2010 (11) TMI 965 - AT - Income Tax

Summary

Issues involved:
The judgment involves cross appeals by the assessee and the department against the order of the CIT(A)-I, Lucknow relating to assessment year 2005-2006.

Assessee's Appeal:
1. The CIT(A) held that a portion of the appellant trust's income was liable to tax under the Income Tax Act 1961.
2. The appellant contended that the entire income, including specific expenditures, should be exempt u/s 10(23C)(iiiae) of the Act.
3. The CIT(A) failed to acknowledge that certain dividend income and receipts from mutual funds were exempt u/s 10(34) and 10(38) of the Act, respectively.

Department's Appeal:
1. The CIT(A) erroneously allowed exemption u/s 11 to the assessee instead of u/s 10(23C) of the Act.
2. The trust's dominant activity was earning income from investments, not medical relief work as claimed, raising concerns about the exemption.
3. The CIT(A) miscalculated the net income chargeable to tax by not considering the lack of application of income for charitable purposes.

Summary of Judgment:
The Appellate Tribunal noted that the trust was established for medical relief work but primarily earned income from investments. The Assessing Officer disallowed the claim that investment income was for the benefit of the hospital. The CIT(A) granted exemption u/s 11 without hearing the Assessing Officer. The Tribunal remanded the case for fresh adjudication, emphasizing the need for a fair opportunity for both parties. The appeals were allowed for statistical purposes, setting aside the CIT(A)'s order.