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2020 (12) TMI 1066
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....iii. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition made by the AO on account of the professional fees paid to Dr. R.S. Chahal without appreciating the evidence on record. iv. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition made by the AO on the basis of disallowance of loss in Kinder woman hospital without appreciating the fact that rent paid is not attributable to the purpose of the trust." 3. A perusal of the record along with the above grounds of appeal would indicate that though Revenue has taken four grounds of appeal but its grievance revolve around solitary issue, whether the assessee is to be treated as a "charitable institution" and entitled for benefit under sections 11 and 12 of the Income Tax Act, 1961 for assessment of its income ? 4. Brief facts of the case are that the assessee is a registered society under the Societies Registration Act, 1860. It has applied for grant of registration under section 12AA of the Income Tax Act. The registration was granted to the assessee by the Commissioner of Income-Tax, Jalandhar vide registration No.J....
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.... has been paid to him as professional charges. This payment is hit by section 13(1)(c) of the Act. In other words, the AO was of the view that on account of Dr.R.S. Chahal's relationship with the Society, undue benefit is being extended to him on account of higher payment of professional charges, (iv) the assessee has another women kinder hospital where it has suffered loss, and such loss are not to be allowed to the assessee, (v) the ld.AO has made reference to section 11(4A) of the Act and observed that if a charitable trust or society runs any other unit for business purpose, which gives rise to profit, then separate books of accounts are to be maintained. According to the AO, such books of accounts were not maintained for the chemists shop. On the basis of above reasoning, the ld.AO has denied the benefit of sections 11 and 12 to the assessee. He determined taxable income of the assessee at Rs. 2,75,41,048/- as against NIL income shown by it. The ld.AO mainly made additions under the following heads: a) Rs. 37,56,251/- Shown as net profit and claimed exempted u/s.11 - disallowed by AO b) Rs. 1,72,42,642/- Loss from kinder women hospi....
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....bnormal. The A.( has wrongly prepared the chart i:e only of one unit. The combined chart of all unit of trust at Page-11 of assessee submission shows profit of 1.05% only. More so the same A.O. accepted profit rate of 9% during the previous year as reasonable. 2 Comparison of rates with SGL and , National Kidney Hospital and Indian Kidney Hospital. SGL Hospital is not comparable with the assessee , as the same received donations and grants from Govt and the maximum rates quoted are in respect of heart bypass, eye care , ortho , Neuro, MRI,CT Scan and our society is not receiving donations, Govt grant or providing any of the above said services. The rates of other hospitals in respect of OPD and ICU rent are more or less either same or more than our society as per chart at Page -21 of the asstt order . Even the charges of each institution depends upon the infrastructure and the facilities. Our each department is being looked after by Doctor having DM Qualification where as in other local /comparable hospitals they are more or less M.D./M.S. The society has utilized more than 85% of the total funds during each year right from the inception of the trust till date. Earning ....
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....uchers of this unit which are duly certified by CA. A.O. failed to point out any omission in either receipts or expenses.The assessee has shown receipts of Rs. 5,09,9007 of this unit. All the major payment of expenses including rent and professional charges were paid through account payees cheque from the start of this unit till its closure. 2 Rent paid without using the building The rent was paid to SH.G.S.Ghosal (PAN:AAWPG0188M) .This building was taken on rent in March 2012 with a lock in period of three year upto March 2015..The rent deed is duly registered with the sub-registerrar, Jalandhar. Copy of rent deed filled with A.O. The building was used by the trust and DR.Arun Kumar Sharma (PAN: BCOPS5796J) was the incharge of this unit. TDS on both the payment was deducted and deposited .The loss of this unit was accepted by the department during the assessment year 2013-2014 and by the same A.O. during the assessment year 2014-2015. I have gone through the assessment order passed by the AO, detailed submissions made by the appellant and find that there are four issues which have been raised in the assessment order- (a) The Hospital run by the trust is also runn....
