TMI Blog2009 (4) TMI 550X X X X Extracts X X X X X X X X Extracts X X X X ..... tion either u/s 10( 23C )(iiiae) or sections 11 and 12 - AO also disallowed assessee s claim of depreciation CIT(A) allowed assessee benefit of exemption u/s 11 and 12 and also allowed benefit of depreciation - According to the revenue, such exemption was allowed despite specific violation of basic objects of the Trust and had resulted in donations received by the Trust being taken out of the ambit of taxation. Hence, this appeal. HELD THAT:- In our opinion, just because an institution like hospital, charges fees for the services rendered, that by itself would not preclude it from claiming to be doing charitable work as defined u/s 2(15). In fact, AO went about by his own definition of charity, oblivious of the definition given u/s 2(15). No defect has been pointed out in the books of account of the assessee by the AO. He has relied on a solitary incidence of a help given to one Mrs. Lata Tolani, wife of one of the donors, who had given donation and therefore according to the AO, this is hit by section 13(1)( c ). However, assessee had all along maintained that Mrs. Tolani was not given free treatment but was discharged before giving any treatment, upon the death of her mothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. M. Subramaniam Anjaneyulu for the Respondent. ORDER Abraham P. George, Accountant Member. - This appeal filed by the revenue is directed against the order of CIT(A)-I, Mumbai and relates to assessment year 2003-04. 2. Revenue is aggrieved that CIT(A) allowed assessee benefit of exemption under sections 11 and 12 of the Income-tax Act, 1961 (in short the Act ) and also allowed it benefit of depreciation. According to the revenue, such exemption was allowed despite specific violation of basic objects of the Trust and had resulted in donations received by the Trust being taken out of the ambit of taxation. 3. Short facts are that assessee is registered as Charitable Trust under Bombay Public Trust Act, 1950 and from 1986 onwards running a 15 bedded hospital at Thane. In January 2003, i.e., during the currency of the relevant previous year, it had started a new 100 bedded hospital with various specialities. Assessee filed return for the impugned assessment year declaring nil income claiming exemption under clause ( iiiae ) of sub-section (23C) of section 10 of the Act. Alternatively, it claimed exemption under sections 11 and 12 of the Act and toward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " - - Peddint Pareira " - - Baburao Y. Palande " - - Ajit S. Chavan " - - Appu Nair " - - Master Nadim Thakkur " - - Lata Tolani Not available Husband gave donation of Rs. 1 lakh to Assessee Husband is one of the donors-Mother died while she was admitted. Discharged without payment of bills. By oversight this was included in concession list. According to the Assessing Officer, only a few persons had responded to the summons and such persons who had responded were having no need for free or concessional treatment. Assessing Officer also noted from the rate chart for services given by the assessee, and found it to be comparable with organizations which were not claiming any tax exemption, but were run on commercial basis, paying their share of taxes. None of the persons were recommended by any Government agencies or other Trusts, except for a few recommended by one M/s. Sevajan Foundation Trust, according to the ld. Assessing Officer. In the opinion of the Assessing Officer, there was no establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. 6. In appeal before CIT(A), assessee assailed the Assessing Officer s decision, not to grant it exemption under sections 11 and 12 of the Act. Assessee did not seriously agitate against non-grant of exemption of section 10( 23C )( iiiae ) of the Act. In addition to reiterating the contentions before the Assessing Officer, assessee further submitted that it had not rendered any concessional treatment to any person falling within sub-section (3) of section 13 of the Act. It was further submitted that assessee was conducting periodical Medical Camps for cancer patients and other persons afflicted with various diseases. According to the assessee, just because it had charged well-to-do persons, who were able to meet the cost of their treatment, would not make it ineligible for claiming exemption under sections 11 and 12 of the Act. Assessee relied on the decision of the Hon ble Kerala High Court in CIT v. Pulikkal Medical Foundation (P.) Ltd. [1994] 210 ITR 299 and that of Indo American Society v. Asstt. DIT (Exemption) [2005] 96 ITD 61 of the co-ordinate Bench. According to the assessee, the case of AWARE ( supra ) relied on by the Assessing Officer had facts entirel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and every case, which were considered by the Assessing Officer for coming to the conclusion that no free/concessional treatment was given by it. Hence, according to him, there was no reason to interfere with the order of the Ld. CIT(A). 