Facts of the Case

The present batch of appeals was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT), which had allowed the assessee’s appeal. The core allegation by the Revenue was that the assessee, a charitable foundation, had granted scholarships predominantly to students belonging to a particular religious community, allegedly violating Section 13(1)(b) of the Income Tax Act, 1961.

The Tribunal relied on earlier assessment years (2010–11 and 2011–12), wherein the Commissioner of Income Tax (Appeals) [CIT(A)] had recorded a factual finding that scholarships were awarded to students across all communities without discrimination. This finding had been accepted by the Revenue in earlier years.

Issues Involved

  1. Whether granting scholarships allegedly to students of a particular religious community violates Section 13(1)(b) of the Income Tax Act, 1961.
  2. Whether the ITAT erred in ignoring the findings of the Assessing Officer regarding targeted benefits.
  3. Whether consistency in tax proceedings should be maintained when facts remain identical across assessment years.

Petitioner’s Arguments (Revenue)

  • The Assessing Officer found that the assessee granted merit-cum-scholarships predominantly to candidates belonging to a specific religious community.
  • The scholarship advertisement was published in Urdu and only in one newspaper, indicating an intention to restrict benefits to a particular community.
  • Such conduct amounts to violation of Section 13(1)(b), which denies exemption where income is applied for the benefit of a particular religious community.

Respondent’s Arguments (Assessee)

  • The scholarships were awarded to poor and needy students across all communities without discrimination.
  • Earlier findings by CIT(A) for Assessment Years 2010–11 and 2011–12 clearly established that there was no restriction to any particular community.
  • The Revenue had accepted these findings in earlier years and could not selectively challenge the same issue in subsequent years without new material evidence.

Court’s Findings / Order

  • The Delhi High Court observed that both CIT(A) and the Tribunal had given concurrent findings of fact that scholarships were not confined to any particular religious community.
  • Mere publication of advertisement in Urdu or in a single newspaper does not establish intent to restrict benefits to a specific community.
  • The Court emphasized the principle of consistency in tax proceedings, holding that departure from earlier accepted findings without new evidence would lead to contradictory outcomes.
  • Relying on Commissioner of Income Tax vs. Sridev Enterprises (1991) 192 ITR 165, the Court reiterated that consistent approach must be followed.

Final Order

The Court held that no substantial question of law arose and accordingly dismissed the appeals filed by the Revenue.

Important Clarification

  • Section 13(1)(b) applies only when benefits are exclusively for a particular religious community.
  • If factual findings establish non-discriminatory application of funds, exemption cannot be denied.
  • Consistency in assessment across years is a key principle unless new facts emerge.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1249-DB/MMH06042022ITA1172021_182026.pdf

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