2022 (5) TMI 883 - AT - Income Tax

Exemption u/s 11 - assessee has paid a sum to Shaheed Baba Nihal Singh Charitable Hospital for medical relief and the AO has treated the said payment as the amount covered under section 13(1)(c) read with section 13(3) - funds of the society have been diverted and transferred to its sister society which is engaged in activities other than religious purposes. It has also been held by the AO that the income of the society has not therefore been applied towards religious purposes for which it was set up and, therefore, the utilization of funds of the assessee society have been held to be not for the purposes for which it was formed - HELD THAT - Both the parties submitted that the similar issue had arisen earlier during the assessment year 2014-15 and the matter has travelled upto the Tribunal and the Coordinate Bench had an occasion to examine the said matter in 2019 (8) TMI 1819 - ITAT CHANDIGARH and the matter has been set aside to the file of the Ld. CIT(A) to decide afresh after bringing all relevant facts on record. Thus the matter is set aside to the file of the Ld. CIT(A) to adjudicate the issue afresh as per law after providing reasonable opportunity to the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
- Addition of Rs. 77,00,000/- paid by the assessee to Shaheed Baba Nihal Singh Charitable Hospital during the year under consideration.
- Treatment of the payment under section 13(1)(c) and section 13(3) of the Income-tax Act, 1961.
- Denial of exemption under section 11 of the Act and assessment of the income of the assessee trust as an AOP.
- Appeal against the order of Learned Commissioner of Income Tax (Appeals)-2, Jalandhar.

Analysis:

Issue 1 - Addition of Rs. 77,00,000/-:
The assessee, a registered society, paid Rs. 77,00,000/- to a charitable hospital for medical relief during the relevant year. The AO treated this payment as falling under section 13(1)(c) and section 13(3) of the Act, stating that the funds were diverted to a sister society not engaged in religious activities. Consequently, the AO disallowed the sum of Rs. 77,00,000/- and denied exemption under section 11, assessing the income as that of an AOP.

Issue 2 - Treatment of Payment under Section 13(1)(c) and Section 13(3):
The AO contended that the funds were not applied towards religious purposes for which the society was established, leading to the disallowance. However, the Coordinate Bench noted that the donation was in line with the stated religious objectives of serving humanity. Further investigation into the hospital's charitable operations was deemed necessary to establish the alignment with the religious objectives.

Issue 3 - Denial of Exemption under Section 11 and AOP Assessment:
The Ld. CIT(A) directed the AO to allow exemption on surplus income but treated the Rs. 77,00,000/- as non-application of income subject to taxation. The denial of exemption was based on the view that the amount was not related to the trust's activities. The matter was appealed, and the Tribunal set it aside for a fresh decision, emphasizing the need to bring out all relevant facts for proper adjudication.

Issue 4 - Appeal Against Ld. CIT(A) Order:
The assessee appealed against the Ld. CIT(A)'s decision to treat the Rs. 77,00,000/- as non-application of income. The Tribunal, following the Coordinate Bench's decision, remanded the issue back to the Ld. CIT(A) for a fresh adjudication in accordance with the law, granting the assessee a reasonable opportunity to present its case.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, setting aside the matter for a fresh decision by the Ld. CIT(A) after considering all relevant facts and providing a fair opportunity for the assessee to be heard.