ASSISTANT COMMISSIONER OF INCOME TAX(EXEMPTIONS), CIRCLE-2, CHANDIGARH, CENTRAL REVENUE BUILDING vs. N C JINDAL CHARITABLE TRUST, OP JINDAL MARG,

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ITA 1028/CHANDI/2024Status: DisposedITAT Chandigarh05 October 20266 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that while the contentions of the AO and the assessee were reproduced in the CIT(A)'s order, the finding of the CIT(A) was cryptic and confined to one paragraph, not constituting a well-reasoned order. Therefore, in the interest of justice, the Tribunal set aside the impugned order and restored the matter to the file of the CIT(A) for de novo adjudication. The Tribunal clarified that it had not decided the issue on merits and directed the CIT(A) to examine all evidence on record and any further evidence required, and then pass a well-reasoned order dealing with all contentions raised by the AO and the assessee. The appeal filed by the Revenue was allowed for statistical purposes.

What were the facts?

The Revenue has appealed against the order of the CIT(A)/NFAC, Delhi, for Assessment Year 2014-15. The Assessing Officer (AO) denied exemption under Section 11 of the Income Tax Act, 1961, to N C Jindal Charitable Trust, alleging commercial operation and intermingling of financial affairs with M/s Om Savitri Jindal Charitable Society. The AO noted utilization of the assessee's assets by another society, non-reconciliation of accounts, and improper treatment of corpus donations. The AO also pointed to a loan taken by the society mortgaging the trust's land and the running of a school on a commercial basis. The CIT(A) allowed the exemption, finding no infringement of Sections 11, 12, or 13 by the Trust.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the learned CIT(A) erred in law by allowing the benefit of exemptions under section 11 of the Income Tax Act, 1961, to the assessee, despite the substantial intermixing of financial affairs between the assessee trust and M/s Om Savitri Jindal Charitable Society, and the alleged improper treatment of corpus donations, which potentially violated the provisions of section 11, 12 and 13 of the Act during the FY 2013-14 relevant to AY 2014-15 without considering the facts of the case? Assessee's Contention: The corpus donation was utilized by the recipient society for charitable activity. The mortgaging of land was done to help another charitable organization engaged in similar activities. The AO's claimed facts were not denied, but legal arguments were presented. Revenue's Contention: The Revenue relied on the order of the CIT(A).

Which sections of the Income-tax Act were involved?

Section 11,Section 12,Section 13,Section 11(2),Section 11(5),Section 13(3),Section 143(3),Section 271(1)(c)

AI-generated summary — verify with the full judgment below

आयकर अपीलीय अिधकरण,च�ीगढ़ �ायपीठ “बी” , च�ीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: VIRTUAL MODE �ी लिलत कुमार, �ाियक सद� एवं �ी िवजय वमा� , लेखा सद� BEFORE: SHRI. LALIET KUMAR, JM & SHRI. VIJAY VARMA, AM आयकर अपील सं./ ITA No. 1028 /Chd/ 2024 िनधा�रण वष� / Assessment Year : 2014-15 The Asst. CIT बनाम N C Jindal Charitable Trust, Circle-2, Chandigarh Model Town Hisar Haryana-125001 �ायी लेखा सं./PAN NO: AAATN0713F अपीलाथ�/Appellant ��थ�/Respondent िनधा�रती की ओर से/Assessee by : Shri Rohit Jain, Advocate Ms. Aditi Garg, C.A and Shri Deepesh Jain, Advocate राज� की ओर से/ Revenue by : Smt. Vandana Vijay Mohite, CIT, DR सुनवाई की तारीख/Date of Hearing : 30/09/2026 उदघोषणा की तारीख/Date of Pronouncement : 05/10/2026 आदेश/Order PER VIJAY VARMA, A.M: This is an appeal fled by the Revenue against the order of the Ld. CIT(A)/NFAC, Delhi dt. 08/08/2024 for the Assessment Year 2014-15.

2.

