2018 (6) TMI 1513 - AT - Income Tax

ITAT grants exemption under Income-tax Act for public health initiatives

Institute of Health Systems Versus Income Tax Officer, Exemptions – 2, Hyderabad

Institute of Health Systems Versus Income Tax Officer, Exemptions – 2, Hyderabad - TMI Issues involved:1. Denial of exemption u/s 11 of the Income-tax Act, 1961 for the assessment year 2014-15 based on the nature of activities carried out by the assessee society.Analysis:Issue 1: Denial of exemption u/s 11The case involved an appeal filed by the assessee against the order of the CIT(A) denying exemption u/s 11 of the Act for the assessment year 2014-15. The Assessing Officer (AO) had denied the exemption, stating that the assessee's activities, particularly providing services to Hyderabad Metro Water Supply and Sewerage Board (HMWSSB) for water quality testing, did not align with charitable purposes. The AO considered the activity as professional/technical services, not falling under the charitable ambit. The CIT(A) upheld the AO's decision, emphasizing that the assessee's expenses were related to water testing only, which he deemed as commercial activity. The assessee contended that it was a nonprofit organization working for public health, specifically contributing to water quality testing for HMWSSB to ensure the supply of good quality water to the public. The assessee argued that despite charging fees, its activities were charitable in nature. The ITAT analyzed the nature of the assessee's activities, noting its involvement in various public health projects and the significant expenses incurred in testing water quality. The ITAT observed that the assessee's primary objective was to contribute to public health, and its collaboration with HMWSSB aimed at providing quality water to the public. The ITAT differentiated the assessee's service-oriented approach from profit-driven entities like diagnostic centers and road contractors. Referring to Section 2(15) of the Act, the ITAT concluded that the assessee's activities fell within the scope of advancing general public utility, making it eligible for exemption u/s 11. Consequently, the ITAT allowed the assessee's appeal, affirming its entitlement to the exemption.In conclusion, the ITAT's judgment clarified that the assessee's activities, particularly in the realm of public health through water quality testing, qualified as charitable in nature, aligning with the advancement of general public utility. The decision underscored the distinction between profit-oriented ventures and service-oriented organizations like the assessee, ultimately granting the assessee the exemption u/s 11 of the Income-tax Act, 1961 for the relevant assessment year.