2016 (9) TMI 57 - HC - Income Tax

Court upholds Tribunal's ruling on separate ledgers for charity hospital income streams

Commissioner of Income-Tax (E) Versus Pushpawati Singhania Research Institute for Liver, Renal And Digestive Diseases

The court affirmed the Income-tax Appellate Tribunal's decision in an appeal by the Revenue regarding exemption eligibility under section 11(4A) of the ... Entitlement to exemption u/s 11 - whether the earning of income from the four streams would disentitle it to exemption in terms of section 11(4A) of the Act? - Held that:- The Income-tax Appellate Tribunal has, in the impugned order, while reversing the decision of the Assessing Officer and the Commissioner of Income-tax (Appeals), accepted the case of the assessee that the activities in question were incidental to the main activity of the hospital itself and were not undertaken with a profit earning motive. The Income-tax Appellate Tribunal also noticed that for the assessment years earlier and later to the assessment year in question, the Assessing Officer accepted the assessee's case and allowed its claim for exemption. In particular, the Income- tax Appellate Tribunal has accepted the contention of the assessee that it maintained separate ledgers for each of the sources of income and thereby fulfilled the requirement of section 11(4A) of the Act. Having heard the learned counsel for the parties, the court is of the view that the view taken by the Income-tax Appellate Tribunal on the basis of the record is a plausible one and does not give rise to any substantial questions of law Issues:1. Whether the earning of income from specific streams would disentitle an institution to exemption under section 11(4A) of the Act.Analysis:The case involved an appeal by the Revenue against an order passed by the Income-tax Appellate Tribunal concerning the assessment year 2008-09. The appellant, a company registered under section 25 of the Companies Act, running a charitable hospital, maintained separate books of account for research activity and hospital operations. The Revenue questioned whether income from various streams, including receipts from hospitals, laboratories, and a drug store, would impact the institution's eligibility for exemption under section 11(4A) of the Act.The Revenue argued that while the activities were incidental to the institution's objectives, the lack of separate books of account for each stream was a concern. In contrast, the assessee contended that it maintained separate ledgers for each income source, enabling the ascertainment of income from each stream. The Income-tax Appellate Tribunal, in its order, supported the assessee's position, emphasizing that the activities were not profit-oriented but incidental to the hospital's main function. The Tribunal also noted the consistency in the assessee's approach across different assessment years, where exemption claims were accepted based on separate ledger maintenance.Upon review, the court found the Tribunal's decision reasonable and devoid of substantial legal questions. Consequently, the court dismissed the appeal, affirming the Tribunal's stance on the matter. The judgment underscored the importance of maintaining separate ledgers to demonstrate compliance with statutory requirements for exemption eligibility under section 11(4A) of the Act.