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2014 (3) TMI 187 - SC - Indian LawsBuilding tax exemption entitlement - High Court of Kerala denied the exemption on the ground that the building of the appellant is not used principally for charitable purposes - Held that:- the application of income derived from a building for charitable purposes does not amount to the building being ‘principally used’ for charitable purpose. - The argument that the income is applied for charitable purposes can be accepted only if it is known what portion of the income goes into charity i.e. free medical services. Does the percentage of patients receiving free medical services increase every year? If we hold that the income derived from a building is applied for charitable purposes then that has to be clearly proved, and the fact that the institution is set up for charitable purposes as stated in its Memorandum of Association cannot be enough to hold that income is necessarily applied for charitable purposes, especially in the light of the fact that the patients who can afford to pay for it are being charged for medical services. The fact is that the details furnished in the documents produced would go to show that the appellant hospital is earning money by charging from patients and therefore the claim of the appellant that the entire area taxed is used for charitable purpose is not reflected in the documents produced - The High Court has correctly interpreted the ‘Explanation’ clause to Section 3(1) of the Act to hold that ‘charitable purpose’ means ‘relief of the poor and free medical relief’. The tax herein is on the ‘building’. The society already has income tax exemption and the question here is whether the building is used principally for ‘charitable purpose’. Only the building utilized for providing free medical aid can be said to be used principally for charitable purpose and it will go against the letter of the law to grant building tax exemption for all the buildings of the hospital irrespective of what it is used for simply on the ground that the overall object of the hospital is charity although it is being predominantly run on a chargeable basis. In this case, the building used for providing free medical aid must be exempted from paying building tax. - Appeal of the appellant hospital dismissed.
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