Charitable approval denied for hospital outsourcing receipts treated as substantially commercial rather than genuine charitable activity.

Recognition under section 80G was refused because the assessee failed to show that its operations were genuinely charitable. The receipts were tied to a percentage of hospital turnover, the arrangement produced substantial surplus year after year, and the assessee did not demonstrate meaningful application of funds to purely charitable objects. The recorded finding that the assessee was not adhering to its stated objects, and that patient relief was negligible compared with income, remained unrebutted. The stated principle applied was that charitable activity cannot be treated as commercial activity for tax approval where the facts show a substantially commercial arrangement rather than genuine charity.

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Issues: Whether the assessee was entitled to recognition under section 80G of the Income-tax Act, 1961 despite receiving income from outsourcing of hospital operations and other commercial receipts.

Analysis: The assessee failed to establish that its activities were charitable in nature. The receipts were linked to a percentage of the hospital turnover, the arrangement generated substantial surplus year after year, and the assessee did not demonstrate meaningful utilisation of the funds for pure charitable objects. The findings recorded by the Commissioner that the assessee was not following its stated objects and that the relief extended to patients was negligible compared with its income remained unrebutted. The reliance placed on the principle that charitable activity cannot be equated with commercial activity supported the conclusion that the arrangement was not a genuine charitable one for the purpose of recognition.

Conclusion: Recognition under section 80G was rightly refused, and the issue was decided against the assessee.

Final Conclusion: The appeals failed because the assessee could not prove charitable activity warranting approval under the relevant tax exemption regime.

Ratio Decidendi: Recognition for tax exemption or approval cannot be granted where the claimed charitable institution is found, on the facts, to be carrying on a substantially commercial arrangement rather than a genuine charitable activity.

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