TaxTMI 
TaxTMI 
2016 (7) TMI 260
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....he Ld CIT (A) erred in confirming the action of the AO in holding that assessee has violated provisions of section 11(4A) by not maintaining separate books of account for pharmacy, which is part of hospital run by the assessee trust. 2. The Ld CIT (A) erred in confirming action of the AO in estimating income from pharma medicines at Rs. 36,20,520/- and assessing the same as taxable income denying the exemption u/s 11 to the said income." 3. Briefly stated relevant facts of the case are that the assessee is a registered charitable trust and engaged in running schools and hospitals. The assessee was established vide trust deed dated 14.12.1983 with the objects of education, medical relief to the poor. Assessee runs a multispecialty hospital at Hiranandani Gardens, Powai and a basic secondary level care hospital at Thane. Assessee filed the return of income declaring the total income at Rs. NIL. The assessment was originally completed u/s 143(3) of the Act on 13.3.2008 for AY 2006-07 and the assessed income was determined at Rs. NIL in the said assessment. Subsequently, the assessment was reopened u/s 148 of the Act vide the notice dated 30.10.2006 and the reassessment was compl....
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....cisions are relevant for the proposition that maintaining of pharmacy is incident to the hospital business, which is entitled for exemption u/s 11 of the Act. Once the pharmacy business is incident to the running of a hospital, a consolidated books of account maintained by the hospital business, it meets the requirements of the condition relating to 'maintain the separate books of account' by the Trust. 5. On the other hand, the case of the Revenue is that the assessee cannot claim exemption in relation to any income of the trust (being profits and gains of the business) unless, the business is incidental to the business is incidental to the attainment of the objectives of the Trust and (ii) separate books of account are maintained by such trust or institution in respect of such business. As per the Revenue, hospital business, in any case, requires maintaining the books of accounts for claiming of exemption, about which there is no dispute. In addition, the "pharmacy business" also requires maintaining of the separate books of account in the pharmacy business, if the benefit of exemption is claimed in respect of income from the business of pharmacy. Revenue dismissed the relianc....
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....sessee mentioned that the issue raised in the grounds stands covered in favour of the assessee. He reiterated the arguments that the "pharmacy business" is an integral part of the hospital business as there cannot be any hospital without a pharmacy store. Pharmacy store is an integral part of the hospital business. Therefore, the assessee maintained a separate books of account for the hospital business including the transactions relating to the pharmacy business. The provisions of sub-section 4A of section 11 mandate the maintenance of separate books of account for all streams of income of the hospital business. He fairly submitted that as such no separate books of accounts are maintained by the Trust exclusively for the pharmacy business. Further, Ld Counsel for the assessee brought our attention to the judgment of the Hon'ble jurisdictional High Court in the case of Baun Foundation Trust (supra) for the proposition that "the activity of chemist's shop is an activity which is incidental or ancillary or incidental to dominant object of running a hospital". Para 4 of the said judgment is relevant. Further, it is also mentioned in the said judgment that 'a hospital must of necessity ....
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....ext of 11(4A) of the Act, about which there is no dispute. Further, he brought our attention to the reported decision of the Tribunal in the case of Indian Machine Tools Mfrs. Association vs. ADIT [1999] 70 ITD 304 (Mum.) and submitted that the said assessee was not granted exemption u/s 11 in respect of the certain receipts earned by them when books of accounts were not maintained. Further, relying on the judgment of the Hon'ble Supreme Court in the case of ACIT vs. Thanthi Trust [2001] (247 ITR 785), Ld DR submitted that books of accounts have to be maintained. During rebuttal time, Ld Counsel for the assessee brought our attention to the said judgment in the case of Thanti Trust (supra) and mentioned that in case of any ambiguity in the language / law, the benefit should be given in favour of the assessee. 8. We have heard both the parties and perused the orders of the Revenue Authorities as well as the decisions cited by both the Ld Representatives and also the relevant material placed before us. The case of the Revenue is that the pharmacy shop constitutes an independent business that requires maintenance of the books of account separately in addition to the books of accoun....
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.... from the Act. Therefore, we agree with the relevant argument propounded by the Ld Counsel for the assessee on the applicability of the cited judgements. 12. Regarding the argument pertaining to whether the pharmacy shop is an integral part of the hospital business, as mentioned above, we have perused the relevant paras from the jurisdictional High Court in the case of Baun Foundation Trust (supra), which was of course delivered in the context of the provisions of section 10(23C) of the Act and find relevant to extract the relevant para which is as follows:- "4. In Aditanar Education Institute Etc. v . Additional Commissioner of Income Tax (1997) 224 ITR 310 (SC), the Supreme Court has observed, while construing the provisions of Section 10(22) that the decisive or acid test is whether on an overall view of the matter the object is to make a profit. If after meeting the expenditure any surplus results incidentally from the activity lawfully carried on by the institution, it will not cease to be one existing solely for the statutorily stipulated purpose so long as the object is not to make a profit. Again, it is a wel1 settled position in law that the dominant nature of the pu....