TaxTMI 
TaxTMI 
2026 (7) TMI 680
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....B) of the Act. 2. At the outset, it may be noted that the present appeal was heard along with the connected appeals in the case of Breach Candy Hospital Trust v. CIT(E), being ITA Nos. 5374/Mum/2026 and 5350/Mum/2026. The issues arising in the present appeal concerning the meaning and scope of "medical relief" under section 2(15), the application of sections 11 and 12AB, the relevance of the scale and financial structure of a charitable hospital, the alleged violation of section 41AA of the Maharashtra Public Trusts Act, 1950, read with the Indigent Patients' Fund Scheme, and the validity of retrospective cancellation of registration are substantially similar to the issues adjudicated in the aforesaid connected appeals. The arguments advanced by the learned representatives of both sides in the present appeal are also substantially the same as those advanced in the connected appeals. Those arguments have, therefore, been duly considered while disposing of the present appeal. Accordingly, the findings, reasoning and observations recorded in the order passed in the case of Breach Candy Hospital Trust v. CIT(E) shall apply mutatis mutandis to the present appeal, insofar as they are ....
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....althcare services for a commercial consideration, and, therefore, do not satisfy the test of section 2(15) of the Act. 9. Without prejudice to the fact that the activities of the Appellant are not carried out on commercial principles, however, even if it is assumed so, the same could not have led to the rejection and cancellation of registration as the test of commerciality under the proviso to section 2(15) is only relevant for objects of general public utility and not medical objects. 10. On the facts and in law, the ld. CIT(E) erred in recording an 'advisory note' which is not only based on factually incorrect assumptions but is also beyond his jurisdiction. 4. The aforesaid grounds are interconnected and arise from the common factual and legal foundation adopted by the learned CIT(E). They are, therefore, considered together. Facts and summary of the order passed by the learned CIT(E) 5. The assessee is a public charitable trust and is operating Masina Hospital at Byculla, Mumbai. The nature of the assessee's activities was described in Form No. 10AD as "Charitable". The assessee filed an application in Form No. 10AB under section 12A(1)(ac)(ii), seek....
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....section patients treated; expenditure incurred under the IPF Scheme; reports submitted to the office of the Charity Commissioner; schedules of charges for medical treatment and diagnostic services; surgeries performed; educational courses conducted; rent or compensation received for space provided to third parties; expenditure on foreign tours and conferences; professional charges; related-party payments; and miscellaneous expenses. 11. The assessee furnished its response on 17.03.2026. On examining the reply, the learned CIT(E) recorded that the assessee operated a 272-bed hospital. The bed strength furnished by the assessee was reproduced in the impugned order as under: Sr. No. Class Number of beds 1 General 176 2 Twin Sharing 32 3 Deluxe 14 4 Suite 6 5 ICU-General 44 Total 272 12. The learned CIT(E) observed that although the assessee had furnished the number of beds under each class, it had not furnished the charges applicable to each category. 13. The learned CIT(E) also reproduced the data concerning the total number of patients treated and the number of indigent or weaker section patients as under....
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....mic Survey 2024-25. 18. The learned CIT(E) found it difficult to understand how the average cost of treatment of an indigent or weaker section patient during the financial year 2024-25 exceeded the average cost incurred on a general-category patient, particularly when the IPF Scheme required certain non-billable services to be provided free of cost and billable services to be valued at the rates applicable to the lowest class. On this basis, the learned CIT(E) observed that the assessee appeared to have inflated the amount stated to have been spent on indigent or weaker section patients. 19. The learned CIT(E) also held that the number of indigent or weaker section patients treated was substantially below what he considered to be the prescribed minimum of 20 per cent of the total patients. The comparative figures reproduced in the impugned order were as under: Financial year General-category patients Prescribed 20 per cent Indigent/Weaker section patients actually treated Percentage treated 2023-24 8,577 1,715 29 0.34 per cent 2024-25 6,925 1,385 81 1.17 per cent 20. The learned CIT(E) further computed an alleged shortfall in IP....
