2022 (4) TMI 595 - HC - Income Tax

Exemption u/s 11 - assessee has paid most of the scholarship amount to the students of a particular religious community which is a clear violation of Section 13(1)(b) - ITAT Allowed appeal of assessee - HELD THAT - Both, the Commissioner Income Tax (Appeal) and Tribunal, have given a concurrent finding of fact that the benefit of scholarship to the poor and needy students was not confined to students of a particular community and a perusal of the list submitted by the assessee showed that the benefit had been granted to students from all communities without any discrimination. Just because advertisement was published in Urdu language and that too in one newspaper, it cannot be presumed that it was targeted at the students belonging to a particular community only. In fact, a similar finding of CIT(A) in the assessment year 2010-11 was accepted by the revenue and was not even challenged before the Tribunal. Undoubtedly, the principle of res-judicata and estoppel are not applicable in taxation matters. However, it has been held that a departure from a finding during the past years would result in a contradictory finding (Commissioner of Income Tax vs. Sridev Enterprises 1991 (1) TMI 52 - KARNATAKA HIGH COURT ) - No substantial question of law.

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal correctly allowed the appeal of the assessee despite the alleged violation of Section 13(1)(b) of the Income Tax Act, 1961?

Analysis:

Issue 1: Violation of Section 13(1)(b) of the Income Tax Act, 1961
The primary issue in this case revolved around whether the Income Tax Appellate Tribunal (Tribunal) was correct in allowing the appeal of the assessee despite the contention that the assessee had paid most of the scholarship amount to students of a particular religious community, allegedly violating Section 13(1)(b) of the Income Tax Act, 1961. The Tribunal's order highlighted that the scholarships were not restricted to a specific community, and the benefit was extended to students from all communities without discrimination. This finding was upheld by the Commissioner Income Tax (Appeal) and the Tribunal for multiple assessment years. The appellant argued that the publication of scholarship advertisements in Urdu language and in one newspaper indicated a bias towards a particular community. However, the court found that the mere publication in Urdu and one newspaper did not imply targeting a specific community. The court emphasized the importance of maintaining consistency in approach, citing the principle that a departure from past findings could lead to contradictory outcomes. The court concluded that no substantial question of law arose, and the appeals were dismissed.

This judgment underscores the significance of factual findings and consistency in tax matters. It highlights the need for concrete evidence to establish violations of tax laws and the importance of maintaining a consistent approach in interpreting and applying legal principles across different assessment years.