THE GHALIB INSTITUTE vs. INCOME TAX OFFICER (E)

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ITA/373/2019HC DelhiDLHC01018480201912 April 2019Author: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE PRATEEK JALAN2 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the ITAT had failed to address the reasoning of the AO and the CIT(A). The Court found it clear that the ITAT did not even address the reasoning provided, which included references to various binding decisions. Consequently, the High Court was of the opinion that the impugned ITAT order required to be set aside. The ITAT was directed to proceed to hear the appeal on its merits and independently decide whether the reasoning of the CIT(A) and the AO's order were sound and in accordance with the law. The appeal was allowed in these terms, with the ITAT being directed to re-adjudicate the matter.

What were the facts?

The assessee, The Ghalib Institute, is an entity granted exemption under Section 12A of the Income Tax Act and had enjoyed this benefit for many years. For the assessment year 2011-2012, the Assessing Officer (AO) brought rental income received by the assessee to tax, asserting it indicated commercial activity. The Commissioner of Income Tax (Appeal) [CIT(A)] set aside the AO's order, relying on authorities that mere receipt of rental income does not constitute commercial activity for a charitable institution. The Income Tax Appellate Tribunal (ITAT) then set aside the CIT(A)'s findings, stating that neither the AO nor the CIT(A) had examined the matter comprehensively. The assessee appealed this ITAT order to the High Court.

What were the issues?

1. Whether the ITAT failed to address the reasoning of the CIT(A) and the AO in its order, thereby not deciding the appeal on merits, concerning the taxability of rental income received by an assessee granted exemption under Section 12A of the Income Tax Act? Assessee's Contention: The assessee argued that the ITAT failed to refer to the reasoning of the CIT(A), who had set aside the AO's decision. The CIT(A) had cited authorities to the effect that mere receipt of rental income does not amount to commercial activity for a charitable institution. Revenue's Contention: The judgment does not record specific arguments made by the revenue before the High Court, other than their representation through counsel.

Which sections of the Income-tax Act were involved?

Section 12A,Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
$~21 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 373/2019 THE GHALIB INSTITUTE .....Appellant Through: Mr.Simran Mehta & Mr.Javed Akhtar, Advocates versus INCOME TAX OFFICER (E) .....Respondent Through: Mr.Zoheb Hossain, Sr.Std.Counsel CORAM: HON’BLE MR. JUSTICE S. RAVINDRA BHAT HON’BLE MR. JUSTICE PRATEEK JALAN

O R D E R %

12.04.

2019

CM Appl. 17227/2019 (exemption)

Exemption allowed, subject to all just exceptions.

The application is disposed of. ITA 373/2019 & CM Appl. 17226/2019 (stay)

1.

Issue notice. Mr.Zoheb Hossain, Senior Standing Counsel accepts notice.

2.

The assessee/appellant’s grievance under Section 260A of the Income Tax Act is that the ITAT did not refer to the reasoning of the Commissioner of Income Tax (Appeal) CIT(A) to set aside the decision of the Assessing Officer (AO), that the rental income received by the assessee in this case rendered it taxable. The assessee was granted exemption under Section 12A This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/06/2026 at 13:15:29

of the Income Tax Act and enjoyed that benefit for many years. For the present year i.e. 2011-2012, the amounts received by it as rental income were brought to tax on the ground that they indicated commercial activity. The CIT(A) set aside the order of the AO, citing several authorities in that regard to the effect that mere receipt of rental income does not amount to commercial activity of the charitable institution. The ITAT set aside those findings observing that neither the AO nor CIT(A) examined the matter in full.

3.

After hearing learned counsel for the parties, we are of the opinion that the ITAT failed to address the reasonings of the AO and the CIT(A), which is clear as to why the assessee’s pleas were dealt with in the manner they were. Clearly, the ITAT did not even address the reasonings which included advertence to various binding decisions. In the light of these observations, the Court is of the opinion that the impugned order requires to be and is, therefore, set aside. The ITAT shall proceed to hear the appeal on its merits and independently decide whether the reasoning of the CIT(A) as well as AO’s order is sound and in accordance with law.

4.

The appeal is allowed in the above terms.

5.

Copy of the order be given dasti.

S. RAVINDRA BHAT, J

PRATEEK JALAN, J APRIL 12, 2019 „hkaur‟ This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 24/06/2026 at 13:15:29

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