DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE 2(1), NEW DELHI, DELHI vs. THE ENERGY AND RESOURCES INSTITUTE, DELHI

ITA 5991/DEL/2026Status: DisposedITAT Delhi28 September 2026AY 2016-1711 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had technically violated Section 13(1)(d) by holding investments not specified under Section 11(5). However, following the Supreme Court's decision in CIT vs. Fr. Mullers Charitable Institution, the Tribunal found that such a violation does not result in the denial of exemption for the entire income of the trust. The forfeiture is confined only to the income arising from the offending investments, which is taxable at the maximum marginal rate. The Tribunal noted that the income and expenditure account for the relevant AYs showed no dividend income, capital gain, interest income, or any other revenue credited in respect of the shares held in Glori Oil Ltd., TIMES (Kuwait), or ONGC TERI Biotech Ltd. Since no income arose from these investments during the relevant period, no amount was liable to be taxed. Therefore, the denial of exemption under Sections 11 and 12 in its entirety by the AO was held to be legally unsustainable. The AO was directed to allow the benefit of exemption under Section 11 of the Act on the entire income of the assessee.

What were the facts?

The Revenue filed two appeals against the orders of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Years (AY) 2016-17 and 2017-18. The assessee, The Energy and Resources Institute, is a registered society under the Societies Registration Act, 1860, and registered under Section 12A of the Income Tax Act, 1961. The Assessing Officer (AO) denied exemption under Sections 11 and 12 of the Act, holding that the assessee violated Section 13(1)(d) by investing Rs. 2,44,39,291/- in joint ventures with foreign entities, which were not prescribed modes under Section 11(5). The AO assessed the total taxable income at Rs. 16,19,74,743/-. The CIT(A) allowed the assessee's appeal, holding that while there was a technical violation of Section 13(1)(d), no income arose from these investments during the relevant AYs, thus the entire exemption should not be denied.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the ground of appeal of the assessee, regarding allowability of exemption under section 11 and 12 of the Act, despite the clear violation of section 13(1)(d) of the Act. 2. Whether, on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in referring to the order of the Hon'ble Supreme Court of India in the case of CIT Vs Fr. Mullers Charitable Institutions despite the fact that the Hon'ble Supreme Court in the SLP(C)/22223/2014 filed by the revenue in the case of CIT Vs Fr. Mullers Charitable Institutions has dismissed the appeal but kept the question of law open. Assessee's contentions: The assessee argued that there was no investment made during the year nor any income earned from the investments in question during the year. They relied on the Supreme Court decision in CIT vs. Fr. Mullers Charitable Institution, holding that only income from offending investments is taxable and violation under Section 13(1)(d) does not lead to denial of exemption on total income. They also pointed to consistent exemption granted in previous assessment years. Revenue's contentions: The Revenue relied on the AO's order, arguing that the violation of Section 13(1)(d) disentitles the assessee to exemption under Section 11. They cited a coordinate bench decision in Indian Gold Union vs. ITO (Exemption). The Revenue also questioned the CIT(A)'s reliance on the Fr. Mullers case, noting that the Supreme Court had kept the question of law open.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 13(1)(d),Section 11(5),Section 164(2),Section 143(3),Section 12A,Section 80G,Section 2(15),Section 12AB(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH, E: NEW DELHI

Before: SHRI VIMAL KUMAR & SMT. RENU JAUHRI

Hearing: 09.09.2026Pronounced: 28.09.2026

Per Renu Jauhri, Accountant Member:

These two appeals by the Revenue are directed against the orders dated 27.02.2026 of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment orders dated 30.12.2018 and 30.12.2019 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by ITO, Circle Exemption 2(1), Delhi 1

ITA Nos.- 5991 & 5992/Del/2026 The Energy and Resources Ins"tute . (hereinafter referred to as the ‘AO’) pertaining to Assessment Years (A.Y.) 2016-17 and 2017-18 respectively.

The order continues below.

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