SHREE RAGHUNATH HOSPITAL SOCIETY, LUDHIANA,LUDHIANA vs. DCIT (EXEMPTIONS), EXEMPTIONS CIRCLE 1, CHANDIGARH, CHANDIGARH

ITA 379/CHANDI/2026Status: DisposedITAT Chandigarh05 October 2026AY 2017-20183 pages
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What did the Tribunal hold?

The Tribunal held that the assessee is eligible for full exemption under Sections 11 & 12 of the Income Tax Act, 1961. The reasoning was that the assessee's aggregate income was Rs. 434.25 Lacs, and it had applied Rs. 403.62 Lacs towards charitable purposes. Even after excluding depreciation of Rs. 35.04 Lacs from the application of income, the remaining application of Rs. 368.58 Lacs (Rs. 403.62 Lacs - Rs. 35.04 Lacs) still exceeded 85% of its gross receipts. The Tribunal found that the assessee had applied funds more than the threshold limit required for full exemption. Consequently, the impugned addition of Rs. 30.62 Lacs made by the Ld. AO was directed to be deleted. The Tribunal noted that the legal grounds raised in the appeal had become academic in nature due to this finding. The appeal was allowed.

What were the facts?

The assessee, Shree Raghunath Hospital Society, is in appeal before the Income Tax Appellate Tribunal (ITAT) against an order dated 03.02.2026 passed by the Commissioner of Income Tax (Appeals), NFAC. This order confirmed an assessment framed by the Assessing Officer (AO) under Section 147 read with Section 144B of the Income Tax Act, 1961, on 23.03.2025 for Assessment Year 2017-18. The assessment was reopened to examine cash deposits during demonetization. The AO accepted the assessee's explanation for the deposits but noted that the assessee claimed depreciation of Rs. 35.04 Lacs as an application of income, even though the entire addition to the capital asset was treated as application. The assessee revised its computation, stating it applied 93% of receipts towards charitable activities after excluding depreciation. The AO assessed Rs. 30.62 Lacs (unutilized amount and corpus donation) to tax. The CIT(A) confirmed this and directed rectification as the addition was Rs. 30.62 Lacs instead of Rs. 35.04 Lacs.

What were the issues?

1. Whether the assessee is eligible for full exemption under Sections 11 & 12 of the Income Tax Act, 1961, for Assessment Year 2017-18, despite the exclusion of depreciation from the application of income. Assessee's Contention: The assessee argued that its aggregate income was Rs. 434.25 Lacs, and it had applied Rs. 403.62 Lacs towards charitable purposes, which is over 92% of its gross receipts. It contended that even if depreciation (Rs. 35.04 Lacs) is not considered an application, the remaining application exceeds the threshold limit of 85% required for full exemption under Sections 11 & 12. Therefore, the addition of Rs. 30.62 Lacs should be deleted. Revenue's Contention: The revenue, through the Ld. AO and Ld. CIT(A), proceeded on the basis that the unutilized amount and corpus donation of Rs. 30.62 Lacs was taxable, implying that the assessee had not met the application requirements for exemption.

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 147,Section 144B,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

MANOJ KUMAR AGGARWAL (Accountant Member)

1.

Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 03.02.2026 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 147 r.w.s. 144B of the Act on 23.03.2025. Having heard rival submissions, the appeal is disposed-off as under.

2.

The assessee’s case was reopened to examine the sources of cash deposit during demonetization period. The L

The order continues below.

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