Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Hiranandani Foundation Versus Asst. Director of Income Tax, Exemption 2 (1) , Mumbai.

Denial of exemption u/s 11 - Violation of provisions of section 11(4A) - non maintaining separate books of account for pharmacy, which is part of hospital run by the assessee trust - Held that:- The running of a pharmacy is a necessary requirement for running of a hospital. It is impossibility from medical point of view that the hospital can run without “pharmacy shop” in the premises of the hospital. Considering the same, the Hon’ble High Court has held that maintenance of a pharmacy shop is an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

- Therefore, we find that 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 this case. Thus, we affirm the assessee’s contention that the pharmacy shop is an integral part of the hospital business and the same is not hit adversely by the conditions specified in the provisions of section 11(4A) of the Act. Therefore, so long as t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

A. Karia For The Revenue : Shri A.N. Sontakke, DR ORDER PER D. KARUNAKARA RAO, AM: There are four appeals under consideration. All these appeals are filed by the assessee involving the assessment years 2006-07 to 2009-2010. Since, the issues raised in all these appeals are identical and also considering the connectivity of these appeals, they are clubbed, heard together and disposed of in this consolidated order. Appeal wise adjudication is given in the following paragraphs of this order. ITA No .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

confirming action of the AO in estimating income from pharma medicines at ₹ 36,20,520/- and assessing the same as taxable income denying the exemption u/s 11 to the said income. 3. Briefly stated relevant facts of the case are that the assessee is a registered charitable trust and engaged in running schools and hospitals. The assessee was established vide trust deed dated 14.12.1983 with the objects of education, medical relief to the poor. Assessee runs a multispecialty hospital at Hirana .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssment, the Assessing Officer segregated the profits earned out of the pharmacy business of the said hospital and sum of ₹ 36,20,520/- was taxed as a business income of the assessee raising the demand of ₹ 23,03,223/- for the AY 2006-2007. Assessing Officer is of the opinion that the said profits are not eligible for exemption in view of non compliance to the provision of section 11 (4A) of the Act. Similar demands were raised for similar reasons for the AYs 2007-08; 2008-09 and 2009 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rd include that the assessee runs a pharmacy store in its hospital and the overall turnover of the hospital is above ₹ 4 Crs. The pharmacy turnover is part of it. Assessee buys the medicine and sells the same to the patients at MRP. This pharmacy is located within the premises of the hospital. Before the AO, assessee made elaborate submissions stating that the pharmacy business is integral part of the hospital business and the books of accounts since maintained separately for the business .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

le of decisions ie (i) the judgment of the Hon ble High Court in the case of Baun Foundation Trust vs. CCIT (251 CTR 237) and the decision of the Mumbai Bench of the Tribunal in the case of Saifee Hospital Trust vs. Department of Income Tax in ITA No.5686/Mum/2011. The above said decisions are relevant for the proposition that maintaining of pharmacy is incident to the hospital business, which is entitled for exemption u/s 11 of the Act. Once the pharmacy business is incident to the running of a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

account are maintained by such trust or institution in respect of such business. As per the Revenue, hospital business, in any case, requires maintaining the books of accounts for claiming of exemption, about which there is no dispute. In addition, the pharmacy business also requires maintaining of the separate books of account in the pharmacy business, if the benefit of exemption is claimed in respect of income from the business of pharmacy. Revenue dismissed the reliance of the assessee on the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essment year 2006-2007, it was observed that assessee purchased medicine to the tune of ₹ 2.4 Crs (rounded of) (para 6.1 of the impugned order) and the said medicines were sold at the rate as exists in the open market. AO noticed that the net profit margin varies from 15-25% of the cost price. AO considered only 15% as the net profit rate and calculated profit @ 15% of the said 2.4 Crs and the income determined as relatable to the pharmacy business at ₹ 36,20,250/-. The said amount w .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is paragraphs, CIT (A) discussed that the pharmacy business constitutes a separate business independent of the hospital business and confirmed the AO s decision in making the said decision for want of separate books of account for pharmacy stores. CIT (A) also discussed the fact of assessee earning 17.18% as a GP rate and dismissed the assessee s contention that it does not have a profit margin. He further mentioned that when such business of pharmacy constitutes an independent business, the pha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s that the pharmacy business is an integral part of the hospital business as there cannot be any hospital without a pharmacy store. Pharmacy store is an integral part of the hospital business. Therefore, the assessee maintained a separate books of account for the hospital business including the transactions relating to the pharmacy business. The provisions of sub-section 4A of section 11 mandate the maintenance of separate books of account for all streams of income of the hospital business. He f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