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....ach as has been held by the Hon'ble Supreme Court in the case of CIT v. Excel Industries Ltd. (2013) 358 ITR 295 (SC) and Radha Soami Satsang v. CIT (1992) 193 ITR 321 (SC). There is no material change in the facts in all the previous years and the view taken for previous years would continue on the principle of consistency the assessee finds support from the decision reported in 245 ITR 492, 264 ITR 276. It is stated that exemption had been granted to the assessee u/s 11 from the A.Y. 1991-92 consistently for twenty six years. There is absolutely no change of circumstances and there was no occasion for a different approach to be taken for the assessment year in question when the activities have continued uninterruptedly since the time of inception of the institution and the fact that the assessee is a non-profit organization and it has not been disputed. 4.10 The appellant has submitted that hospital is running a chemist shop which is an integral part and is also approved by the CIT while giving approval to the trust and has been there since 1991. It is also stated that a complete list of concession of Rs. 24.78 lacs which includes medical camp, free OPD etc has been ....
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....provisions of section 2(15) of the IT Act clearly provide that provision of medical relief is covered with in the definition of charitable purpose. The appellant has also relied upon the circular issued by the CBDT on this issue. 4.15 Having considered the material available on record, I find that appellant trust is claiming the benefit of exemption of income u/s 11 of the IT Act for the last more than 25 years. I find that as regards the nature & purpose of activities carried out by the trust are concerned, the amount of profit earned there-from has to be viewed as a whole rather than segment wise because at times surplus of one segment would help in meeting the deficit of other segment. For this purpose, it would be appropriate to compare the aggregate receipts, expenses and net surplus for period of 5 years which would involve 2 years preceding and 2 years succeeding the year under consideration. The comparative results are as under:- Asstt year Total Receipts Revenue Expenditure Capital Expenditure % of utilisation Net Profit Of NP 2012-13 16,70,35,839 15,84,11,623 10,71,38,157 158.97% 86,24,216 5.2% 2013-14 22,24,44,203 ....
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....n view of the above facts and material available on record, I find that it cannot be held that activities of the trust are being run on commercial principles and there is no justification in the action of the AO in denying the claim of exemption of income u/s 11 of the IT Act. Accordingly, I direct the AO to allow the claim of exemption of income u/s 11 of the IT Act to the appellant. 4.20 Further, as regards the issue of payment of professional charges to Dr. R.S. Chahal is concerned, the finding given by the AO that payments made to the doctor 11.52% of total professional charges claimed is stated by the appellant to be not rect. The appellant had filed a chart of payments made to different doctors :- Dr. VijayNanda : Rs. 68,60,728 Dr. Ravi Angral : Rs. 68,57,756 Dr. R.S. Chahal : Rs. 65,42,155 Dr. Manoj Chaudhary : Rs. 54,31,589 Dr. Atul Khullar : Rs. 46,61,318 Dr. Satish Mishra : Rs. 80,28,920 4.21 Further, it is seen that payments in the same range have been made to the doctor R.S. Chahal who is a reputed professional in his area of Specialization and also payments of similar amounts or even higher amount ....
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....ess- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of that previous year; **** **** 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; **** **** Section 11(4A) Sub-section (1) or sub-section (2) or sub-section (3) or subsection (3A) shall not apply in relation to any income of a trust or....
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....ee should not carry out activities in the nature of trade, commerce or business for fees, cess or for any other consideration. In other words, it should not be carried out with a profit embedded intention or motive. If some incidental profit is there, then it is a secondary circumstance. Sub-clause (i) and (ii) further provides guidance and conditions to find out whether this fifth category of activity is being carried out on trade, commerce or business. Since this aspect is not involved in this appeal, therefore, it is not necessary to go in detail. The activity undertaken by the assessee is medical relief, and same is per se charitable. 8. Next condition is that such institution/trust should get itself registered under section 12AA of the Act. Section 12AA of the Income Tax Act provides that on receipt of an application for registration by the Pr.Commissioner/Commissioner from a trust/institution under this section he will call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about; (i) genuineness of the activities of the trust/institution, (ii) compliance of such requirement of any other law for the time....
