Facts of the Case

The present appeal was filed by the Revenue challenging the order dated 28th August 2019 passed by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘B’ for Assessment Year 2012–13. The core issue arose from the grant of exemption to the assessee under Sections 11 and 12 of the Income Tax Act, 1961.

The assessee, a charitable trust, had entered into an Operational and Management Agreement with a private entity (Fortis Hospital Pvt. Ltd.) for managing Rajan Dhall Hospital. The Revenue contended that such an arrangement indicated commercial activity inconsistent with charitable purposes.

Issues Involved

  1. Whether the assessee was entitled to exemption under Sections 11 and 12 of the Income Tax Act, 1961.
  2. Whether the activities of the assessee fell within the definition of “charitable purpose” under Section 2(15) of the Act.
  3. Whether entering into a management agreement with a private hospital entity rendered the activities commercial and violative of Section 11.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in granting exemption under Sections 11 and 12.
  • The activities carried out by the assessee were purely commercial in nature and did not qualify as “charitable purpose” under Section 2(15).
  • The transfer of management and operational control of the hospital to a private company (Fortis Hospital Pvt. Ltd.) was for commercial purposes and violated Section 11 of the Act.

Respondent’s Arguments (Assessee)

  • The activities in question had been consistently carried out since Assessment Year 2007–08.
  • Similar exemptions had been granted in earlier and subsequent assessment years under identical circumstances.
  • There was no change in facts or law to justify denial of exemption for the relevant assessment year.

Court’s Findings / Order

  • The Court observed that the ITAT, being the final fact-finding authority, had correctly concluded that the Revenue failed to establish that the activities were confined only to the relevant assessment year.
  • It was noted that exemptions had been consistently allowed in earlier and subsequent years under similar circumstances.
  • The Court emphasized the principle of consistency and uniformity, holding that the ITAT’s order did not suffer from perversity.
  • The Court concluded that no substantial question of law arose in the present appeal.

Final Order:

The appeal filed by the Revenue was dismissed.

Important Clarification

  • The judgment reinforces that consistent treatment across assessment years is crucial unless there is a material change in facts or law.
  • Even where allegations of commercial activity are raised, past acceptance by the Revenue plays a decisive role.
  • The Court did not re-examine factual findings where the ITAT had already adjudicated them. 

Sections Involved

  • Section 11 – Income from property held for charitable or religious purposes
  • Section 12 – Income of trusts or institutions
  • Section 2(15) – Definition of “Charitable Purpose”

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:509-DB/MMH07022022ITA1372021_122357.pdf

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