is also mentioned in the said judgment that a hospital must of necessity have a section or department where medicines can be dispensed and it is not uncommon for a medical hospital................to have a chemist shop where pharmaceutical products are sold . Ld Counsel for the assessee is of the view that running of a pharmacy store is a ancillary activity of running of hospital, which is for philanthropic purposes and therefore, assessee is entitled for exemption u/s 11 of the Act. 7. On the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of running schools and also business of running a pharmacy shop. The requirement of maintaining the separate books of account for pharmacy shop to become eligible for exemption u/s 11 of the Act was not met by the assessee. When a pharmacy shop in the open market maintains separate books of account, why should the assessee fail to do so and resort to include trading transaction of medicine in the hospital business. He also dismissed the assessee s argument that the medicines / drugs are not sold .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed by the Ld DR for the Revenue who mentioned that the pharmacy is an independent business activity so far as maintenance of books of accounts is concerned. He also distinguished the other judgments by stating that the same were delivered in favour of the respective assessee in the factual matrix of the maintenance of the books of accounts for the pharmacy stores by the respective assessees. Further, he mentioned that the said decisions were not delivered in the context of 11(4A) of the Act, abo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

books of accounts have to be maintained. During rebuttal time, Ld Counsel for the assessee brought our attention to the said judgment in the case of Thanti Trust (supra) and mentioned that in case of any ambiguity in the language / law, the benefit should be given in favour of the assessee. 8. We have heard both the parties and perused the orders of the Revenue Authorities as well as the decisions cited by both the Ld Representatives and also the relevant material placed before us. The case of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of the assessee is that the running of a hospital includes a run of pharmacy as well. Therefore, the pharmacy business is not an independent business activity so far as the assessee is concerned. In fact, the same constitutes an integral part of the business of running of a hospital. For this proposition, assessee relied on various decisions, which were already cited above. As the assessee has undisputedly maintained the books of account for the hospital separately, the assessee fulfils the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust ....... Further, as cited by the assessee, we have also examined the relevant proviso to section 10(23C) of the Act and the relevant portions are extracted as under: Provided also that nothing contained in sub-clause (iv) or sub-clause (v) [or subclause (vi) or sub-clause (via)] shall apply in relation to any income of the fund or trust or instit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

provisions appearing in to different sections from the Act. Therefore, we agree with the relevant argument propounded by the Ld Counsel for the assessee on the applicability of the cited judgements. 12. Regarding the argument pertaining to whether the pharmacy shop is an integral part of the hospital business, as mentioned above, we have perused the relevant paras from the jurisdictional High Court in the case of Baun Foundation Trust (supra), which was of course delivered in the context of the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

carried on by the institution, it will not cease to be one existing solely for the statutorily stipulated purpose so long as the object is not to make a profit. Again, it is a wel1 settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital. Even if the figures which are taken into account by the Chief Commissioner are to be had reg .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ses to have a chemist shop where pharmaceutical products are sold. This is a facility which is intended to be used predominantly by patients and their relatives. Though the members of the general public are not prohibited from using the facility, the crucial question to ask or the test to answer is whether the establishment of a chemist shop is incidental or ancillary to the dominant object and purpose which is to set up and conduct a hospital for philanthropic purposes. As a matter of fact, Sec .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at the nature of the activity has assumed such a dominating or overwhelming importance so as to cast doubt on the true nature and character of the hospital which is conducted by the Petitioner. The Chief Commissioner has acted contrary to the judgments of the Supreme Court which hold the field consequent upon which the impugned order would have to be set aside. 13. From the above, it is clear that the running of a pharmacy is a necessary requirement for running of a hospital. It is impossibility .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     Latest Happenings     ↓  

Forum: GST on RCM on rent in a unregistered state

Forum: COMPOSITION SCHEME

Forum: Input Tax Credit - Reg

Forum: GST Invoice

Article: Websites of Government Departments need lot of improvement. We are noticing detoriations in them for example, case of website of ITAT.

