TaxTMI 
TaxTMI 
2021 (11) TMI 1070
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....ct that the assessee has not maintained separate books of account viz, independent ledgers, journals, cash book, bank book etc. except for purchase and sale account in respect of its Pharmacy unit. d) The CIT(A) has failed to appreciate the fact that the AO has also made the finding in assessment order that the accounts of pharmacy unit are merged with Chinmaya Mission Hospital Accounts. e) Whether CIT(A) is right in not appreciating the fact that the activities carried out by the assessee with regard to pharmacy unit are "admittedly" in the nature of a business and, therefore, the provisions of Section 11(4A) are attracted, with the result that the assessee should maintain separate books of accounts for such activities in respect of pharmacy unit. f) Whether in the facts and circumstances of the case, CIT(A) while deleting the addition u/s.11(4A) of the Act, is right in relying on the decision of the Supreme Court in the case of M/s. Aditanar Educational Institute Etc. Vs. Addl.CIT,224 ITR 310, wherein the facts relied upon are distinguishable and not applicable to the facts of the assessee's case. g) Any other ground to be raised at the tim....
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....tions filed by the assessee are dismissed inlimine. 6. Now, coming to the appeals filed by the Revenue, we consider the facts narrated in ITA No.1667/Bang/2019 in the asst. year 2013-14. The brief facts of the case are as under:- 7. The assessee is a Public Charitable Trust registered under the Indian Trust Act 1882. The Trust is also registered u/s 12A(a) of the Income Tax Act, vide certificate of registration No. TRUST/718/1OAIVOL.A1/374 dated 20.12.1985 issued by the CIT, Karnataka -II, Bangalore and the trust is also enjoying recognition u/s 80G of the Income Tax Act, vide order No. DIT(E)BLR/80G(R)/702/AAATKO797Q/ITO(E)-1 VOL2009-10 dt.26.11.2009. 8. The assessee is carrying on activities of the nature of Charitable as defined under section 2(15) of the Income Tax Act ,1961 and, therefore, is eligible for exemption as per the provisions contained in sections 11, 12 and 13 of the Act. 9. For the Assessment year 2013-14, the assessee had filed the return of income, admitting gross receipts of Rs.35,67,77,831/- and total income as NIL after claiming specific deductions. 10. The trust has been established with the object of promoting relief to the poor, education....
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....such business. 14. The CIT(A) observed that the Assessing Officer is not correct in invoking provisions of Section 11(4A) as the pharmacy unit maintained by the appellant is not a separate unit and is part of Chinmaya Mission Hospital maintained with the objective of attaining the one of the objects of the trust i.e., providing medical relief. The pharmacy unit procures and supplies the medicines for the purpose of effectuating the charitable objective of providing 'medical relief to the general public at large'. Merely because the activity yielded some surplus, a negative inference cannot be drawn. If the predominant object is to carry out as a charitable purpose and not earn profit, the organization would not lose its charitable character merely because some surplus arises from the charitable activity. 15. The CIT(A) placed reliance on the judgment of Hon'ble Supreme Court in the case of Aditanar Educational Institute Etc. Vs. Addl.CIT, 224 ITR 310 wherein,the addition is deleted by observing as under:- ""while construing the provision 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....
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.... submitted that running pharmacy is not incidental business of the assessee and on the other hand, it is part and parcel of the main object of the trust activity of the assessee and being so,the assessee is not required to maintain separate set of books of account as enumerated u/s 11(4A) of the Act. He submitted that the assessee has been established and carriedout the followingactivity. "4.2. The one of the objective of the assessee-trust is "To provide medical relief to the poor, distressed, afflicted and mentally, physically, or psychologically handicapped persons, in India including supply of spectacles and other medical, surgical and remedial appliances and for this purpose to start, establish, conduct, maintain and manage and help dispensaries, hospitals, medical centres, diagnostic centres or other medical or aftercareinstitutions." The affirmations of the AO for brining to tax the surplus income from pharmacy by invoking provisions of section 11(4A) of the Act areas under: 1. No separate books of account are not maintained except purchase and sale account in respect of pharmacy unit. 2. On perusal of purchase and sale of medicine and after determ....
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....nothing contained in sub-clause (iv) or subclause (v) [or sub clause (vi) or sub-clause (via)] shall apply in relation to any income of the fund or trust or institution [or any university or other educational institution or any hospital or other medical institution], being profits and gains of business, unless the business is incidental to the attainment of its objectives and separate books of account are maintained by it in respect of such business;" 26. From the comparison of the language of the two provisions extracted above, we find, the language used in the provisions are comparable and, therefore, the common purpose is easily decipherable by the above provisions appearing in to different sections from the Act. Therefore, we agree with the relevant argument propounded by the Ld Counsel for the assesse. 27. Regarding the argument pertaining to whether the pharmacy shop is an integral part of the hospital business, as mentioned above, we find that the High Court of Bombay in the case of Baun Foundation Trust Vs. CCIT (73 DTR 45), which was 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 fol....
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....cate that the nature of the activity has assumed such a dominating or overwhelming importance so as to cast doubt on the true nature and character of the hospital which is conducted by the Petitioner. The Chief Commissioner has acted contrary to the judgments of the Supreme Court which hold the field consequent upon which the impugned order would have to be set aside." 28. From the above, it is clear that the running of a pharmacy is a necessary requirement for running of a hospital. It is impossibility from medical point of view that the hospital can run without "pharmacy shop" in the premises of the hospital. Considering the same, the Hon'ble High Court has held that maintenance of a pharmacy shop is ancillary to the dominant object of running of a hospital and thus, it is an integral part of the hospital. Actually the pharmacy shop is being maintained by the hospital itself and not by any private contractor. Drawing the medicine from such pharmacy shop by the Doctors in respect of the patients is also evident from the records, commonly maintained in their medical reports. It is not the case of the revenue that the profits earned on pharmacy was not spent for the objects of tr....