In the present appeal Revenue has raised only one ground which is as under: Whether, on the facts and in the circumstances of the case, the learned CIT(A) erred in law by allowing the benefit of exemptions under section 11 of the Income Tax Act,1961, to the assesse, despite the substantial intermixing of financial affairs between the assesse, despite the substantial intermixing of financial affairs between the assesse trust and M/s Om Savitri Jindal Charitable Society, and the alleged improper treatment of corpus donations, which potentially violated the provisions of section 11,12 and 13 of the Act during the FY 2013-14relevant toAY2014-15 without considering the facts of the case?

3.

The assessment order in this case holds that the appellant trust is being run as a commercial entity and the affairs of the trust are intermixed with another society and therefore the application of income claimed by the

assessee is not verifiable. Moreover the assets of the assessee are also utilized by another society and there is non reconciliation of various accounts. On this ground exemption under section 11/12 were denied and the surplus generated was taxed as taxable income. For reference the assessment order is reproduced herein under:

Return of Income was filed on 30.09.2014. The case was selected in CASS for complete scrutiny. Notice u/s 143(2) was issued on 31.08.2015 in response to which Sh. Ajay Goyal, C.A attended from time to time and filed the requisite details. The assessee has been claiming exemption u/s 11/12 of I.T.Act, the trust has been registered on 17.02.1965 with the objects to promote the educational clarification 'etc. However a hospital is being run presently under the aegis of the said trust apart from the hospital a school and another charitable organization has been shown as the working areas of the trust. The registration u/s 12A has been granted to the trust by C.I.T- Patiala on 08.09.1975. 2. The total receipts from the activities had been shown at Rs. 34,15,81,911/-. The income has been shown at Rs. 6,86,27,417/-. There have been investment in the capital assets through which the assessee has tried to show that more than 85% of the receipts have been utilized for charitable purposes. The I.T.I of this office was deputed to enquire about the activities. It transpired that from a single site three different hospitals are being run. In fact another society with the name of M/s Om Savitri Jindal Charitable Society is running two different hospitals and the assessee trust has been running a medical hospital with the name of M/s N C Jindal Institute of medical Care and Research. Although the three buildings are separate yet the affairs of all the hospitals are intermingled as is clear from the copies of the accounts which have been filed by M/s O P Jindal Institute of Cancer and Cardiac Research and M/s Om Savitri Jindal Institute of Nursing. Considering the intermixing, quarry was raised regarding the affairs being managed by the assessee. It transpired that the land bellowing to M/s N C Jindal Charitable Trust has been given on lease to the society for construction of building and running of two different hospitals at a meager sum. Further it also transpired that a loan from the bank has been taken by M/s N C Jindal Charitable Trust (assessee) mortgaging not only its own land but the land which has been given on lease. The more extinguishing fact is that the loan has been granted not to the trust (assessee) but to M/s Om Savitri Jindal Charitable Society on the land belonging to the assessee. 3. In order to substantiate the affairs the books of accounts and the ledger accounts were examined. It transpired that three are running accounts of the hospitals being managed by the society in the books of the assessee and there has been regular payments of the patients who have been admitted in the hospitals being run by the assessee. For example as on 30.04.2013 CT Scan charges of Rs. 4,87,764/- have been shown to be payable to M/s OP Jindal Institute of Cancer. Further on 22.05.2013 an amount of Rs.2,50,000/- have been shown as payable to OPG Care as received from patient Sh.Suresh Jain. Similarly on 14.06.2013 an amount of rs. 7,145/- has been shown as amount receivable from M/s O P Jindal Institute of Cancer. On 14.06.2013 an amount on electricity expenses of Rs. 14,35,350/- have been shown as receivable from M/s OP Jindal Institute of Cancer by the assessee. These are some of the examples which have been narrated out of the continuous transactions all through the year. Not only this there have been continuous transfer of funds

