TaxTMI 
TaxTMI 
2009 (4) TMI 550
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.... the currency of the relevant previous year, it had started a new 100 bedded hospital with various specialities. Assessee filed return for the impugned assessment year declaring nil income claiming exemption under clause (iiiae) of sub-section (23C) of section 10 of the Act. Alternatively, it claimed exemption under sections 11 and 12 of the Act and towards this, filed audit report in Form 10B along with the audited balance sheet, income and expenditure account and schedules thereto for the relevant previous year. 4. During the course of assessment proceedings, in order to ascertain eligibility of the assessee for exemption under section 10(23C)(iiiae) of the Act and sections 11 and 12 of the Act, Assessing Officer required it to produce records and evidence to prove that it had existed solely for philanthropic purpose and not for profit motive. Assessee submitted a list of patients who were given free/concessional treatment during the relevant previous year during short period of January 2003 to March 2003. As aforesaid, prior to that, assessee was running an old hospital with negligible receipts and expenses. From the list submitted by the assessee, Assessing Officer made enqu....
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..... Assessing Officer. In the opinion of the Assessing Officer, there was no established norms for giving concessions. 5. Assessee replied that its objects were purely charitable and in the realm of medical relief. According to the assessee, it was already granted registration under section 12A of the Act. Further submission was that it was running a charitable out patient department from 1 p.m. to 2 p.m every day which catered exclusively to backward classes and poor people. Assessee also produced clippings of newspaper advertisements which published its charity treatments. Data was also given by the assessee for proving that it had treated 390 patients on concessional basis in financial year 2002-03 and 2853 persons in financial year 2003-04 in the new hospital. Further, according to the assessee, free treatment given to Lata Tolani could not be considered as a violation of exemption provisions, since she was discharged before conducting any invasive procedures, due to death of her mother and was by oversight included in the list of concessions. Assessee specifically brought to the attention of the officer, case of one Baby Deepika Oza, a polio child treated by it free of cost. ....
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....ied on by the Assessing Officer had facts entirely different to it and therefore, had no applicability. Ld CIT(A) after going through the submissions of the assessee, directed the Assessing Officer to grant assessee exemption under sections 11 and 12 of the Act. According to the Ld. CIT(A), statutory auditors of the assessee had never given any adverse remarks in the report under Bombay Public Trust Act, 1950 or in the Form 10B filed by the assessee in support of its return. CIT(A) noted that assessee had given concession to 370 persons and value of such concessions came to Rs. 2,29,194. However, as regards Assessing Officer's finding that assessee had given concessional medical services to a person mentioned in sub-section (3) of section 13 , he directed the Assessing Officer to ascertain the value of such concessions and to deny exemption under sections 11 and 12 to the assessee, only to that extent. 7. Now before us, the Ld. D.R. strongly supported the order of the Assessing Officer. According to her, assessee was neither doing any philanthropic work nor could its activities be classified as charitable in nature. Concessions given were incidental to its commercial functioning....
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.... - For the relief of poor, including establishment, maintenance and support of instructions or funds for the relief, any form of poverty including relief from any distress caused by elements of nature, such as famine, pestilence, fire, tempest, flood, earthquake or any other calamity. (d) Research and Development - For the accomplishment of various objects of the trust, to promote, establish, provide, maintain, propagate, conduct, or otherwise subsidize, assist research programme, laboratories and experimental institutions mainly for scientific medical, surgical research, experiments and tests and to undertake and carry on researches, experiments and tests of all kinds without in any way derogating from generality of the force going keeping in view the social, economic and industrial needs of the country. (e)To do all such acts and things as are incidental or conductive to the attainment of the objects of the trust. (f)For advancement of any other public charitable purposes, which the board may deemed fit to do so in their absolute discretion." Stipulation regarding application of income as contained in the trust Deed has been reproduced by the Ld. CIT(A) at page 31 of ....
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....sferred directly or indirectly by way of dividend, bonus or otherwise howsoever by way of profit to the Settlor or the Trustees of the Trust. PROVIDED HOWEVER THAT nothing contained herein shall prevent the Trustees from reimbursing themselves and discharge out of the Trust Fund all bona fide expenses that may be incurred by them jointly or severally in or about the execution of the Trust, and any other reasonable expenses incurred for Trust purposes." Thus, clearly the main objective of the Trust are medical aid/relief, educational work, relief from poverty, and Research and Development. Admittedly, during the relevant previous year assessee's work was con-centrated in the medical field. Even if assessee is generating some surplus, no doubt, the conditions set out in the trust deed regarding obligation of utilizing such surplus clearly stipulate that such utilization has to be only for charitable purposes and other objects specified here-in-above. If we see the definition of charity as given under section 2(15) of the Income-tax Act as it stood for the relevant assessment year, it read as under: "Charitable purpose includes relief of the poor, education, medical relief an....
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.... income referred to in sub-section (2) of section 12) by reason only that a trust had provided education or medical facilities to a person specified in sub-section (3) of section 13. Therefore, this could not have been considered as a reason for denying assessee its claim of exemption under sections 11 and 12 of the Act in toto. In fact, it was the only solitary instance which the Assessing Officer could point out to have been in deviation, vis-a-vis the provisions of the Act and even such incidence was never admitted by the assessee. We find that no trustee founder or relative had taken any services nor participated in the profits and surplus or activities of the Trust. Helping a director or a person involved in an accident is also charity because this would fall within the definition of medical relief. In the case of Dharmadeepti v. CIT [1978] 114 ITR 454 decided by the Hon'ble Apex Court, assessee was under one of its incidental objectives, carrying on kuri business. The terms of the trust deed provided that income could not be applied for any purpose other than charitable purpose. Such income was held by the Apex Court to be income from property held under Trust for charitable ....
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.... We are satisfied that the profit element is missing. Fees were charged to meet the cost. As such, it cannot be construed to be the business of the assessee-society. Once this finding is arrived, the conclusion is irresistible that the case of the assessee is not coming within the ambit of sub-section (4A) of section 11 of the Act. Accordingly, the benefit of section 11(1) of the Act cannot be denied to the assessee. We direct the Assessing Officer to allow exemption under section 11 of the Act to the assessee-society." Though the above decision was given in relation to an educational society, the principles emanating therefrom would be applicable here also. At least for the impugned assessment year, there was nothing which could show that assessee was running its hospital with a view to earn profit. On the other hand, there was a huge deficit in its income and expenditure account. Again, there was nothing in the accounts which would show that any money was utilized by the assessee for promotion of anything other than the objects mentioned in its memorandum. Therefore, assessee's case would not come within the ambit of sub-section (4A) of section 11 of the Act also. In our opini....