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TMI Blog2015 (3) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... pital'. In September, 1985 the petitioner was registered under the Societies' Registration Act, 1860. On 11.9.1985 name of the petitioner was changed to 'Birla Vidhya Vihar Society' and thereafter on 13.12.1988 it was changed to the present name 'Yash Society'. 3. It is the petitioner's case that the main object of the petitioner in its Memorandum and Articles of Association is to relieve persons suffering from disease or illhealth or requiring medical aid by establishing, constructing and maintaining or assisting Charitable Dispensaries, Hospitals, Convalescent Homes, Sanitoria and Maternity Homes etc. 4. By Finance Act, 1970 Clause 10 (22A) was inserted in Section 10 of the Act with effect from 1.4.1970 so as to exclude income inter alia of a hospital offering service for treatment as provided therein. The provision reads thus : "(22A): any income of a hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescenes or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not for earning profits. This show cause was issued on the basis of annual accounts furnished by the petitioner which showed increase of development fund, cash/bank balances and fixed assets which in the opinion of respondent no.1 was indicative of the fact that petitioner's hospital earns substantial profits from its basic operations. 10. Petitioner's Chartered Accountant by his letter dated 23.8.2010 informed respondent no. 1 of the reasons for increase in the development fund, cash and bank balances and fixed assets and the purpose of their utilization and proposed utilization. It was stated that the surplus earned by the hospital has been utilized for incurring capital expenditure for the hospital and also for the acquisition of land at Thane for the purpose of establishing a new hospital and medical research centre. The details of receipts and payments showing surplus and deficit for Assessment years 200607, 200708, 200809 and 200910 were furnished to respondent no.1 Respondent no.1 by his letter dated 26.8.2010 called upon the petitioner to furnish further details which were duly furnished by the petitioner by its letter dated 16.9.2010. 11. Respondent no.1 by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow that there is systematic generation of profits from the activities of the trust and the increase in assets has helped the petitioner to generate more income and thereby earn more profits. 13. Learned counsel for the petitioner in assailing the impugned order has made the following submissions : (i) It was erroneous for the respondent no.1 to hold that generation of surplus funds would indicate that the petitioner was not existing for philanthropic purposes; (ii) For the first time in A.Y.198990 in granting exemption under section 10 (23A) the authorities had held that benefit of section 10 (23A) was applicable to the hospital conducted by the petitioner and that the petitioner existed solely for philanthropic purposes. For Assessment years 19992000 to 200809 returns of the petitioners were accepted as correct and exemption was allowed under section 10 (C) (iiiae) of the Act. (iii) The respondent no. 1 had not considered the fact that surplus earned by the petitioner was ploughed back for acquisition of capital assets for hospital and for acquisition of land at Thane which was for establishing a new hospital and a medical research centre. The figures for A.Y.200607 to 200910 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (1997) 3 SCC 346 (3) Secondary Board of Education vs Income Tax Officer. (1972) 86 ITR 403 (ORI). 15. With the assistance of the learned counsel for the parties, we have perused the impugned order and the relevant documents as placed in the paper book. The issue which arises for our consideration in these proceedings is whether on the above facts the decision of the respondent no.1 in the impugned order holding that the petitioner is not entitled for an approval under section 10 (23C) (via) of the Act is legal and valid. 16. In order to effectively adjudicate the above issue, it would be useful to refer to the provisions of section 10 (23) (via) which read thus : " Incomes not included in total income. 10: In computing total income of a previous year of any person, any income falling in any of the following clauses shall not be included....................... (23C) : any income received by any person on behalf of __ (via): Any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for reception and treatment of persons during convalescence or of persons requiring medical attention or r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s right in rejecting the petitioner's application seeking an approval under section 10 (23C) (via). In doing so, we examine whether the impugned decision suffers from any arbitrariness and/or an illegality. From the material on record as placed before respondent no.1 it was reflected that the petitioner was earning surplus revenue from its activities and that the assets were increasing. The