like on 22.11.2013 there has been transfer of Rs.10 Lakhs to M/s O P Jindal Institute of Cancer and Cardiac Research. Further on 28.11.2013 there has been transfer of Rs. 35 Lakhs to M/s OP Jindal Institute of Cancer and Cardiac Research. These amounts have been transferred without having any pendency of bills or services. The intermixing of the affairs of two different entities is further proving claimed when we see the construction of a multi story car parking which has been made to be constructed by the assessee. A total of Rs. 4,04,96,232/- invested has been said to be under the construction of the multi level parking which is being utilized by both the institute as there is no separate parking area. The investment under construction as well as the receipts are being shown by the assessee. 4. It transpired that during the previous year the assessee has made a donation of Rs. 2,20,000/- to M/s Om Savitri Jindal Charitable Society. The donations has been shown as corpus donation, there has been declaration from the society as well. The donation has been made on 19.06.2013 of Rs. 25 Lakhs and on 10.08.2013 of Rs. 95 Lakhs and on 31.03.2013 of Rs. 1 Crore. The donations have been shown to have been paid from the existing capital which was shown in the balance sheet of the society. As per provisions of explanation to section 11(2) any amount paid out of accumulated fund to other institute will not be treated as application of income and the same will be taxed in the year in which such payments is made out of accumulated income. The assessee was asked to clarify on these points vide reply dated 27.06.2016. It has been submitted by the assessee that only a sum of Rs. 2.20 Crore has been given as corpus donation where the trust had excess of income over expenditure of Rs. 6.86 Crores and there is no bar that the trust can be given corpus donation to another trust. The submission made by the assessee in this regard is not at all acceptable. First of all the payments have been made in three different dated before the earning of income of Rs. 6,86,27,417/-. Further the donations have been given out of accumulated capital which is shown in the balance sheet and not from the income and expenditure account. Further there has been no specific directions regarding the utilization of the funds being claimed as corpus donations as such the amount is liable to be added in hands of the assessee. 5. The intermixing of the two societies is clearly evident from the copy of the certificate from the HDFC bank wherein it has been mentioned as "To whom it may concern This is to certify that Om Savitri Jindal Charitable Society and its group concerns N. C.Jindal Charitable Trust, N. C. Jindal Institute of Medical Care and Research O. P. Jindal Institute of Cancer and Research are having its Term Loans and SB/CA accounts with our bank, As on 31.03.2014 account- wise outstanding/balance amount may be noted as below-

It cost on to show that the affairs of the trust are not reflecting the true affairs as there is clear intermixing and also the societies of the trust are being used by the society and vice-versa the payment. The amounts of the closing

balances mentioned in the said certificates CX pertaining to the M/s N C Jindal Institute of Medical Care and Research of Ks. 5,06,553.04/- is not reconcilable from the closing balances and reconciliation statement filed in the case of assessee. It is further seen that huge amount have been transferred on 31.03.2014 from the medical hospital to the trust. There has been a transfer of Rs. 30 Lakh on 31.03.2014 from HDFC Bank of the trust to the medical research institute, which is also not reconcilable. 5. The total receipts allowable for TDS as per 26AS has been shown as Rs. 51,60,834/-. Further the total TDS has been shown at Rs. 4,74,393/-. Thus there has been undisclosed TDS of Rs. 26,530/- which is not reconcilable. The affairs of the school being run by the trust in Delhi if also been perused, it transpired that the school is being run on purely commercial basis where the receipts in form of activity fees, computer fees, development fees, bus fees etc. have been shown. There has been total receipts of Rs.1,36,15,874/-. The affairs of the school have been shown through the copies of the accounts which clearly needs to intact with the school is being run as a pure commercial entity rather than having any charitable intent. 6. Considering all these aspects it is clear that the trust is being run in the form of pure commercial entity and the affairs of the trust are clearly intermixing with that of another society. The societies as well as the application of the trust used are not separable from that of another society and as such application shown towards charitable cannot be taken as verifiable. The utilization of the assets by another society and the non-reconciliation of various accounts tend to conclude that the activities of the trust are not charitable and hence the surplus generated by the activity of Rs.6,86,27,417/- is treated as taxable income. As exemption u/s 11/12 is denied the investment made towards capital assets is denied to the assessee as well. The assessment is completed on total income of Rs.6,86,27,417/-. As assessee has filed the inaccurate particulars. Penalty proceedings u/s 271(1)(c) are also initiated herewith. Issue ND and Challan. Charge interest accordingly.

