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TaxTMI 
TaxTMI 
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2022 (8) TMI 1083
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....020 dated 08.07.2009, in respect of the Immaculate Conception Convent Hospital and to quash the same and to direct the respondents to pass an order by granting exemption from levy of property tax under Section 123(e) of the Tamil Nadu Act 25 of 1981. 3. The said Writ Petition was disposed by a learned Single Judge of this Court vide order dated 07.12.2017 after considering the order passed in the case of Sundaram Medical Foundation Vs. The Commissioner Corporation of Chennai, CDJ 2017 MHC 5265 and in the light of the decision of this Court in Masonic Charity Trust Vs. The Corporation of Coimbatore, (2010) 8 MLJ 643, with the following observations:- 11. Thus, for the above reasons, this writ petition is allowed, the impugned demand is quashed and the respondents are directed to consider the petitioner's claim for exemption vide petition dated 08.05.1995, along with the annexures and the petitioner is at liberty to submit a fresh petition enclosing the copies of earlier petition on the claim for exemption within a period of thirty days from the date on which the petition submitted by the petitioner. It is needless to state that while quashing the impugned demand of property t....
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....or exemption. In the present case too, you have not produced any proof to show that you are rendering free treatment or the profits earned by you is spent for charitable purpose. Therefore, you are not entitled to claim exemption from payment of property tax to your hospital premises under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. 5. The learned Senior Counsel for the petitioner submitted thatsince the petitioner is running a Charitable Hospital as its object is only to do charity, the petitioner is entitled for exemption from payment of property tax under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981 which has been wrongly denied to the petitioner vide impugned order. 6. The learned Senior Counsel for the petitioner has also drawn attention to the following cases: i. PSG & Sons Charities Vs. City Municipal (1997) 1 CTC 331, ii. Queen's Educational Society Vs. Commissioner of Income Tax (2015) 8 SCC 47. iii. Chief Commissioner of Income Tax Vs. St.Peter's Educational Society, (2016) 14 SCC 306. iv. Govel Trust Running Aravind Eye Hospital, Madurai Vs. The Commissioner Coimbatore City Municipal Corporation, Coi....
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....s objectives and does not pay any dividend or bonus to its members'. The Madras enactment does not employ the same phrase and extends the exemption to all 'charitable hospitals and dispensaries but not including residential quarters attached thereto'. However, the use of the word 'charitable' would necessitate an examination of established parametres such as the following, among other tests: (i) the activity engaged in by the entity in question (ii) whether such activity is generally understood to fall within the ambit of public service and social good (iii) whether other statutory authorities, including income-tax have recognised the petitioner as being engaged in, and rendering charitable activities (iv) whether the dominant object of the institution is to render service or to earn profit (v) if the activity does generate profit or the institution earns income from other sources, is such profit/net income ploughed back into the institution or diverted to other avenues/individuals." 10. The learned Senior Counsel for the petitioner further submits that the petitioner Hospital was exempted from payment of property tax till 1980 under Section 83(1)(e) of the Tam....
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....me Tax Act has to be recognised for the purpose of grant of exemption. It is further submitted that the hospital is 174 years old hospital and is engaged only in providing charitable premises. 15. Opposing the prayer, the learned counsel for the respondents submits that the hospital premises of the petitioner was inspected and it was found that the petitioner was collecting fees for treating patients as inpatient and outpatient and therefore, it cannot be stated that the petitioner was a charitable hospital for the purpose of Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. 16. The learned counsel for the respondent has drawn the attention to a recent decision of a learned Single Judge of this Court rendered in the case of Sundaram Medical Foundation vs. Chennai Metro Water Supply & Sewerage Board, in W.P.Nos.20992 & 20993 of 2018, vide dated 26.04.2021, wherein, it was held as follows:- "40.The above facts are not controverted and this Court has considered the online web portal of the writ petitioner / Sundaram Medical Foundation and the facts were extracted in aforementioned paragraphs. Perusal of the above details regarding the charges collected from th....
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....e Charitable institutions are functioning for the welfare of the poor, needy and deserving people and in the event of any contra facts, all suitable actions are to be initiated. 45.As far as the provisions of the Chennai City Municipal Corporation Act is concerned, it is unambiguous that Charitable Hospitals are eligible for exemption. However, the character of the Charitable Hospitals are to be scrutinized as the loss of Revenue is detrimental to the interest of public at large. Thus, the authorities are bound to be cautious, while scrutinizing all material facts and circumstances, for taking a decision. In the present case, the respondents have conducted inspection regarding the functioning of the petitioner / Medical Foundation and formed an opinion that they are providing free Medical services to 15% of the patients and they are collecting charges from 85% and further, the charges collected from the patients are comparable on par with the established reputed Hospitals in Chennai City." 17. I have considered the arguments advanced by the learned Senior Counsel for the petitioner and the learned counsel for the respondents. I have perused the case laws relied on by the learned....
