Income Tax Appeal (ITA 1311/DEL/2022) – DCIT vs. Hamdard Laboratories India related to Exemption Claim

The income tax appeal case number ITA 1311/DEL/2022 involves the appellant, DCIT, Circle-1(1)-Exemption, New Delhi, and the respondent, Hamdard Laboratories (India), New Delhi. The case pertains to the assessment year 2016-17 and revolves around the appellant’s challenge against the order dated 30.03.2022 of the Ld. Commissioner of Income Tax (Appeals) NFAC, Delhi (CIT(A)) related to exemptions under sections 11 and 12 of the Income Tax Act, 1961.

The Revenue raised concerns that Hamdard Laboratories (India) offered substantial concession in rent to persons specified under section 13(3), which was seen as a violation of Section 13(2)(b) of the Act, 1961. The primary argument was centered around whether the Ld. CIT(A) erred in allowing the appeal of the assessee by neglecting the significant concession in rent provided to related entities, leading to a potential violation of the Income Tax Act provisions regarding exemptions.

In response to the appeal filed by the Department, Hamdard Laboratories (India) defended their stance by elaborating on their charitable nature and trust registration under section 12A. Their filing for AY 2016-17 showed ‘nil’ income after claiming exemptions under sections 11 and 12. The debate highlighted the application of properties leased at concessional rates to trustees and their family members, which the Department argued could attract provisions of section 13(2)(b).

However, after careful examination and considering the remand report and counter comments alongside the appellate proceedings under the faceless scheme, the Ld. CIT(A) concluded that Hamdard Laboratories (India) is a charitable institution eligible for exemptions under section 10(23C)(iv) or under sections 11/12 of the Act. The judgment referenced various judicial precedents supporting the authority of appellate bodies to entertain fresh claims and emphasized the absence of undue benefits to specified persons under section 13(3) of the Act. Consequently, the plea for exemption under section 10(23C)(iv) was deemed justifiable, and the original grounds of appeal raised by the Department relating to the violation of exile provisions were dismissed.

The Income Tax Appellate Tribunal (ITAT), upon reviewing the matter, upheld the decision of the Ld. CIT(A), leading to the appeal by the Revenue being dismissed. The Tribunal’s judgment reaffirmed the eligibility of Hamdard Laboratories (India) for the claimed exemptions, marking a significant decision that emphasizes the principle of consistency and the detailed examination required when invoking the provisions of section 13 related to exemptions in charitable trusts.

This case illustrates the intricate balance between the scrutiny of tax exemption claims and the recognition of charitable institutions’ genuine efforts towards public welfare through their activities and operations.

Income Tax Appeal (ITA 1311/DEL/2022) – DCIT vs. Hamdard Laboratories India related to Exemption Claim