4.

The Ld. CIT(A) dismissed the appeal of the assessee on the ground intermingling of the activities of the assessee trust and Om Savitri Jindal Charitable Society as both organization function from same premises and there were plethora of transactions between two. It is also mentioned that there is also a donation of Rs. 2.2 crores to Om Savitri Jindal Charitable Society, which is in the nature of corpus donation. The school run by the assessee is also mentioned to be running purely on commercial basis beside construction of multi level car parking, which is not incidental to charitable activities of the assessee trust. The findings of the Ld. CIT(A) are given in para 3.5 of the appellate order which are reproduced herein under: 3.5 I have considered the reasoning of the Assessing Officer for denial of the exemption. I have also considered the explanation provided by the assessee Trust and I find that there is no infringement on a part of the assessee Trust in its activity in terms of various provisions u/s.11, 12 or 13. The activity of the Trust was to ensure benefit of general public without any special treatment to any

particular religious community or for the benefit of any person referred to in section 13(3), the income of the Trust are not invested or deposited otherwise than as specified u/s.11(5). Moreover, the business ventures undertaken by the assessee Trust are found to be incidental to the attainment of the objectives of the Trust neither any investment of the Trust is found to be impermissible as per section 11(5). Therefore, I find that the Trust is eligible to get benefit of exemption u/s.11 of the Act and I direct the Assessing Officer to allow exemption to the income over expenditure for a sum of Rs.6,86,27,417/- as disallowed in the order passed u/s.143(3) on 15.11.2016.

5.

The Ld. AR during the hearing vehemently contested the basis for disallowance of exemption by the AO and its confirmation by the Ld. CIT(A). It claimed that the corpus donation was utilized by recipient society for charitable activity.

6.

Regarding the mortgaging of land it states that it was done to help another charitable organization engaged in the similar kind of activity essentially the facts claimed by the AO have not been denied however legal arguments in respect of the same have been taken.

7.

On the other hand the Ld. DR relied on the order of the Ld. CIT(A).

8.

We have considered the rival contention, it is noticed that while the contention of the AO and the arguments of the assessee have been reproduced in the order of the Ld. CIT(A), the finding of the Ld. CIT(A) is very cryptic and just confined to one paragraph which does not amount to a well reasoned order. Therefore in the interest of justice we set aside the impugned order and restore the matter back to the file of the Ld. CIT(A) for denovo adjudication.

9.

For the removal of doubt we make it clear that we have not decided the issue on merits and the Ld. CIT(A) should examine all the evidence on record and any further evidence which he / she may require for deciding this appeal and then pass a well reasoned order dealing with all the contentions raised by the AO and the assessee.

10.

In the result, appeal filed by the Revenue is allowed for statistical purposes.

Order pronounced on 05/10/2026 Sd/- Sd/- लिलत कुमार िवजय वमा� (LALIET KUMAR) (VIJAY VARMA) �ाियक सद� /JUDICIAL MEMBER लेखा सद�/ ACCOUNTANT MEMBER AG आदेश की �ितिलिप अ�ेिषत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent 3. आयकर आयु�/ CIT 4. आयकर आयु� (अपील)/ The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, च�ीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File ANUP Digitally signed by ANUPAMA GHERA AMA Date: BY ORDER, 2026.10.22 ASSISTANT REGISTRAR GHERA 16:37:25 INCOME TAX APPELLATE TRIBUNAL KENDRIYA SADAN, SECTOR-9A +05'30' CHANDIGARH

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