9. We have perused the orders and heard the rival contentions. Main objects of the assessee as per the Trust registered under the Bombay Public Trust Act, 1950 are as under: "( a ) Medical - For giving medical aid and relief including establishment, maintenance, administration and support of hospitals, dispensaries, clinics, nursing home, medical care centres, convalescent homes, rest houses, recreation centers and institutions for medical aid and relief or promotion of health and hygiene, both preventive and curative. ( b ) Educational - For the advancement and propagation of educational and learning in all its branches, for the establishment, maintenance, administration and support of colleges, schools or other educational institutions, professorship, scholarship, prizes and fellowship, specially in medical science and/or in any other branch of science, commerce, arts etc. Or in assisting students to study abroad, either by way of lump ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the foregoing that the help to be given under any of the foregoing heads may be given either by way of pecuniary payments or in kind or in any other manner which the Trustees may consider desirable. PROVIDED HOWEVER THAT, if at any time hereinafter it is held that any of the objects or purposes aforesaid for which the corpus and/or income of the Trust Fund or any part thereof hereby directed to be applied or expended are not charitable according to the law relating to income-tax then in force, so as to exempt the Trustees of this KAUSHAL MEDICAL FOUNDATION from the payment of income-tax on the income of the trust expended the corpus and/or income towards execution of and carrying out only such of the objects and purposes aforesaid as may be held to be strictly charitable according to such law to enable the Trustees of the Trust to qualify for and secure such tax exemption. The Trust shall exist solely for philanthropic purposes and not for purposes of profit. Any income, surplus or profits derived by the Trust, from whomsoever and wheresoever shall be applied solely for the attainment and promotion of the objects of the Trust setforth in these Presents. No portion of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we see audited accounts of the assessee-trust, for the relevant previous year, it would show that there was a deficit and no surplus. Even after ignoring the substantial depreciation claim of Rs. 47,33,795.79, the net surplus would be only Rs. 1,36,936.79 which against the total hospital receipts of Rs. 62,40,866.76 was negligible. Had the assessee been running the institution with profit motive, there would definitely have been a surplus even after charge of depreciation. No defect has been pointed out in the books of account of the assessee by the Assessing Officer. He has relied on a solitary incidence of a help given to one Mrs. Lata Tolani, wife of one of the donors, who had given Rs. 1,00,000 as donation and therefore according to the Assessing Officer, this is hit by section 13(1)( c ) of the Act. No doubt Smt. Tolani would fall within the class of persons mentioned in sub-section (3) of section 13 read along with Explanation 1 thereto. However, assessee had all along maintained that Mrs. Tolani was not given free treatment but was discharged before giving any treatment, upon the death of her mother. Again, sub-section (6) of section 13 clearly specifies that exemption un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affluent persons. It was held at para 11 of the Tribunal order as under : "11. We have perused the objects of the assessee-society as given in the memorandum of association along with the activities undertaken by the society to achieve the objects. Just because the assessee-society is charging fee for conducting the courses, the assessee cannot be put within the ken of section 11(4A) of the Act. The Finance Act, 1983, has inserted sub-section (4A) in section 11 to provide that benefit of charity will not be available in relation to profits and gains of business. "Business" is a word of wide import. It denotes continuous and systematic exercise of an occupation or profession with the object of making income or profit. There is absolutely nothing in the impugned order to suggest that the assessee-society conducted the educational programmes with a view to earn profit. The society was formed for the public good. The society charged the fees to meet the cost of educational programmes. Wherever surplus resulted, it was utilized for the promotion of the objects of the society. The educational programmes were conducted in conformity with the objectives. There is absolutely nothing to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears. Therefore, in the facts and circumstances, and as per law, we find no infirmity in the order of the Ld. CIT(A) directing the Assessing Officer to give assessee exemption under sections 11 and 12 of the Act. 11. As for the grievance of the revenue that assessee was allowed benefit of depreciation on assets received as donation in kind, we find from Explanation to sub-section (1) of section 43 of the Act, that assessee had to be allowed depreciation even on assets received by way of gifts or inheritance based on the actual cost of the previous owner as reduced by the depreciation allowed under the Act. Therefore, there is no error in the direction of the ld. CIT(A) to grant assessee the benefit of depreciation. As for the taxability of the donation received by the trust, voluntary donations received by a trust are by virtue of sub-section (1) of section 12 deemed to be income derived from property held under trust and therefore, on such amounts also assessee would be eligible for claiming exemption under sections 11 and 12 of the Act. 12. In the result, there is no need to interfere with the order of ld. CIT(A) and appeal of the revenue stands dismissed. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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