2023 (10) TMI 33 - AT - Income Tax

Exemption u/s 10(23C)(iv) and/or u/s 11 and 12 - Charitable activity u/s 2(15) - assessee is trust constituted by and under its own Trust Deed dated 28.09.1948 ( Deed ) whereby the partners of a business known as Hamdard Dawakhana dedicated the said business to charity - as per DR assessee has offered substantial concession in rent to persons specified under section 13(3) which violates the provision of section 13(2)(b) - HELD THAT - The predecessor Ld. AO has observed that the assessee claimed exemption under section 10(23C)(iv) and that the objects of the Trust being charitable within the meaning of section 2(15) the benefit of section 11 and 12 is allowed. There is no change either in facts or in law in AY 2016-17 from those in preceding years as evidenced from the orders of assessment for AY 2013-14, 2014-15 and 2015-16. In CIT vs. Amit Jain 2015 (3) TMI 720 - DELHI HIGH COURT and Denso India Ltd 2015 (1) TMI 824 - DELHI HIGH COURT held that where the AO has been following a view for the past several years, he cannot depart from the same when there has been no change in law or facts. We may note the facts and decision of Hamdard National Foundation (India) 2022 (2) TMI 931 - DELHI HIGH COURT In this case, the facts were that the assessee-foundation had let out its properties and received rental income from H in relevant assessment years. In addition, the assessee had also received corpus donation from 11 during assessment year 2007-08. The Assessing Officer after making enquiry from various websites held that in lieu of voluntary and corpus donation received from H, properties owned by assessee were let out to H at a much lower rate as compared to the market rate. He, thus, invoked section 13(2)(b) read with section 13(3) and held that assessee was not eligible for exemption under sections 11 and 12. The Tribunal decided in favour of the assessee. Appeal of the Revenue is dismissed.

Summary

Issues Involved:
1. Whether the CIT(A) erred in allowing the appeal by ignoring the alleged violation of Section 13(2)(b) of the Income Tax Act, 1961.
2. Whether the CIT(A) was correct in allowing exemption under Sections 11 and 12 of the Income Tax Act, 1961.

Summary:

Issue 1: Alleged Violation of Section 13(2)(b)
The Revenue contended that the assessee offered substantial concession in rent to persons specified under Section 13(3), violating Section 13(2)(b) of the Income Tax Act, 1961. The AO found that leasing properties at 25 Kautilya Marg and 13 Rajdoot Marg to trustees at a consolidated rent of Rs. 90,000/- per month attracted the provisions of Section 13(2)(b), thereby disqualifying the assessee from exemptions under Sections 11 and 12. The CIT(A) disagreed, noting that the AO failed to provide cogent evidence and did not follow the rule of consistency as there was no change in facts compared to preceding assessment years. The CIT(A) held that the assessee trust did not provide any undue benefit to specified persons, and the properties' rental values were justified given the long-term lease and condition of the properties. The Tribunal upheld the CIT(A)'s findings, emphasizing the lack of evidence to support the AO's claims.

Issue 2: Allowing Exemption under Sections 11 and 12
The CIT(A) allowed the assessee's claim for exemption under Sections 11 and 12, also considering the applicability of Section 10(23C)(iv). The CIT(A) referenced several judicial precedents, including the Supreme Court's decision in Goetze India, which allows fresh claims before appellate authorities. The Tribunal noted that the assessee had consistently received exemptions under Section 10(23C)(iv) in previous years, and there was no change in facts or law for AY 2016-17. The Tribunal cited the principle of consistency and the Hon'ble Delhi High Court's decision in CIT (Exemption) vs. Hamdard National Foundation, which held that the burden of proving inadequate rent lies with the Revenue, and mere internet data or estate agents' information is insufficient. The Tribunal concluded that the Revenue failed to provide substantial evidence, thus upholding the CIT(A)'s decision to grant exemptions under Sections 11 and 12.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order that the assessee is eligible for exemptions under Sections 11, 12, and 10(23C)(iv) of the Income Tax Act, 1961, and there was no violation of Section 13(2)(b). The Tribunal emphasized the need for consistent application of law and adequate evidence to support claims of violations.