 24. In the present ca....
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....e 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- ....... (23C) any income received by any person on behalf of- ......... (iv) any other fund or institution established for charitable purposes which may be approved by the Principal Commissioner or Commissioner, having regard to the objects of the fund or institution and its importance throughout India or throughout any State or States. Provided that the exemption to the fund or trust or institution or university or other educational institution or hospital or other medical institution referred to in sub-clause (iv) or sub-clause (v) or sub-clause (vi) or sub-clause (via), und....
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....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 which has been utilised for purposes other than providing relief to the victims of earthquake in Gujarat or which remains unutilised in terms of sub-section (5C) of section 80G and not transferred to the Prime Minister's National Relief Fund on or before the 31st day of March, 2004 shall be deemed to be the income of the previous year and shall accordingly be charged to tax. Section 13. Section 11 not to apply in certain cases. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- ......... (c) in the case of a trust for charitable or reli....
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....s. 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 there being no change in facts, principle of consistency was applied and the benefit was extended to the respondent/assessee. Secondly, even on issues of Section 13(2) and Section 13(3) of the IT Act, the CIT(A) held that no benefit to individual or trustee would arise in the case. This decision was appealed by appellant/Revenue before the ITAT against the CIT(A)'s order, however, the said appeal was dismissed by the ITAT, upholding the order of the CIT(A). 17. In this context, it is noted that the Trust was constituted under a Trust Deed dated 20th August 1948 and the partners of the business known as Hamdard Dawakhana, dedicated the business to charity. Hamdard created a Special Purpose Vehicle namely Hamdard National Foundation (HNF) with a registered society f....
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....r 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 enjoyed the benefit of exemption under Section 11 of the Act since its inception on 12.05.1964. HNF's charitable status was further approved by the CIT(A) in its order dated 31.01.2012. However, the DGIT(E) has drawn a distinction between corpus and non-corpus donations of Hamdard to HNF, the non-corpus fund -which is the source of HNF‟s charity - comprises of a small proportion of Hamdard's total donation to HNF. In other words, the DGIT(E) held that the predominant portion of donation is applied towards building HNF's corpus as opposed to being applied for charitable purposes and the extent of actual charity carried out by HNF is not significant. However, in this Court's opinion, Hamdard rightly contends that the DGIT(E) erroneously drew a distinction between corpus and non-corpu....
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....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, the appellant succeeds." (emphasis added) 26. The ITAT while considering submissions with regard to Section 10(23C)(iv) of the IT Act approved of the view taken by the CIT(A) and noted as under: "8. We have carefully considered the submission of the parties and perused the records. It is significant to note from the assessment order dated 07.12.2017 in the case of the assessee after scrutiny under CASS for AY 2015-16 (copy at page 49 of Paper Book) that the order specifically mentions that the assessee Trust is registered under section 12A and also notified under section 10(23C)(iv) of the Act, said Notification having been restored by the Hon'ble Delhi High Court vide order dated 18.09.2015 in W. P. (C) 5711/2013 with effect from AY 2004-05 onwards. The predecessor Ld. AO has observed that the assessee claimed exemp....
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....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 year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 17. On these reasonings, in the absence of any material change justifying the Revenue to take a different view of the matter-and, if there was no change, it was in support of the assessee-we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that th....
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...., 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 been rightly taken into account by the CIT(A) in the impugned decision. There has been no change in facts or law. The previous three assessment orders of AYs 2013-2014 to 2015-2016 relating to Section 10 (23C) (iv) of the IT Act clearly stated as under: "The main activity of the assessee trust is to run a manufacturing and trading business of Ayurvedic and Unani medicines. The popular products/formulation of the assessee trust are Rooh-Afza, Rogan Badam-Shrin, Cinkara, Safi & Chavyan Prash etc. The assessee has claimed exemption u/s 10(23C)(iv) of the Act. The objects of the society appear to be charitable in nature within the meaning of section 2(15) of the Income-tax Act, 1961. The benefit of section 11 & 12 is allowed to the assessee." 35. The appellant/Revenue did not plead any particular circumstance or fact before this Court to displace the exemption granted under Section 10 (23C) (iv) of the IT Act and no unique feature or dist....
