Delhi HC stays Income Tax Order revoking Tax Exemption to NGOs like Oxfam and Care India

The Delhi High Court has stayed the income-tax department’s order revoking Oxfam India and Care India Solutions for Sustainable Development’s tax exemption status but has directed the NGOs to only accept domestic contributions and keep proper accounts of the funds they receive, including contributor details.

The high court, in an order issued on January 18 and made public on Monday, also asked the non-profits to use the funds in a way that aligned with their objectives and to provide details of the same. The order was issued in response to petitions filed by the two NGOs challenging the IT department’s order revoking their tax exemption status in September of last year.

A bench of justices Yashwant Varma and Purushaindra Kumar Kaurav granted relief to the NGOs, noting that a coordinated bench of the court had halted the IT department’s order withdrawing the tax exemption licence of the think tank Centre for Policy Research on August 25, last year. The Income Tax department challenged the August 25 order in the Supreme Court, but the court refused to postpone the ruling.

“We also recognise the importance of taking a consistent and uniform approach when it comes to interim orders. This is because an identical challenge was duly heard by a coordinated Bench of this Court, and interim protection was granted,” the bench stated.

“We, therefore, hold that the petitioners shall be able to receive interim reliefs in terms identical to those specified in paragraphs 17-19 of the aforenoted order of 25 August 2023… subject to the explanation that the donations that may be accepted by the petitioners pursuant to the aforenoted interim directions shall be confined to domestic contributions only,” it went on to say.

The court also extended its interim order on CPR until February 27, when the applications filed by Oxfam, Care India, and CPR will be considered next.

The IT department cancelled Oxfam’s tax exemption status on September 30, months after conducting a search of its premises. Oxfam, represented by senior attorney Arvind Datar, claimed on Thursday that the Supreme Court on January 5 upheld the High Court’s August 25 order on CPR.

To be sure, in August, a bench of justices Rajiv Shakdher and Girish Kathpalia stayed the income tax reassessment proceedings against CPR, which had been initiated on the basis that it was allegedly engaged in litigation activities that violated Section 8(1) of the Foreign Contribution (Regulation) Act (FCRA).

The Tax department, represented by special counsel Zoheb Hussain, sought dismissal of the writ on the grounds that the Income Tax Tribunal was competent to consider the matter of retrospective cancellation of a tax exemption licence.