AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2017 (3) TMI 1245
X X X X Extracts X X X X
X X X X Extracts X X X X
....y its impugned order, dated 27 April, 2012. It, therefore, seeks quashing of the order and appropriate consequential directions. 2. The petitioner, to promote its objectives categorized its patients into three - Charity, Subsidized and Private. It argued, before the respondent/Revenue in its application for exemption, that treatment of the same quality is provided to all patients and that the fee charged is reasonable and does not involve any profit element. Its objects and activities were, therefore, wholly philanthropic and for the benefit of the public at large. The petitioner argued that the expression, "not for purposes of profit" under Section10 (23C) cannot mean that a hospital or institution cannot or should not charge any fees from its patients. It only means that one cannot reap profits on commercial lines. It is submitted that philanthropy not only means free treatment but also means concessional treatment and the petitioner charges a nominal fee from the patients to cover running expenses of the hospital. It was also stated that the petitioner imparts training, which too is a charitable object, covered by its memorandum and that the fees and charges recovered by it a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tioner's website as well as the details provided by it) held as follows: "11. From the above it is clear that the applicant society besides running the Hospital and doing charitable activity is also engaged in imparting educational training on regular basis for which various facilities are provided to the students and fee is charged. Although, education may be a good activity but this is not in consonance with the provisions of section 10(23C)(via) of the IT Act, 1961. Further, the society has categorized their patients in 3categories viz.- (i) Charity patients (ii) Subsidized patients and (iii) Private patients which show that besides charity the society is also working on commercial lines. The society has made collaboration agreements with other Trusts and one of the conditions made in the agreements is that the eye centre of the society running from the premise of other Trusts can also treat the patients on payment basis which proves that the society is also running on commercial lines. All these facts clearly prove that the applicant society is existing not solely for philanthropic purposes but existing for purposes of profit also as against the spirit of the pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bjectives in the memorandum does not preclude it from claiming exemption under Section 10 (23C) of the Act. For this point, it relies on Baun Foundation Trust v. CCIT & Anr. (2012) 251 CTR (Bom.) 237 in which it was held that one has to consider whether the overall object is to make 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. The dominant nature of the purpose has to be considered. It is argued that the petitioner had claimed exemption under Section 11 and therefore omitted to claim exemption under Section 10 (23C) for AYs 200708 to 2009-10. 8. Counsel for the Revenue relies on the order denying exemption and submits that during the proceedings under Section10(23C)(via), information was obtained from the petitioner's website which was reproduced in the impugned order. These details clearly indicated that the petitioner is also engaged in the field of imparting education and training for which it charges fee. Even separate training programmes for foreign stud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 10(23).Also, the society categorized their patients into three, i.e.(1) Charity patients (2) Subsidized patients and(iii) Private patients which show that besides charity it works on commercial lines. The society has made collaboration agreements with other Trusts and one of the conditions in those agreements is that the eye centres in the said third parties' premises can also treat the patients on payment basis, which proves that the petitioner functions on commercial lines. All these facts clearly prove that the petitioner does not exist solely for philanthropic purposes but for profit purposes too, contrary to the provisions of Section 10(23C)(via) of the Income Tax Act,1961. Therefore application of the petitioner society for notification under Section 10(23C)(via) for the AY 2011-12 and onwards was correctly rejected by the respondent. Analysis and Findings 12. The record reveals that the petitioner was registered under Section 12A of the Act by order dated 16.11.1987 passed by the CIT and it also obtained approval under Section 80G of the Act, after satisfying the conditions prescribed. It was also notified for exemption under Section 35AC of the Act by the N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alth care; and lastly that it made no application for renewal of exemption under Section10(23C)(via) for AY 2007-08 to 2010-11. 15. The provision, i.e. Section 10(23)(vi) reads as follows: "10. Incomes not included in total income.- In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included -- (23C) any income received by any person on behalf of- (vi) any university or other educational institution existing solely for educational purposes and not for purposes of profit, other than those mentioned in sub-clause (iiiab) or sub-clause (iiiad) and which may be approved by the prescribed authority; or Provided that the fund or trust or institution or any university or other educational institution or any hospital or other medical institution referred to in sub- clause (iv) or subclause (v) or sub-clause (vi) or sub- clause (via) shall make an application in the prescribed form and manner to the prescribed authority for the purpose of grant of the exemption, or continuance thereof, under sub-clause (iv) or sub-clause (v) or sub- clause (vi) or sub-clause (via): Provided further that the Ce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tute is carried on with the object of making profit or not, it is the duty of the prescribed authority to ascertain whether the balance of income is applied wholly and exclusively to the objects for which the applicant is established. The decisions of the Supreme Court in Queens Educational Society v Commissioner of Income Tax (2015)] 372 (ITR) 699 (SC); Indian Chamber of Commerce v Commissioner of Income Tax (1975) 101 ITR 796 (SC); Aditanar Educational Society v Commissioner of Income Tax (1997) 224 ITR 310 (SC)and Oxford University Press v CIT (2001) 247 ITR 658 (SC) also talk of the predominant purpose test as determinative of whether an assessee existed solely for educational purposes. 17. Section 10 (23C) of the Act exempts any hospital or other institution for treatment of illness or mental deficiencies or treatment during convalescence requiring medical attention or rehabilitation solely for philanthropic purposes and not for purposes of profit. If the government does not fund it, then, its annual receipts should not exceed the prescribed limit. Section 2 (15) defines "Charitable Purpose" and includes the following- i) Relief of the poor; ii) Education; iii) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....roperty to any of those objects, the institution would not be eligible to be regarded as one existing solely for educational purposes, and no part of its income would be exempt from tax. But if the primary or dominant purpose of an institution is "educational", another object, which is merely ancillary or incidental to the primary or dominant purpose, would not dis-entitle the institution from the benefit. In American Hotel and Lodging Association Educational Institute vs. CBDT [2008] 301 ITR 86 (SC), the Supreme Court held that at the time of granting approval under Section 10(23C)(vi), the prescribed authority is to be satisfied that the institution existed during the relevant year solely for educational purposes and not for profit. Once the prescribed authority is satisfied about fulfillment of this criteria i.e., the threshold precondition of actual existence of an educational institution under Section10 (23C)(vi), it would not be justifiable, in denying approval on other grounds. 20. The Revenue's other contention was that the petitioner had applied for exemption under Section 11 as well as Section 10(23C) in the same year. Section 10(23C) does not prescribe any stipulation....
X X X X Extracts X X X X
X X X X Extracts X X X X
....able purpose is, an educational institution may qualify for relief under Section 10 (23C) of the Act, as well as, Section 11. In the present case, the petitioner provides training courses to students and nursing staff, which qualify for exemption. The main objective of the program must be the availability of such a training to the public at large and imparting some kind of knowledge through it. The fact that some of the beneficiaries pay for the benefits they get from the institution would not be fatal to the charitable character of the institution. Accordingly, where an association, which was in charge of a nursing home and hospital, charged its patients for the services rendered, it was held it would not cease to be charitable. In IRC v. Peebleshire Nursing Assn 11 TC 335, it was held that where a hospital runs a private ward where patients pay in full for the services rendered to them, it would not make the hospital inconsistent with its charitable objects. Likewise, the petitioner's providing medical facilities on wholly charitable, or partly subsidized basis to some patients and charging others at rates par with other institutions per se cannot debar it from the benefit of bei....