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....t 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 provided to the respondent/assessee for his counter comments. In particular, it was stated in the objections that AO had not offered any comments on the judgments of the Apex Court and the jurisdiction of High Court where there was a history of tax assessments conducted over the last few decades and there was no appreciable change in the factual and legal position. The Assessment Orders for AYs 2014-2015 and 2015-2016 were also adverted to. CIT(A) noted the appellant/Revenue's advertence to the decision of the Supreme Court in Goetze (India) v. CIT (2006) 284 ITR 323 in that no claim can be made otherwise than by filing a revised return which cannot be entertained by the AO during the pendency of an assessment proceeding. CIT(A) however, relied upon other decisions inter alia CIT v. Mithesh Impex 270 CTR (Guj) 66, CIT v. Rajasthan Fasteners (P) Ltd. 266 CTR (Raj.) 401 as also Jute Corporation (supra) to reach the following conclusion: "The law developed, post ....
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....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 deliberation. Not only was the respondent/assessee entitled to raise the issue before the Appellate Authority, but also the Appellate Authority had the power to entertain the issue and make a determination, rather than remanding it back simplicitor to the AO. Determination under Section 11 and 12 of the IT Act 43. Respondent's/assessee's reliance on the following judgments with regard to scope of enquiry by the High Court, when there is no such question of law proposed, is apposite. In K Ravindranath Nair v. CIT (2001) 1 SCC 135 the Court emphasized that the High Court is to answer the question of law that is placed before it. Relevant extract from the decision is as under: "7. The High Court overlooked the cardinal principle that it is the Tribunal which is the final fact finding authority. A decision on fact of the Tribunal can be gone into by the High Court only if a question has been referred to it which says that the finding of the Tribunal on facts is perverse, in the sense that it....
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.... 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. 5.4 lakhs (Rs. 45,000/- per month). It was stated by the respondent/assessee that "property owned by us that had been given to the trustees on license fee, as per terms of employment for the last more than 40 years". 46. It was emphasized that onus to prove that undue benefits had been passed on to the specified persons under Section 13(3) of the IT Act was on the Appellant/revenue. The AO noting this, stated that the respondent/assessee has not furnished any comparable market rates of the properties to justify the reasonableness of the rent received from the trustees. The AO cursorily noted as under: "11. Online inquiries with regard to market price of rental in respect of space at Kautilya Marg had given illustrative results available at various online portals. On perusal of data available at makaan.com, the quotation for semi furnished accommodation for area of 3300 sq ft is Rs. 5 lakhs per month against the security deposit of Rs. 15 Lakhs whereas the assessee has charged consolidated rent of Rs. 45,000 per month from ....
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....ilya Marg, i.e. ground floor, with a covered area of 401.12 sq.mt. free of rent, entirely on compassionate grounds. As regards property at 13 Rajdoot Marg, the respondent/assessee submitted that it is not owned by the respondent/assessee, but by Hamdard National Foundation (HNF), which leased it out to the respondent/assessee since 2007, and part of it is occupied by Mr. Abdul Majeed since 2010-2011, as per the terms of his employment with the respondent/assessee since 1995. 50. The CIT(A) noted that the law required the AO to bring on record cogent evidence to justify the invocation of Section 13 of the IT Act to deny exemption, and the material collected from the internet cannot be termed as corroborative piece of evidence. Comparison made with the online inquiries, done by the AO, was not tenable. 51. The CIT(A) relied upon the decisions in Kishore Trust v. ADIT (1996) 59 ITD 137 (Calcutta), CIT v. Bharat Sewa Sansthan (2013) 36 taxsman.com 539 Allahabad, Ragubhir Saran Charitable Trust v. ITO (1987) 22 ITD 11 (Delhi), to buttress the point that merely because of a difference in rental value of property, it cannot be said that undue benefit was passed on to a trustee or a spec....