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 appeal of the assessee, namely Hamdard National Foundation (India).

The core allegation by the Assessing Officer was that the assessee had distributed scholarships/financial assistance predominantly to students belonging to a particular religious community, thereby allegedly violating Section 13(1)(b) of the Income Tax Act, 1961.

It was further contended that the scholarship advertisement was published in Urdu language and only in one newspaper, suggesting an intention to benefit a specific community.

However, both the Commissioner of Income Tax (Appeals) [CIT(A)] and ITAT recorded concurrent findings that scholarships were granted to students from all communities without discrimination.

Issues Involved

  1. Whether granting scholarships allegedly benefiting a particular religious community violates Section 13(1)(b) of the Income Tax Act, 1961?
  2. Whether publication of scholarship advertisement in Urdu indicates restrictive intent?
  3. Whether the Revenue can take a different stand in subsequent years when earlier findings were accepted?

Petitioner’s Arguments (Revenue)

  • The assessee granted scholarships predominantly to a particular religious community, violating Section 13(1)(b).
  • The scholarship advertisement in Urdu and limited publication indicated an intention to restrict benefits to a specific community.
  • The Tribunal ignored material findings of the Assessing Officer.

Respondent’s Arguments (Assessee)

  • Scholarships were granted to poor and needy students across all communities without discrimination.
  • Similar findings for earlier assessment years (2010-11 and 2011-12) were accepted by the Revenue and not challenged.
  • No fresh material was brought by the Revenue to contradict earlier factual findings.

Court’s Findings / Judgment

  • The Delhi High Court upheld the concurrent findings of CIT(A) and ITAT that scholarships were not restricted to any particular religious community.
  • Merely publishing an advertisement in Urdu or in a single newspaper does not establish discriminatory intent.
  • The Court emphasized consistency in tax proceedings, noting that earlier findings accepted by the Revenue cannot be arbitrarily challenged in subsequent years.
  • No substantial question of law arose in the matter.

Result: Appeals filed by the Revenue were dismissed.

Important Clarifications

  • Section 13(1)(b) applies only when benefits are exclusively restricted to a particular religious community.
  • Incidental or perceived concentration of beneficiaries does not automatically lead to violation.
  • Language of advertisement alone is insufficient to prove discriminatory intent.
  • Consistency principle plays a crucial role in tax litigation.

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

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