Medical relief charity and registration cannot be denied merely for fees, surplus, or facilities absent proven private enrichment.

Medical relief remains a distinct charitable purpose under section 2(15), and registration under section 12AB cannot be denied merely because a hospital charges fees, maintains premium facilities, earns substantial receipts, or generates surplus, absent evidence of private enrichment, diversion of income, or abandonment of charity. An alleged breach of section 41AA of the Maharashtra Public Trusts Act and the IPF Scheme could not independently justify cancellation without a finding by the competent authority under that law. Where refusal of section 80G approval is only consequential to denial of section 12AB renewal, the 80G rejection also falls once the 12AB order is set aside.

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Issues: (i) Whether the assessee's renewal of registration under section 12AB of the Income-tax Act, 1961 could be rejected and its existing registration retrospectively cancelled on the grounds that its hospital activity was commercial in nature and that it had not complied with section 41AA of the Maharashtra Public Trusts Act, 1950 and the IPF Scheme; (ii) Whether rejection of renewal of approval under section 80G of the Income-tax Act, 1961 could survive when it was consequential to the refusal of renewal under section 12AB.

Issue (i): Whether the assessee's renewal of registration under section 12AB of the Income-tax Act, 1961 could be rejected and its existing registration retrospectively cancelled on the grounds that its hospital activity was commercial in nature and that it had not complied with section 41AA of the Maharashtra Public Trusts Act, 1950 and the IPF Scheme.

Analysis: Medical relief is a distinct head of charitable purpose under section 2(15) of the Income-tax Act, 1961, and the commerciality proviso cannot be mechanically imported into a case where the institution is engaged in providing medical relief. The existence of premium facilities, substantial receipts, organised infrastructure, different room categories and surplus does not by itself establish a profit motive, in the absence of any finding of private enrichment, diversion of income, or abandonment of the charitable object. On the compliance issue, the learned CIT(E) could not independently adjudicate an alleged breach of section 41AA of the Maharashtra Public Trusts Act, 1950 and the IPF Scheme in the absence of any adverse determination by the competent authority under that enactment; actual occupancy shortfall, if any, was not enough to establish a specified violation for cancellation under section 12AB.

Conclusion: The rejection of renewal and retrospective cancellation of registration were not justified and were set aside; renewal and continuance of registration were directed in accordance with law.

Issue (ii): Whether rejection of renewal of approval under section 80G of the Income-tax Act, 1961 could survive when it was consequential to the refusal of renewal under section 12AB.

Analysis: The 80G refusal rested solely on the failure of the section 12AB renewal application, and no separate independent disqualification under section 80G(5) was recorded.

Conclusion: Once the section 12AB order was set aside, the consequential rejection under section 80G could not survive and was also set aside.

Final Conclusion: The assessee retained charitable registration and approval, as the findings of commerciality and alleged non-compliance with the Maharashtra public trust regime were held unsustainable.

Ratio Decidendi: For an institution engaged in medical relief, charity is not lost merely because it charges fees, maintains sophisticated infrastructure or generates substantial surplus; cancellation or refusal of registration cannot rest on an alleged breach of another statute unless that breach has been determined by the competent authority entrusted with administering that statute.

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