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....ioner, the said application is still pending before the first respondent. On the other hand, the first respondent in the counter has stated that the said application was rejected. However, details of orders have not been furnished before this Court. 27. The petitioner later received a demand notice dated 08.07.2009 from the second respondent. The petitioner was called upon to pay a sum of Rs.6,59,876/- as property tax for the period between 1998-99 to 2009-10. 28. The petitioner thereafter received another demand notice dated 09.01.2019 from the second respondent. The petitioner was called upon to pay a sum of Rs.13,60,636/- as property tax up to the date of demand. There are however no details of period for which the aforesaid amount was demanded. 29. Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981 is pari materia with Section 101(e) of the Chennai City Municipal Corporation Act, 1919 and Section 83 of the Tamil Nadu District Municipalities Act, 1920. These provisions exempts "Charitable Hospital and Dispensaries" from payment of property tax. These provisions are reproduced below:- Chennai City Municipal Corporation Act, 1919 Tamil Nadu District Municip....
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....lso been defined in Section 2(15) of the Income Tax Act, 1961. Section 2(15) of the Income Tax Act, 1961 reads as under:- 2(15) "Charitable purpose" includes relief of the poor, education, yoga, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility. 34. Section 92 of the Civil Procedure Code uses the expression "Public Purposes of a Charitable or Religious Nature". It reads as under:- 92. Public charities.-(1) In the case of any alleged breach of any express or constructive trust created for public purposes of a charitable or religious nature, or where the direction of the Court is deemed necessary for the administration of any such trust, the Advocate-General, or two or more persons having an interest in the trust and having obtained the leave of the Court, may institute a suit, whether contentious or not, in the principal Civil Court of original jurisdiction or in any other Court empowered in that behalf by the State Government within the local limits of whose jurisdiction the whole or any pa....
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....to be, a unit for such purposes; or (e) where the original purposes, in whole or in part, have, since they were laid down, - i. been adequately provided for by other means, or ii. ceased, as being useless or harmful to the community, or iii. ceased to be, in law, charitable, or iv. ceased in any other way to provide a suitable and effective method of using the property available by virtue of the trust, regard being had to the spirit of the trust. 35. Section 10(22A) of the Income Tax Act, 1961 was inserted with effect from 02.09.1970. The said provision was however later deleted with effect from 01.04.1999 vide Finance (No. 2) Act, 1998. Under Section 10(22A) of the Income Tax Act, 1961, an income of a "Medical Institution" was exempt from payment of income tax. 36. Section 10(22A) of the Income Tax Act, 1961 prior to its deletion read as under:- CHAPTER III INCOMES WHICH DO NOT FORM PART OF TOTAL INCOME Incomes not included in total income. 10. 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- (1) ........... (2) ........... ................. (22A) any income of a h....
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....ption from the payment of Income Tax is available under Section 11 and 12, and 12A of the Income Tax Act, 1961 to such Charitable Institutions. Donations to such Charitable Institutions qualify for tax relief to the doners under Section 80G of the Income Tax Act, 196 in the form of Section 80G Certificate issued by Charitable Institution. 42. The Allahabad High Court in Secretary of State for India Vs. Radhaswami Satsang Sabha, (1945) 13 I.T.R. 520 held that the registration of a charity under the Societies Registration Act, 1860 is a prima facie evidence of valid dedication. 43. In Inland Revenue Commissioners Vs. Glasgow Police Athletic Association, [1953] AC 380 (HL); [1953] 1 All ER 747 (HL), Lord Normand held as under: - If any association has two purposes, one charitable and the other non-charitable, and if the two purposes are such and so related that the noncharitable purpose cannot be regarded as incidental to the other, the Association is not a body established for charitable purposes only. 44. In the above case, Lord Cohen laid down certain principles deducible from the cases as follows:- i. If the main purpose of the body of persons is charitable and the only el....
