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2022 (5) TMI 1405 - ITAT BANGALOREExemption u/s.11 - Treatment of pharmacy income as income of charitable trust - assessee challenged the action of the A.O. before the CIT(A) contending that the assessee is running the pharmacy in the hospital premises itself, and therefore, it cannot be treated as business activity - as per AO assessee is not maintaining separate set of books though he was able to identify the pharmacy business related details from the ledger accounts maintained by the assessee - AO has also stated that the assessee is able to generate gross profit out of running the pharmacy and hence justified treatment of the same as business income - HELD THAT:- As running the pharmacy is very much an integral part of running the hospital as per the objects of the trust and the conditions of maintenance of books of account in respect of the business activity of trading of medicines, which is an integral part of the hospital activities, is not the requirement of the law on the facts of the case. When running of the pharmacy is part and parcel of the main activity of running the hospital, the incidental sale of medicines to outside public cannot be considered as the criteria for the denial of exemption and such distinction of to whom the medicines are sold is of no relevance. In any case the assessee is maintaining separate ledger accounts from where the profits are clearly identifiable and given that the transactions of pharmacy is incidental to the business of the hospital and the objects of the Trust, the conditions relating to maintenance of separate books of account are met within the meaning of section 11(4A) of the Act. We respectfully follow the decision of Karnataka Chinmaya Trust [2021 (11) TMI 1070 - ITAT BANGALORE] and the principle laid down by the Hon’ble Chennai Bench in M/s.Franciscan Sisters of St.Joseph Society [2014 (1) TMI 1754 - ITAT CHENNAI] and hold that the income from running the pharmacy which is integral part of the hospital is eligible for exemption u/s.11 and hence the AO is directed to delete the addition made in this regard. The appeal is allowed in favour of the assessee.
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