Hamdard eligible for exemption u/s 10(23C) (iv) for business held in trust, as dominant purpose of assessee is charitable

Delhi High Court held In the case of Hamdard Laboratories India and Anr vs. ADIT (E) & DGIT (E) that Hamdard‟s objects are charitable in nature and its activities relating to manufacture and sale of unani medicines and other allied businesses are only meant to act as a source of funds for its charitable activities. It is undisputedly a case of a business held in trust, and Hamdard has been consistently applying the proceeds of its activities for charitable purposes.

On the matter of accumulation of profits more than permissible years, this Court finds that the DGIT(E) has misintepreted the provision concerning accumulation of income, third proviso to Section 10(23C) (a), which forms condition (a) in the order granting exemption under Section 10(23C)(iv) dated 28.12.2007. That provision mandates that income accumulated in excess of 15% of the total income should be utilized within five years of the period of accumulation. It does not bar all forms of accumulation. The DGIT (E) has nowhere concluded that Hamdard accumulated in excess of 15% of the income, much less concluding that any amount in excess of 15% accumulated by Hamdard was not utilised within a period of five years of its accumulation. Further, Revenue‟s contention that Hamdard had admitted a certain amount to be deemed income within the meaning of Section 11(3) of the Act does not conclusively determine the issue. It is settled that estoppel does not apply under the Act and the assessee can resile from an incorrect position it had adopted earlier (refer CIT v. Bharat General Reinsurance, 81 ITR 303).

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