TaxTMI 
TaxTMI 
2009 (4) TMI 550
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.... 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 enquiries in a few cases and the result of such enqui....
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....egistration 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. Nevertheless, Assessing Officer did not accept any of these since, according to him, the charitable acts done by the assessee were insignificant and was of the same magnitude as generally done by any private hospital. According to the Assessing Officer, advertisement....
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....ing 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 and exemptions under sections 11 and 12 were not intended by the Legislature to be mis-utilized by such commercial organizations. 8. Per contra, the Ld A.R. strongly supported the order of the CIT(A). He submitted that assessee was hither-to-before granted exemption un....
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.... 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 his order as under: ".................. Application of the Trust Fund .................. (c)To pay or utilise the balance of such interest, dividends, rent and other income of the Trust Fund, (hereinafter called "the Net Income") and if the Trustees so desire the corpus of the Trust or any part of the Corpus for all or anyone o....
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.... 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 and the advancement of any other object of general public utility." Now the objects of the assessee would definitely fit in with the definition of charitable purpose as given under section 2(15) of the Act. It is not mentioned in the definition that medical relief has to be directed to the poor only. Medical relief is given to any sick persons and they could....
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....ary 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 purpose and exempt under section 12 of the Act. Their Lordships gave a finding that the terms 'to give charity' and to 'promote education' are same as 'relief to poor' and 'education' mentioned in sub-section (15) of section 2 of the Act which defines 'charitable purpose'. If that be so, the objectives of the assessee as mentioned at para 9 above have to be c....
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....tion 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 opinion, the reliance has been correctly placed by the Ld. CIT(A) on the decision of Hon'ble Kerala High Court in Pulikkal Medical Foundation (P.) Ltd.'s case (supra). Ld. CIT(A) had elaborately quoted from the decision of Hon'ble Kerala High Court to stress his finding that even if there were incidental profits earned, benefit of exemption could not be denied for a hos....