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.... private hospital was to relieve the pressing demand of the public for admission to the general hospital. Charges were made at the private hospital for beds, it provided accommodation and medical treatment in greater privacy than would be possible in a general hospital. There were surpluses of income over expenditure but the private hospital was not conducted for profit. The surpluses were used to contribute to the maintenance of the general hospital and for the general purposes of the Sisters of Charity. 49. In that context, it was held that the gift of income to the Sisters of Charity for the general purposes of the private hospital was a valid charitable gift. Therefore, what prevailed in the mind of Court is the dominant purpose for which the hospital was being run. However, in the present case, the Article of Association does not reveal the same. 50. In Re Smith's Will Trusts : Barclay's Bank Ltd. Vs. Mercantile bank Limited, (1962) 2 All E.R. 563 (C.A.), it was held that although a "hospital" in its wider meaning was capable of covering institutions such as private nursing homes, which were run for profit and thus were not charitable, yet, having regard to the time when the....
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....he Maulana Mohammad Ibrahim Riza Malak case referred to supra and the observations of Lawrence L. J., in Keren Kaymeth Le Jisroel Ltd. Vs. I.R.C., (1932) 17 Tax Cases 27, 40, 41 : (1932) AC 650 and held that if there are several objects of the trust, some of which are charitable and some noncharitable, and the trustees have unfettered discretion to apply the income to any of the object, the whole trust would fail and no part of the income would be exempt from tax. 56. In Municipal Corporation of Hyderabad Vs Hyderabad Race Club, (1986) 4 SCC 696 : AIR 1987 SC 92, the Hon'ble Supreme Court held that the test to apply is to seek an answer to the question; "To what use is, the property put or for what purpose is the property put and to ascertain whether such occupation or user is for a "charitable purpose". This decision was rendered in the context of Section 202(1) (b) of the Hyderabad Municipal Corporation Act, 1955. The Court in para 4 held as follows:- "In the present case the occupation and user is to conduct horse races and to train horses for racing. Unless it can be posited that conducting of horse races is a charitable purpose, it cannot be concluded that the exemption env....
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.... setting out any specific mode by which this purpose is intended to be achieved. Now obviously promotion of sports can be achieved by organising cricket matches on free admission or no profit no loss basis and equally it can be achieved by organising cricket matches with the predominant object of earning profit. Can it be said in such a case that the purpose of the trust or institution does not involve the carrying on of an activity for profit, because promotion of sports can be done without engaging in an activity for profit. If this interpretation were correct, it would be the easiest thing for a trust or institution not to mention in its constitution as to how the purpose for which it is established shall be carried out and then engage itself in an activity for profit in the course of actually carrying out of such purpose and thereby avoid liability to tax. That would be too narrow an interpretation which would defeat the object of introducing the words "not involving the carrying on of any activity for profit". We cannot accept such a construction which emasculates these last concluding words and renders them meaningless and ineffectual. 58. The Hon'ble Supreme Court in th....
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.... and buildings exclusively occupied and used for public worship or by society or body for charitable purposes provided: that such society is supported wholly or in part by voluntary contribution, applies its profit, if any, or other income in promoting its objections and does not pay any dividend or bonus to its members. " 60. The Hon'ble Supreme Court in the above case held as follows:- "82. It cannot be gainsaid that the municipal general tax is an annual tax. Therefore, normally speaking, the liability for taxation must be determined with reference to each year. In other words, the society claiming exemption will have to show that it fulfills the condition for exemption each year. If it shows, for example, that for its support it has to depend on, either wholly or in part, voluntary contributions, in that particular year, it may be exempt. But where in that year, for its support, it need not depend on voluntary contributions at all or again if the society produces surplus income and excludes the dependence on voluntary contributions it may cease to be exempt. Of course, the word "support" will have to mean sustenance or maintenance. Only to get over this difficulty that t....
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....ion of education and such activity must be in the nature of public health or philanthropy. iii. The entity seeking exemption must be supported wholly or in part by voluntary contribution. iv. The excess/surplus income must be utilised for the promotion of objectives and must not be distributed as dividend, bonus or profit to its members or diverted elsewhere. 62. This decision was taken note of by this Court in Parivar Seva Sanstha case referred to supra and distinguished by placing reliance on the decision of the Delhi High Court in W.P.(c).No.2212 of 2008 vide order dated 18.05.2007. The Allahabad High Court in Sherwani Charitable Trust Vs. C.I.T., (1968) 69 I.T.R. 750 (All) had held that "It is clear from the third part of the preamble to the trust deed that the trustees themselves have definitely stated that the purpose of creating the trust was to utilise the income of the trust property "partly on charitable objects and partly towards the maintenance of the members of the donors family". Clause 2(B) of the trust deed clearly shows that one-third of the income from the trust property was to be spent on the maintenance and support of the members of the Shervani family and ....
