ITAT Mumbai Sets Aside CIT(A) Order for Ignoring Bombay High Court Interim Relief in Section 10(23C)(via) Exemption Dispute
Overview of the Case
The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) recently delivered a significant ruling in the matter of Breach Candy Hospital Trust Vs ACIT (Exemption), concerning the claim for exemption under Section 10(23C)(via) of the Income Tax Act, 1961. The Tribunal set aside the order passed by the first appellate authority on the ground that it had proceeded to dispose of the appeal without giving due regard to the pending writ petitions before the Hon'ble Bombay High Court and the interim relief already granted therein. The appeal was allowed for statistical purposes, with clear directions for the appellate authority to await the final outcome of the writ proceedings.
Background and Facts of the Case
Who Is the Assessee?
The assessee in this matter is a charitable Trust registered with the Charity Commissioner, Mumbai. It is also registered under Section 12A of the Income Tax Act, 1961, and has been engaged in running a hospital for providing medical care to the public. Given the nature of its activities, the Trust had sought approval under Section 10(23C)(via) of the Act to claim tax exemption on its hospital income.
It is relevant to note that the assessee had previously availed exemption under Section 10(22A) of the Act from Assessment Years 1970-71 to 1995-96. Thereafter, the Central Board of Direct Taxes (CBDT) granted approval under Section 10(23C) of the Act vide order dated 10.04.2003, pursuant to which the Trust availed exemption for Assessment Years 1999-2000 to 2001-02.
The Rejection of Approval and Writ Petitions
The Trust's application for renewal of approval under Section 10(23C) for Assessment Year 2010-11 was rejected by the Chief Commissioner of Income Tax vide order dated 15.04.2010. Aggrieved by this rejection, the assessee approached the Hon'ble Bombay High Court by filing Writ Petition No. 2462 of 2010.
Among the reliefs sought in the said writ petition, the assessee requested that:
"Pending the hearing and final disposal of the present Petition, the Respondents be: (i) restrained from giving effect to the order dated 15th April, 2010 (Exhibit 'U' hereto) or to bring the surplus earned by the Petitioner to tax under the Act, and (ii) complete assessments and all other proceedings under the Act on the basis that the Petitions applications under section 10(23C)(via) are approved."
The Hon'ble High Court granted interim relief in terms of the above prayer vide order dated 17.01.2011, which was subsequently made absolute on 13.06.2011.
Subsequently, the assessee filed another application seeking renewal of approval under Section 10(23C)(via). This application was also rejected by the competent authority vide order dated 28.09.2012. Challenging this second rejection, the assessee filed Writ Petition No. 1051 of 2013 before the Hon'ble Bombay High Court with prayers similar to those in Writ Petition No. 2462 of 2010. The High Court admitted the petition and granted similar interim relief vide order dated 25.04.2014.