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TMI Blog2014 (3) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... ief are stated hereunder: SH Medical Centre is a charitable institution registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955. This institution manages the appellant hospital which is managed by nuns of the Christian religious faith who have renounced their worldly existence to serve humanity to render charitable services like free treatment to patients belonging to the lower strata of the society and charges nominal amount for treatment from those who can afford such treatment. 4. The Memorandum of the SH Medical Center states that the object of the institution is purely philanthropic purposes and not profit. It states that the members of the society are not entitled to any share in the net proceeds of the society and in case the society is wound up the assets of the society shall not go to any of the members and shall go to any other charitable trust, society or institution with similar objects or to the Government. 5. The appellant started constructing buildings to house the hospital. Several buildings were constructed from 1987-1988 to 2002-2003 for the functioning of the hospital. On 16.10.1995 the respondent passed an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 01.11.2006 and 27.02.2004 and to declare the appellant to be a charitable institution under the Act. In the petition the appellant had annexed the audited income and expenditure account of the hospital as well as balance sheet for the years 2002 to 2005. 12. The learned single Judge of the High Court dismissed the writ petition on the ground that the building of the appellant is not used principally for charitable purposes. To arrive at the said conclusion the learned single Judge took into account the gross income of the appellant and compared the gross income vis-a-vis the amount spent on free medical aid and social work. Aggrieved by the aforesaid order the appellant filed a Writ Appeal No. 362 of 2007 before the Division Bench of the High Court. By an order dated 13.03.2009, the Division Bench of the High Court dismissed the writ appeal by relying on two Division Bench decisions of the High Court in (1) Medical Trust Hospital (supra) and (2) Thirurangadi Muslim Orphanage Committee v. The Government of Kerala [W.P. (C) No. 4426 of 2009(B)] and held that as long as the appellant is a hospital run on chargeable basis it is not entitled to exemption. 13. Both the single Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hospital to be able to provide free medical relief to poor patients, some income would have to be generated and it would otherwise be virtually impossible for any hospital to undertake free medical service. The counsel then went on to refer to the Income and Expenditure Account of the appellant hospital which shows that for the years 2002-03,2003-04 and 2004-05, the appellant has spent 75.12 lakhs, 78.39 lakhs and 88.33 lakhs respectively for providing free medical services and for charity. For the said years, the net income of the appellant hospital has been 4.2 lakhs, 5.37 lakhs and 8.33 lakhs respectively and it was submitted that the High Court ought to have compared the amount spent for free medical services vis-a-vis net income and not gross income which was what was done to hold that the buildings were not 'used principally' for the charitable purpose as required under Section 3(1)(b) of the Act. By doing this, it was contended that the various expenses for running the hospital were ignored. 15. The respondents, on the other hand, through learned senior counsel, Mr. Jogy Scaria, have contended that the appellant is not entitled for exemption from paying building tax as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. 18. Now we will examine the question of what 'charitable purpose' means. The Oxford English Dictionary defines 'charitable' as "of or relating to the assistance of those in need". In the present case, it can be argued that all medical services relate to the assistance of those in need. This is a valid interpretation but cannot be accepted for the purposes of tax. If these medical services in the present case were being offered free to a majority of the patients rather than a minority of patients, then the conclusion could have been reached that the buildings are principally used for charitable purposes. Further, an amount of approximately 28,00,000/- of the expen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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