HAMDARD NATION FOUNDATION (INDIA),NEW DELHI vs. ACIT (E), NEW DELHI

Following grounds have been raised by the assessee: “1. That the CIT(A) erred both on facts and in law in upholding the actions of the AO in denying the benefit of the exemption under section 11 of the Income Tax Act 1961 ("the Act").

That the CIT(A) failed to appreciate that the AO had erred in applying the Provisions of Section 13(2) (b) read with Section 13(3) of the Act without any evidence and without discharging the onus that lay on the AO under the law.

That the CIT(A) failed to appreciate that the lease transactions were between two Charitable Institutions and no individual had derived any benefit there from.

That the CIT(A) not only erred in by-passing the Principle of Consistency so ably followed by her predecessors, but chose not to agree with their orders for the assessment years 2008-09, 2010-11, 2011-12 & 2012-13 without adverting to any points of distinction.

The CIT(A) further erred in upholding the action of the AO in subjecting to tax the corpus donations which were in the nature of capital receipts irrespective of the Act whether exemption u/s 11 of the Act was available or not.

That the CIT(A) erred in not deciding on merits Ground 2 and 4 in the Appeal.

That the CIT(A) further erred in not allowing the deduction on account of depreciation, donations and other outgoings which otherwise were available irrespective of the exemption u/s 11.”

Brief history and facts of the case are as under:

The grounds raised in the instant appeal pertaining to application of provisions of Section 13(2)(b), lease transactions, alternate plea and the corpus donations have

Coming to the issue covered by grounds No. 1 to 5, namely, rejection of exemption under section 11 of the Act on the ground of violation of provisions under section 13(2)(b) of the Act read with section 13(3) of the Act, it could be seen from the assessment order for the assessment year 2007-08, during the scrutiny learned Assessing Officer found that the assessee received a sum of Rs.46,41,028/- towards rentals received in respect of the property of the assessee. On enquiries, learned Assessing Officer came to know that the market rent of the properties at a Chanakya Puri and Asaf Ali road was much higher than the rent at which the assessee had entered into agreement with its substantial donor Hamdard Dawakhana among other organizations. Further, we find that the learned Assessing Officer based the addition on the website information and also two letters from two estate agents under section 133(6) of the Act from one HSN Reality Services and CB Richard Ellis South Asia private limited.

Ld. CIT(A), on consideration of the material available on record and in the light of the submissions made on either side, observed that the onus to prove the basis for the addition was on the learned Assessing Officer; that the examination of the facts reveal that such a onus was not discharged by the Revenue because the learned Assessing Officer was completely misdirected by placing the onus on the assessee; that the assessing officer had acted entirely on the basis of information on the Internet without confronting the assessee with any evidence and that also under legal notion that something which was in the public domain need not be confronted to the affected party; that the learned Assessing Officer having accepted that there was no mechanism with the Department to undertake “valuation of rent” should not have applied the provisions under section 13 of the Act entirely on surmises and conjectures without the existence of evidence including the so-called collaborative evidence; that the property at Asaf Ali road was tenanted to HLI as far back as in the year 1981 with a periodical increase in the rent and on numerous occasions in the numerous assessments framed under section 143(3) of the Act, learned Assessing Officer had accepted the agreement between the parties is not violative of section 13 of the Act; that the property Chanakya Puri was not occupied till December 2009, lying vacant prior thereto; and that there had to be uniformity in treatment and consistency of approach when the facts and circumstances were identical and the learned Assessing Officer cannot change his view by examining the same set of facts in a different light, more so when the question is one of an exemption enjoyed over a few decades and the case of the Department sans evidence. Ld. CIT(A), therefore, for the assessment year 2008-09 had taken a view that such an addition is not sustainable. However a different view was taken for few other years.

It is the submission on behalf of the assessee that right from 1981- 82 for about a period of 26 years, on the same set of facts, the rents received by the

Grievance of the assessee has been that the learned Assessing Officer never confronted the assessee with any evidence that was collected behind the back of the assessee, but the learned Assessing Officer maintained that the said information is available on Internet and can also be accessed from the Internet which is a public domain and the Department has no method to have valuation of rent done independently by any government agency.

As a matter of fact, in the order for the assessment year 2008-09, Ld. CIT(A) dealt with this aspect in detail and recorded a finding that the learned Assessing Officer cannot say that the information collected by him has already been in the public domain and not obtained behind the back of the assessee, inasmuch as the Assessing Officer is duty bound to confront the assessee with such information if it is to be used against the assessee in any proceedings. CIT(A) further found that it is an admitted fact that the property of the assessee at

It has rightly been observed by the Ld. CIT(A) that there has to be uniformity in treatment and consistency in approach when the facts and circumstances are identical and the learned Assessing Officer cannot change the views by looking at the same set of facts in a different manner more so when the question is of exemption enjoyed by an assessee for the last few decades and case of Revenue sans evidence and based entirely on surmises and conjectures.

