Charitable hospital tax exemption turns on dominant charitable purpose and use of surplus, not mere collection of charges.

A charitable hospital or dispensary does not lose municipal property-tax exemption merely because it charges patients or occasionally generates surplus income. The governing test is whether the institution is charitable in substance, with service to the public as the dominant object and profit not the main purpose; any surplus must be applied to the institution's charitable objects and not diverted elsewhere. The text also treats income-tax recognition, compliance with imposed conditions, and actual deployment of surplus as relevant factors in assessing exemption. The authority must verify the factual use of income before rejecting the claim on the ground of surplus alone.

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Issues: (i) Whether a charitable hospital or dispensary loses exemption from property tax merely because it collects charges and occasionally earns surplus income. (ii) What tests govern exemption under the municipal provision for charitable hospitals and dispensaries, including the relevance of income-tax recognition and utilisation of surplus.

Issue (i): Whether a charitable hospital or dispensary loses exemption from property tax merely because it collects charges and occasionally earns surplus income.

Analysis: The municipal exemption for charitable hospitals and dispensaries requires the institution to be charitable in substance, but the existence of charges or a surplus by itself does not establish a commercial character. The decision emphasises that prosperity is not incompatible with charity, provided profit is not the dominant object and the surplus is applied to the institution's charitable purposes. The decisive enquiry is whether the activity is genuinely charitable and whether income is ploughed back into the institution rather than diverted elsewhere.

Conclusion: Mere collection of charges or occasional surplus does not automatically disentitle the institution from exemption.

Issue (ii): What tests govern exemption under the municipal provision for charitable hospitals and dispensaries, including the relevance of income-tax recognition and utilisation of surplus.

Analysis: The determination must proceed on established parameters, including the nature of the activity, whether it serves public good, whether other statutory authorities have recognised it as charitable, whether the dominant object is service rather than profit, and whether any surplus is deployed to advance the charitable objects. The order also notes that conditions imposed by income-tax authorities remain relevant and must be complied with, and that the authority must verify the actual deployment of surplus before deciding the exemption claim. The principle of feeding the charity was treated as relevant to the statutory interpretation.

Conclusion: Exemption depends on a factual verification of charitable character and use of surplus, and the matter could not be rejected solely on the ground of surplus income.

Final Conclusion: The rejection of exemption was set aside and the matter was directed to be reconsidered after verifying compliance and utilisation of surplus.

Ratio Decidendi: For exemption to charitable hospitals or dispensaries, profit-making must not be the dominant object, and the presence of surplus income does not by itself defeat exemption if the surplus is applied to charitable purposes and the institution otherwise satisfies the charitable character test.

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