Protecting Charitable Funds from Retrospective Tax Rules: ITAT

Can they retroactively change the rules for money you already saved

Facts of the Case

The Holy Spirit Hospital trust is in a tax dispute over Rs. 29 Crore saved in 2017-18, during a period when six years of expenditure were permitted. A 2022 regulation change eliminated the sixth year, prompting tax authorities to classify the entire amount as taxable income, claiming the hospital utilized the funds that year. The tax department is enforcing a stricter deadline retroactively, while the trust maintains the original timeline promised for the funds.

Issue of the Case

Does the new law enacted in 2022 pertain to funds that were previously saved according to the old regulations?

Decision Of the Tribunal

The Tribunal ruled in favor of the hospital, affirming the trust’s “vested right” to the six-year spending period set at the funds’ allocation. The court deemed it unfair to change the rules mid-process and impractical for the trust to spend ₹29 Crore within 24 hours after the new law on March 30 and the financial year-end. Consequently, the tax bill was annulled, confirming the hospital acted within its legal rights.