2023 (8) TMI 1449 - HC - Income Tax

Trust's Tax Exemption Upheld: Appeal Dismissed, Exemption Restored u/s 11 of Income Tax Act.

Commissioner of Income Tax (Exemptions), Pune Versus Lata Mangeshkar Medical Foundation

The HC dismissed the appeal against the ITAT's decision, which upheld the CIT(A)'s restoration of the trust's exemption under Section 11 of the Income Tax ... Exemption u/s 11 - denial of claim vide assessment order u/s 143(3) as Assessee-Trust had not furnished proper information to the Charity Commissioner and there was shortfall in making provision of Indigent Patients Fund (“IPF”) - Also Assessee-Trust had generated huge surplus and therefore, the intention of the trust was profit making as running a canteen in the hospital with profit motive and was not providing free meals - CIT(A) followed the orders of his predecessor for Assessment Years 2008-2009 and 2009-2010 and decided the issue in favour of Assessee which was upheld by ITAT - HELD THAT:- ITAT in the impugned order has also followed what its co-ordinate Bench held in its order [2016 (4) TMI 1307 - ITAT PUNE] for Assessment Years 2008-2009 and 2009- 2010. Since there was nothing on record before the ITAT (or even before us) that the order of ITAT dated 15th April 2016 has been set aside or overruled in any manner by the High Court, the ITAT found no reason to interfere with the order of CIT(A). Therefore, we also find no reason to interfere with the order of ITAT. Decided against revenue. Issues involved:The judgment deals with the denial of exemption under Section 11 of the Income Tax Act, 1961 to a trust running a hospital due to various reasons such as shortfall in the provision of Indigent Patients Fund, generating surplus indicating profit-making intentions, running a canteen with profit motive, violation of provisions related to remuneration, and alleged lack of services to the poor and underprivileged.Issue 1: Shortfall in Indigent Patients Fund provisionThe Assessing Officer denied exemption under Section 11 of the Act due to the trust's failure to credit the required amount to the Indigent Patients Fund as per the Charity Commissioner's observation. The AO noted that only Rs. 75.96 lakhs were credited instead of the necessary Rs. 2.14 crores.Issue 2: Profit-making intentionsAnother ground for denial of exemption was the trust's substantial surplus generation, leading the AO to believe that the trust aimed at profit-making rather than charitable activities. The AO alleged that the hospital did not serve the poor and underprivileged, indicating a profit motive.Issue 3: Canteen operations and remuneration violationThe AO also pointed out the trust's operation of a canteen with a profit motive and failure to provide free meals. Additionally, the violation of Section 13(1)(c) was alleged due to remuneration paid to individuals lacking qualifications, raising concerns about the trust's compliance with legal provisions.Commissioner's decision and ITAT appealThe Commissioner of Income Tax (Appeal) restored the exemption under Section 11 for the trust, citing similarities with previous assessment years. The Income Tax Appellate Tribunal (ITAT) dismissed the Revenue's appeal challenging the CIT(A)'s decision, as it aligned with previous rulings for similar assessment years. The ITAT upheld the CIT(A)'s decision, finding no reason to interfere based on the lack of evidence overturning previous judgments.ConclusionAfter considering the findings, the High Court found no issues with the ITAT's order and dismissed the appeal. The judgment in another similar appeal, Income Tax Appeal (IT) No. 1144 of 2018, was also dismissed based on the same lines as the first appeal, reaffirming the decisions made regarding the trust's exemption status under Section 11 of the Income Tax Act.