2016 (3) TMI 970 - HC - Income Tax

High Court affirms exemption for private limited companies under Income Tax Act

CIT, Central Versus Apeejay Medical Ltd.

The High Court upheld the Tribunal's decision to grant the assessee the exemption under Section 10(22A) of the Income Tax Act for the assessment years ... Entitlement to the benefit under Section 10(22A) - whether private limited company cannot come within the purview of the word 'Institution', used in section 10(22A)? - Held that:- Even a private limited company can get the benefit of section 25 of the Companies Act, 1956. The benefit is to have the word 'Limited' or the words 'Private Limited' dropped. On the basis of this sub-section, one cannot say that a private limited company cannot come within the purview of the word 'Institution', used in section 10(22A) of the Act. When the legislature has not restricted the meaning of the word 'Institution', there is no reason why any restriction should be put to the word by the Court. No further submission was advanced by Mr. Agarwal. We find no substance in the submission, which, he already advanced and, therefore, the is answered in the affirmative in favour of assessee Issues:1. Entitlement to benefit under Section 10(22A) of the Income Tax Act for assessment years 1986-87 and 1987-88.2. Whether a private limited company can qualify for exemption under Section 10(22A) of the Income Tax Act.Analysis:Issue 1: Entitlement to benefit under Section 10(22A) of the Income Tax Act for assessment years 1986-87 and 1987-88:The Assessing Officer initially denied the assessee the benefit under Section 10(22A) for both assessment years. However, the Tribunal disagreed and granted the benefit to the assessee. The revenue then approached the High Court under Section 256(2) of the Act. The key contention raised by the revenue was that the medical facilities provided by the assessee were primarily for the employees of sister concerns, lacking a philanthropic purpose. Conversely, the assessee argued that its main objects, as per the Memorandum of Association, were solely philanthropic, supported by certificates confirming the provision of free medical services to laborers and local inhabitants. The High Court acknowledged that findings of fact by the Tribunal are generally final unless challenged on the basis of insufficient material, which was not the case here. Consequently, the High Court refused to answer question No.1, upholding the Tribunal's decision to grant the exemption.Issue 2: Whether a private limited company can qualify for exemption under Section 10(22A) of the Income Tax Act:Regarding the eligibility of a private limited company for exemption under Section 10(22A), the revenue contended that only companies under Section 25 of the Companies Act could qualify. However, the High Court rejected this argument, citing Section 25(1) of the Companies Act, 1956, which allows for the registration of a company with limited liability, including private limited companies, without the word 'Limited' in its name. The Court emphasized that the absence of a specific restriction in the legislation implies that private limited companies can fall within the scope of the term 'Institution' in Section 10(22A) of the Income Tax Act. As no further substantive arguments were presented, the High Court answered question No.2 in the affirmative, affirming that private limited companies can indeed benefit from the provisions of Section 10(22A).In conclusion, the High Court disposed of the reference, affirming the Tribunal's decision to grant the assessee the exemption under Section 10(22A) for the relevant assessment years and clarifying the eligibility of private limited companies for such exemptions under the Income Tax Act.