fact that surplus was generated is not disputed by the petitioner. This surplus revenue was utilized for acquisition of assets which in the opinion of respondent no.1 was capable of generating more income. In the Assessment years 200607, 200708, 200809 and 200910, the percentage of transfer of gross surplus to the development fund was at 19.12 % 28.37 % 73.17 % and 12.12 % respectively. Accompanied with this, there was a huge increase in fixed assets from Rs. 63,75,577/in A.Y.200607 to Rs. 8,02,75,706/in Assessment year 200910 which was approximately an increase of Rs. 7.50 crores within four years. Petitioner's cash and bank balances also increased from Rs. 1,42,420/to Rs. 1,74,15,757/during the same period which was an increase of about Rs. 1.30 crores. The petitioner had purchased lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05 411270 36935 Total:288 2727930 2464910 263020 2007-08 No.of poor/ needy patients Gross Concessional Amt receivable Amt received from the poor patients Amount of relief provided to concessional 35 272865 251030 21835 32 372355 319260 53095 53 434450 407705 26745 51 486490 444410 42080 74 829035 762610 66425 67 487325 445105 42220 65 699018 619935 79083 33 339000 318737 20263 57 593425 540975 52450 53 568165 521660 46505 52 502645 449090 53555 52 560575 491600 68975 Total:624 6145348 5572117 573231 2008-09 No.of poor/needy patients Gross Concessional Amt receivable Amt received from the poor patients Amount of relief provided to concessional 42 400380 360725 39655 57 576715 516480 60235 51 564255 516145 48110 50 675275 627885 47390 66 783960 719445 64515 50 711065 669885 41180 55 544170 497596 46574 57 749905 668310 81595 56 682625 642895 39730 58 561315 5217775 39540 60 641265 596760 44505 68 539638 486308 53330 Total:670 7430568 6824209 606359 For the A.Y. 200708, 200809 and 200910 the percentage of net concessional treatm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. It was the legal duty of respondent no.1 to consider independently the application of the petitioner for the assessment year in question on the basis of the material as submitted by the petitioner and applying the requirements of the provisions of subclause 23C (via) of section 10 decide the same independently. Any deduction and/or exemption as granted to the petitioner for earlier assessment years cannot be claimed to be of any consequence by the petitioner so as claim this deduction as a matter of right for A.Y.200910 and thereafter. We therefore, reject this submission as urged on behalf of the petitioner. 24. The decision of the Division Bench of this Court in the case of Breach Candy Hospital vs CCIT & ors (supra) as relied on behalf of the petitioner is of no assistance to the petitioner. The Division Bench in the facts of the case had held that there was absence of any material to show that generally there was a profit in the hospital activities of the petitioner therein. In this context, it was held that it cannot be said that the petitioner did not exist solely for philanthropic purpose but, for the purpose of profit and the rejection of the application of the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C) (via) of the Act. In the petitioner's case, from the details of the accounts as submitted by the petitioner, this position remains hardly satisfied so as to enable the respondent no.1 to grant an approval for the purpose of the petitioner claiming exemption under the said provisions. 26. The decision of the Division Bench in the case of Rukmarani Education Foundation (supra) as relied by the petitioner in support of the proposition that the petitioner has not been informed by the respondent no.1 on the grounds and reasons before the application by the petitioner was rejected. The petitioner in the said case had sought to furnish information/evidence to meet the grounds on which the impugned order was passed which is not the position in the present case. In the present case respondent no.1 had issued a show cause to the petitioner. Apart from that ample opportunity was given to the petitioner to place all the material to show that the petitioner becomes eligible to the deduction as claimed for the assessment year in question. A personal hearing was also granted to the petitioner 's representative to present the facts of the case on 23.9.2010. After taking into considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay for it are being charged for medical services. 17. 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 Rs. 26,00,000 of the expenses are towards "social work and charities" as per the income and expenditure accounts provided, whereas "free medical aid" is around Rs. 60,00,000 for the year 2004-2005. It is not clearly mentioned that "social work and charities" is. Furthermore, an exemption is provided for that area in which free medical aid is provided by the appellant Hospital. The appellant has not produced cogent material evidence before the competent authority or the State Government or before t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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