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....the Hon'ble Supreme Court in Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, AIR 1980 SC 387, wherein it was held that the activity involved in carrying out the charitable purpose must not be motivated by a profit objective. It must be undertaken for the purpose of advancement or carrying out the charitable purpose. The Hon'ble Supreme Court held that the predominant activity was for the promotion of Commerce and Trade. The Division Bench held as follows:- 9. We have considered the rival contentions of the parties. Before we proceed to deal with the legal submissions with reference to the relevant provisions of the Act, it would be useful to find out as to whether the plaintiff/respondent has proved its case to the effect that it is a Charitable Institution within the meaning of the Act. A perusal of Exhibit A-12 dated 14.5.1979, which is an application submitted by the plaintiff/respondent discloses several particulars about the hospital. In the said application, Ex.A-12 it is admitted that the details relating to the number of patients, out-patients as well as inpatients who have been treated free of charges or at conce....
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.... been created. They are not expected to generate income through economic activities. They are not driven by profit motive and service is the sole motto. There is no quid pro-quo. Contribution received from persons of altruistic disposition and are used for public cause. Charitable institutions do not distribute surplus to its promoters or donors as dividends. 68. Charity and bounty and contributions from general public are necessary concomitant of a charitable institution for carrying charitable activities. Economic activity like any other entity or person should not clothe an institution with a tag of a "Charitable Institution" merely because a portion of the revenue from such economic activity is doled out as a charity for needy and poor. A hybrid form charity is not what is contemplated. The activity has to be charitable to achieve the object of the trust or deed. There cannot be any discrimination between different sections of persons who visit the hospital for treatment. There also cannot be different facilities to those who pay and those who do not pay. If such discrimination exists, it cannot be said a hospital was a charitable hospital. 69. Over a period, the perception o....
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....y other property and to raise money by fates and entertainment for the promotion of any of the objects of the society". 75. The facts on record also indicate that the all along the hospital has been receiving charges for the services rendered by it and only a section of the patients were receiving free services. Further, if the constitution of a trust or institution expressly provides that the purpose shall be carried out by engaging in an activity which has a predominant profit motive, there would be no scope for controversy, because the purpose would, on the face of it, involve carrying on of an activity for profit and it would be non-charitable. 76. Where a society or body is making systematic profit, even though a portion of the profit is utilised only for charitable purposes, it cannot be said that it could claim exemption. The test according to the Hon'ble Supreme Court is whether the society could survive without receiving voluntary contributions, even though it may have some income by the activities of the society. 77. Sub Clause (xv) to Clause 2 of the petitioner's society indicatesthat the other object is to employ on such terms and conditions as the society ma....
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.... the objects of the society indicates that the object of the hospital is not purely charitable in nature. The fact that the Memorandum of the Society itself authorises collection of charges from the persons receiving treatment in hospital, nursing school and work rooms indicates that the petitioner's object is not a charitable hospital. 80. In case of a Charitable Institution, there is an absence of quid pro-quo for services. The Charitable Institutions largely depend on the Charity and donations from public to achieve their objects as per the Trust Deed in case of a Charitable Institution or Memorandum of Association in case of a Society. The Charitable Institutions are ordinarily not expected to involve themselves in the generation of income and the economic activities unless such activity itself is meant for re-habiting its beneficiaries. Such Institutions sometimes employ physically handicapped persons or mentally challenged persons and destitute and/or other physically challenged persons etc. for the generation of income. Generation of income in such case is incidental to the main activity. Generation of income can be a by-product of the charitable activity. Therefore, th....
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.... for educational purposes. (5)The ultimate test is whether on an overall view of the matter in the assessment year concerned the object is to make profit as opposed to educating persons. 84. The question in the present case is not about making profit. Issue is whether the hospital is a charitable hospita or notl. In this case, it cannot be said that the petitioner was a charitable hospital either on admitted facts or based on the registered Memorandum of Association dated 24.01.1973. The subsequent decision of the Hon'blw Supreme Court in St. Peter's Educational Society case referred to supra is also therefore of no relevance to the facts of the present case. 85. When under a similar circumstances the Division Bench of this Court has held this exemption was not available to the said Hospital, it remains inexplicable how a different view can be entertained. 86. Thus, if the objects are distributive, each and every one of the objects must be charitable in order to conclude that the trust might was a valid charity. Same principle is applicable in the case of a building in which medical hospital is being run with a charitable object. Merely because a portion of service is ....