×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
01-11-2019, Hamdard National Foundation, Section 11, 12, Tribunal Delhi
This is a batch of eight appeals, three appeals by the assessee for Asstt. Years 2007-08, 2009-10, & 2014-15, four by the revenue for Asstt. Years 2008-09, 2010-11, 2011-12 & 2012-13 and Cross Objection by the assessee for the Asstt. Year 2008-09 against the separate orders of the Commissioner of Income-tax (Appeals), New Delhi for the respective assessment years. For the sake of convenience, we deem it fit and proper to dispose of these appeals by a common order.
2. Brief facts of the case are that the Hamdard Laboratories (India) (“HLI”) came into existence being constituted on 28/08/1948. Partners of the business in HLI are also known as “Hamdard Dawakhana (Wakf)”. They dedicated the said business to charity. Hamdard National foundation (India) (“HNF”) (“the assessee”) was setup as a charitable trust in 1964 with the main objects of running educational and medical institutions/providing medical relief, namely, as a special purpose vehicle to effectuate the charitable activities of HLI in the areas of relief to the poor, education and medical relief. Hamdard Dawakhana (Wakf) as a charitable institution has been enjoying the benefits of section 11 and 12 of the Income-tax Act, 1961 (“the Act”) and also exemption under section 10(23C)(iv) of the Act. The assessee enjoyed the benefit of sections 11 and 12 of the Act all the while till the assessment year 2007-08, but in the year assessment year 2007-08 the learned Assessing Officer rejected the claim for exemption under section 11 and 12 of the Act to the assessee for the years 2007-08, 2008-09, 2009-10, 2010-11, 2011-12, 2012-13 and 2013-14 on the ground that there had been a violation of the provisions of section 13(2)(b) of the Income Tax Act, 1961 (for short “the Act”) read with the provisions of section 13(3)(b) of the Act vis-à-vis the letting of properties at the Asif Ali Road and Rajdoot Marg, New Delhi owned by the assessee to another trust, namely, Hamdard Dawakhanna (Wakf) at the rents alleged to be lower than the prevailing market rates. The properties were said to have been taken by Hamdard Dawakhana (Wakf) for charitable activities only.
3. In the appeals preferred by the assessee, Ld. CIT(A) reversed the assessment orders for the assessment years 2007-08, 2008-09 and 2010- 11 whereas confirmed the same for the assessment year 2009-10. For assessment years 2010-11 and 2011-12, the Ld. CIT(A) had allowed exemption under section 11 of the Act.
4. Learned A sessing Officer also invoked the proviso to section 2 (15) of the Act in respect of the royalty income earned by the assessee pursuant to an agreement entered into between the assessee and HLI for the use of the brand names/patent rights (owned by HNF) for its medical preparations. According to the learned Assessing Officer, the said royalty represented a commercial receipt as it assisted HLI in furthering its business activity.
5. Besides this, learned Assessing Officer recorded that the assessee paid a major portion of the scholarship amount to the students of a particular religious community and therefore there is violation of section 13(1)(b) of the Act. We shall deal with these aspects hereunder. ITA No. 1640/Del/2019 (AY 2007-08).
6. Coming to the issue covered by grounds No. 1 to 5, namely, rejection of exemption under section 11 of the Act on the ground of violation of provisions under section 13(2)(b) of the Act read with section 13(3) of the Act, it could be seen from the assessment order for the assessment year 2007-08, during the scrutiny learned Assessing Officer found that the assessee received a sum of Rs.46,41,028/- towards rentals received in respect of the property of the assessee. On enquiries, learned Assessing Officer came to know that the market rent of the properties at a Chanakya Puri and Asaf Ali road was much higher than the rent at which the assessee had entered into agreement with its substantial donor Hamdard Dawakhana among other organisations. Further, we find that the learned Assessing Officer based the addition on the website info mation and also two letters from two estate agents under section 133(6) of the Act from one HSN Reality Services and CB Richard Ellis South Asia private limited.
7. Ld. CIT(A), on consideration of the material available on record and in the light of the submissions made on either side, observed that the onus to prove the basis for the addition was on the learned Assessing Officer; that the examination of the facts reveal that such a onus was not discharged by the Revenue because the learned Assessing Officer was completely misdirected by placing the onus on the assessee; that the assessing officer had acted entirely on the basis of information on the Internet without confronting the assessee with any evidence and that