INCOME TAX ACT, 1961

Section 11 Section 13(2)(b) Section 13(3)

Charitable trust - Bar to exemption under section 11 - Rental receipt alleged low as determined by assessee and sister concern -

Hamdard Laboratories (India) ('HLI') came into existence being constituted on 28-8-1948. Partners of the business in HLI were also known as 'Hamdard Dawakhana (Wakf). Hamdard National foundation (India) ('HNF') ('Assessee') was set-up as a charitable trust in 1964 with the main objects of running educational and medical institutions/providing medical relief, namely, as a special purpose vehicle to effectuate charitable activities of HLI. Hamdard Dawakhana (Wakf) as a charitable institution had been enjoying benefits of sections 11 and 12. During the scrutiny AO found that assessee received a sum of Rs. 46,41,028 towards rentals received in respect of property of the assessee. On enquiries, AO 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 organisations. AO based the addition on the website information and also two letters from two estate agents under section 133(6). CIT(A) allowed assessee's. appeal.Held: The law requires the revenue to bring on record cogent evidence to justify invocation of section 13 and material collected by the AO from the Internet as well as the estate agents cannot be termed as the collaborative piece of evidence to any facts which was established substantively first; that actual rent received by the assessee from HLI far exceeds the valuation adopted by the MCD for the purpose of levying house tax as could be seen from the information furnished by the assessee and also that unless and until the AO brings on record some credible information, the burden to rebut does not shift to the assessee. The Tribunal was in agreement with the 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-a-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 was not open for the AO to proceed to make addition, that disturbing the accepted position for about more than two decades. Merely because the other charitable trust guilty property for accommodation of the person covered under section 13(3), such a fact ipso facto does not lead to the addition in the hands of the assessee without first clinching the issue with corroborative piece of evidence. There was, therefore, no justification for addition made by the AO by invoking the provisions under section 13(2)(b) read with section 13(3) and therefore, AO was directed to delete the same.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2007-08 to 2012-13

INCOME TAX ACT, 1961

Section 10(23C)(iv)

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