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....ussion is not required on other procedural aspect of section 11. 11. Similarly, a perusal of section 13 would indicate that if any part of income from the property held under a trust does not enure for the benefit of public, and it has been used for the benefit of certain individuals who happen to be relatives of the trustee, then such receipt will not qualify for exemption under sections 11 and 12 of the Act. In other words, benefit of section 11 and 12 would not available. For this purpose, list of persons who could be categorized as enured undue benefit from the trust or institution provided in section 13(3) of the Act. If some undue benefit is being extended to such persons on account of their position in the institution/trust, then to that extent that income would not qualify for exemption, and will be brought to tax. 12. Keeping in mind, this basic scheme of Income Tax Act for assessment of charitable institution, let us revert to the facts of the present case. In the opening part of the order, we have briefly summarized the reasons assigned by the AO for denying the benefit of sections 11 and 12 to the assessee. However, it is pertinent to observe that the assessee ....
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.... itself, order of the CIT(A) should be upheld, but nevertheless, we would like to go into circumstances narrated by the AO for arriving at a conclusion, whether settings of these circumstances as whole could goad any adjudicating authority to record a finding that activities of the assessee are not charitable, and therefore, benefits under sections 11 and 12 of the Act should be denied to the assessee. 13. First circumstance highlighted by the AO is that the assessee is running a pharmacy in the hospital. While impugning orders of theld.CIT(A), the ld.DR relied upon order of the AO and contended that running a pharmacy in the hospital is an independent business activity, and therefore, the profit earned in such running of a pharmacy ought to be separately assessed. On the other hand, the ld.counsel for the assessee relied upon written submissions made before the CIT(A) as well as synopsis filed during the hearing before the Tribunal. We have duly considered these objections of the AO and the explanation of the assessee. The stand of the assessee is that hospital provides various services for 24-hours in various medical fields. Therefore, it becomes more necessary and forms a dut....
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....is to be construed that the hospital is being run on commercial line under the shadow of a charitable institution. We have gone through the details as well as circumstances highlighted by the ld.AO. The ld.CIT(A) as a matter of fact found that the AO has not appreciated activities of the assessee as a whole, rather he has carved out the higher range of profit under one unit. The ld.CIT(A) took note of total receipts, revenue expenditure, capital expenditure etc. in para 4.15 of the impugned order. The AO has compared rate of such hospitals who were provided subsidies from the Government. SGL Hospital, whose rates were relied by the AO, received subsidies/donations/grants from Government, therefore, rates of such hospital cannot be compared with rates of the assessee, who has to take care of day-to-day operational expenses, and future expansion in the area of investigative tools viz. xray machines, CT-scan etc. These equipments require higher lay out of the capital, and therefore in order to remain in competition with the hospitals, and to provide best facility to the patients, and to provide medical help, the assessee has to upgrade its investigative tools. Therefore, the rates ....
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....tc. may be extended to the medical professions. Thus, the ld.CIT(A) has rightly appreciated the facts and circumstances and also considered rule of consistency. 16. The next reason assigned by the AO is that loss from Kinder Hospital should have not been claimed by the assessee. During the assessment proceedings, the AO noted from the balance sheet of Kinder Women Hospital that the assessee has not shown any receipts, rather it has claimed various expenditure for running of this centre. It was explained by the assessee that this unit could not be run successfully and therefore it was closed down. The unit was functioning from the rented premises and paid rent amounting to Rs. 71,72,980/-. The assessee has also to incur certain other fixed overhead expenses which also contributed to the increase in loss. The assessee was under obligation to run the unit for a minimum period of three years as per the registered lease agreement with the land landlord; that immediately after the expiry of lease period, assessee vacated the premises and closed down the unit in order to avoid increasing loss due to recurring and fixed overhead expenses. The ld.AO doubted contentions of the assessee an....