It could be seen from the letters issued by HSA reality services and CB Richard Ellis South Asia private limited, they have given information available with them and to the best of their knowledge and belief whereas CB Richard Ellis South Asia Private limited is clear in their observation that there is no verified market referral rate and the information furnished by them and make no guarantee, warranty or representation about it, requested the learned Assessing Officer to independently verify and confirm its accuracy and completeness. They are also specific in their statement that the information furnished by them does not represent the current or future performance of the market. Even on the face of the caveat mentioned above, it does not 8 seen from the record that the Assessing Officer did any independent exercise to verify the correctness or applicability of the information furnished by those two persons vis-à- vis the extent location and suitability of the property in dispute for its comparison to the market rates provided by those persons and also the information gathered from the website.

Moreover, the lease agreement in question was executed on 16/7/1982 in respect of Asaf Ali road property and also for this period this agreement was accepted in the same set of facts and circumstances without raising any objection. It is submitted on behalf of the assessee that, the assessee gave property on rent to another charitable trust which perhaps has given the same to its directors so should there be anything to be charged to tax that has to be charged to tax in the hands of such other charitable trust or the director, but in any case not in the hands of the assessee.

On consideration of the entire material before us and in the light of the submissions made on either

We are, therefore, convinced with the reasoning given by the Ld. CIT(A) in his order for the Assessment Year 2008-09 wherein while dealing with this issue in detail, the Ld. CIT(A) reached a conclusion that on the date of the observations of the learned Assessing Officer that there is no mechanism with the Department to determine “valuation of rents” imperative the adjudicatory authorities to look further corroborative evidence in the absence of which it is not desirable to disturb the consistent view taken over a period of more than two decades. We are in agreement with the Ld. CIT(A) that not only on the basis of the rule of consistency but also on the basis of the facts relating to the rent received by the assessee from HLI vis-à-vis the rent under the Delhi Rent Control Act. Without vouchsafing the correctness of the information received from the website and without correlating the information furnished by the property dealers without realities on ground with a specific reference to the property in dispute, it is not open for the Assessing Officer to proceed to make addition, that disturbing the accepted position for about more than two decades. No change of facts and circumstances are brought on record and no independent evidence with a specific relation to the property in dispute is available on record. Merely because the other charitable trust guilty property for accommodation of the person covered under section 13(3) of the Act, such a fact ipso facto does not lead to the addition in the hands of the assessee without

Ground No. 6 relates to the alternative ground taken by the assessee before the Ld. CIT(A) stating that in the event that exemption is not allowed, a sum of Rs.9,43,81,000/- has to be excluded from the taxable income.

Ld. CIT(A), on this aspect, observed that as per the definition of ‘income’ as contained in section 2(24)(iia) of the Act, income includes voluntary contributions received, and further the said voluntary contributions are not included in total income by virtue of the provisions of section 12(1) of the Act which deems such contributions to the income derived from property held under the trust. According to him, once the provisions of section 11 are not applicable, such contributions have to be charged to tax in terms of section 164(2) of the Act and on this premise, Ld. CIT(A) rejected the contention of the assessee for exclusion of Rs.9,43,81,000/-.

It is submitted by the Ld. AR that from a reading of section 12(1) of the Act and Section 2(24)(iia) of the Act, it clearly emerges that the position would change in case an institution is not treated as a charitable being denied the benefit of section 11, then the sums received as voluntary contributions would not be treated as “income”. He placed reliance on the decision of the Hon’ble Andhra Pradesh High Court in the case of CIT vs. SRMT staff Association (1996) 221 ITR 234 (AP).

On grounds No.1 to 5, it is held that the assessee cannot be denied exemption under section 11 and 12 of the Act by invoking the provisions under section 13(2)(b) of the Act read with section 13(3) of the Act. On the face of the findings returned on grounds No. 1 to 5, the question of alternative plea does not

I.T.A. No. 1640 of 2019 is, accordingly, allowed in part.”

During the year, the assessee received corpus donations of Rs.55.85 crores. The AO denied the benefit u/s 11(1D) and brought this amount to tax treating the assessee as AOP. This issue has been covered by the order of ITAT as mentioned above:

We have gone through the record in the light of the submissions made on either side. Facts of this case are quite similar to the facts involved in the case of Patanjali Yogpeeth (Nyas) (supra) wherein it is held that in the absence of any allegation or proof as to the assessee undertaking any activities in the nature of trade, commerce or business, donations received by the assessee forms part of the corpus of trust and thus capital receipt are not liable to tax. The objects of the assessee as discussed above clearly established that they are in the nature of providing education, medical relief and relief to the poor and no evidence is available on record to say that the assessee has been providing services in the nature of business. We, therefore, are of the considered opinion that the corpus donation is a

To conclude, we hereby hold that, a) Provisions of Section 13(2)(B) are not applicable to the case of the assessee b) No individual benefit has been derived with regard to the lease transactions c) Alternate ground becomes infructuous d) Corpus donations are in the nature of capital receipts in the instant case and hence doesn’t constitute a part of income and expenditure statement.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 03/06/2020.