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.... further observed that the hospital had a well-established organisational setup of the nature required by a private hospital carrying on healthcare services on a commercial basis. It had departments such as administration and finance and employed a large number of workers and staff. The learned CIT(E) referred to expenditure of Rs. 23.57 crore incurred towards salaries and wages during the financial year 2024-25. 27. According to the learned CIT(E), the hospital's activities were well-organised, systematic and carried on continuously, resulting in substantial receipts and accumulation of funds. He held that only a limited portion of the funds and services was utilised for underprivileged persons, merely to maintain what he described as a facade of charity. 28. The learned CIT(E) further observed that the object of the IPF Scheme was not merely to maintain documentation and fulfil the minimum numerical requirements. In his view, a charitable hospital was required to demonstrate charity in letter and spirit by making medical services accessible to persons from the lower strata of society. He held that the reservation of beds and allocation of 2 per cent of gross billing represented o....
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....MPT Act or the IPF Scheme in the absence of an adverse determination by the authority competent under the said enactment. 34. The learned AR further submitted that the assessee had regularly submitted reports under the IPF Scheme to the prescribed authority under the MPT Act and that no adverse order had been passed by the Charity Commissioner or any other competent authority holding that the assessee had violated the Scheme. 35. The learned Departmental Representative, on the other hand, relied upon the impugned order passed by the learned CIT(E) and adopted the submissions advanced on behalf of the Revenue in the connected appeals of Breach Candy Hospital Trust. He submitted that the learned CIT(E), upon examining the patient statistics, treatment costs, hospital receipts, utilisation of the IPF and the extent of treatment provided to indigent and weaker section patients, had rightly concluded that the assessee had failed to carry on its activities in the true spirit of charity and had not complied with section 41AA of the MPT Act and the IPF Scheme. He, therefore, supported the rejection of renewal and cancellation of the existing registration. 36. The following finding....
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....urplus. What the statutory scheme regulates is the destination and application of such income. The scale of receipts, maintenance of infrastructure, employment of professional and administrative staff, provision of different categories of accommodation and the organised manner in which a hospital carries on its operations do not, by themselves, establish that the institution exists for private profit. 41. The Income-tax Act does not prescribe an affordability index, a ceiling on hospital charges, a cap on receipts or a particular model of healthcare delivery as a condition for registration under section 12AB. The decisive considerations are whether the institution is genuinely engaged in medical relief, whether its activities are carried on in furtherance of its objects, and whether its income and resources remain devoted to such charitable objects. 42. We have also held in the connected appeals that the learned CIT(E), while exercising jurisdiction under section 12AB, cannot assume the functions of the Charity Commissioner or the authorities entrusted with the administration of the Maharashtra Public Trusts Act and independently adjudicate whether a hospital has violated sec....
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....eatment cost, the average revenue per bed per day, salary expenditure, the alleged accumulation of the IPF balance and the organised manner in which the hospital operates. These considerations, either individually or collectively, do not establish that the assessee exists for private profit or that its medical activities are not genuine. 48. The learned CIT(E) observed that the average revenue per bed per day ranged between Rs. 7,049/- and Rs. 8,007/- and compared the same with the estimated monthly income of an average Indian household. Such a comparison proceeds on the same affordability test which has been found by us to be outside the statutory framework of sections 2(15) and 12AB. Average revenue per bed is an accounting average derived by dividing the aggregate receipts by the number of beds and days. It cannot, without examination of the nature of services included in the receipts, be treated as the daily bed charge payable by an individual patient or as evidence of a profit motive. 49. The learned CIT(E) also referred to the expenditure of Rs. 23.57 crore incurred towards salaries and wages during the financial year 2024-25. A hospital employing doctors, nurses, techn....
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....igent or weaker section patient approaching the assessee was denied admission, medical examination or treatment. Nor has any material been brought on record to demonstrate that the assessee refused to reserve or make available the prescribed beds or facilities. 54. The learned CIT(E) also computed an alleged annual shortfall by comparing 2 per cent of the hospital receipts with the expenditure incurred during the respective financial year. This exercise overlooks the cumulative nature of the IPF account and the possibility of adjustment of a monthly surplus or shortfall in subsequent periods under the Scheme. The balance appearing in the IPF account cannot, without examining the opening balance, monthly credits, utilisation and subsequent adjustments, be treated as conclusive evidence of non-compliance or an absence of charitable intention. 55. More importantly, the impugned order does not refer to any adverse order of the Charity Commissioner, the State Government, the Monitoring Committee or any other competent authority under the MPT Act holding that the assessee had violated section 41AA or the IPF Scheme. The assessee has specifically stated that it had been regularly fu....