Highlight: Levy of additions tax u/s 115O on distribution of dividend - shares of its profits declared as distributable among the shareholders is not impressed with the character of the profit from which it reaches the hands of the shareholder - not to be bifurcated as agriculture and non-agriculture dividend - SC

Highlight: Rate of GST on old and scrap buses - 28% or 18% - at such initial tender process initiated by the Respondents-KSRTC, the present petitions filed by the petitioners are premature and misconceived and do not require any interference by this Court at this stage. - HC

Forum: Rent a cab operator

Highlight: In view of amendment made u/s 132A of the Income Tax Act, 1961 by Finance Act of 2017, the 'reason to believe' or 'reason to suspect', as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal, SC dismissed the appeal of the assessee

Highlight: Validity of Assessment Order - period of limitation u/s 153 (2A) is applicable even if the entire order was not set aside but matter was remanded back for for limited aspects with directions - HC

News: Note ban was a shake-up, achieved its main objectives

Notification: Amendments in the notification No.5/2017- Integrated Tax (Rate) dated the 28th June, 2017.

Highlight: Levying interest u/s 234C - interest is to be charged on the returned income and not on assessed income.

Highlight: Accrual of income - sale of right to develop and sell incentive FSI under LOI - till the conditions of LOI are fulfilled transfer is not complete and income does not accrue to the assessee

Highlight: TPA - determination of ALP - TP adjustment by applying Bright Line Test (BLT) is not sustainable on protective basis having no statutory mandate.

Highlight: Safeguard Duty - Advance License Scheme - as there is no exemption from safeguard duty leviable under Section 8C, which is imposed on the goods imported from China, the importer has to pay safeguard duty

Highlight: Manufacture - process of cutting of waste plastic container - Such plastic containers before and after cutting are nothing but waste / scrap - Not a manufacturing activity as no new product emerges.

News: NITI Aayog and Govt. of Assam organizes workshop on health sector reforms in Guwahati; launches SATH- Sustainable Action for Transforming Human Capital

Notification: Seeks to amend notification no. 5/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding restriction of refund on corduroy fabrics

Notification: Seeks to amend notification no. 2/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst exemptions

Forum: GSTR 3B Rectification

Notification: seeks to exempt Skimmed milk powder, or concentrated milk

Notification: Seeks to amend notification no. 2/2017- integrated tax(rate) dated 28.06.2017 to give effect to GST council decisions regarding GST exemptions.

Notification: Seeks to amend notification no. 1/2017- central tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates

Notification: Seeks to amend notification no. 1/2017- integrated tax(rate) dated 28.06.2017 to give effect to gst council decisions regarding gst rates.

News: Notification Issued For GST Actionable Claim On Branded Food Products

Highlight: Classification printed computer stationary/manifold Business Forms - to be classified under Chapter Heading 4820.00 or under Chapter Heading 4901.90 - items like A4 sheets, advertisement and job card to be classified under Chapter 49

Article: RCM – Applicability to persons not liable to get registered us 23(1)

Article: Credit of unsold stock [Section 140(3)] - Actual Credit as well as Notional Credit - Part-I - GST Transitional provisions

News: GST Refund - Blockage of Working Capital of Exporters - earlier also there was a normal blockage of funds for a period of 5-6 months at least

News: Clarification about Transition Credit - ₹ 1.27 lakh crore of credit of Central Excise and Service Tax was lying as closing balance as on 30th June, 2017 - claim of credit of ₹ 65,000 crore is not unexpected

Article: 20 Things You must know about E Way Bills in GST Law

Article: MISTAKES IN DRAFTING

Highlight: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg. - Circular

Highlight: The definition of "subsidiary company" or "subsidiary" u/s 2(87) of the Companies Act, 2013 shall come into force w.e.f. 20-9-2017

Highlight: Central Government notified the All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017 - Notification

Notification: All Industry Rates of Duty Drawback Schedule w.e.f. 1.10.2017

Circular: Investment by Foreign Portfolio Investors in Corporate Debt Securities – Review

Notification: Exemptions on supply of services under UTGST Act

Notification: Rates for supply of services under UTGST Act

Notification: Exemptions on supply of services under IGST Act

Notification: Rates for supply of services under IGST Act

Notification: List of Exempted supply of services under the CGST Act

Notification: Rates for supply of services under CGST Act

Highlight: Acceptance of deposits by companies from its members - conditions relaxed in case of Specified IFSC Public company and a private company - Rule 3 amended

Notification: Rate of exchange of conversion of the foreign currency with effect from 8th September, 2017

News: Tax Payers Advised To Confirm Identities Of Income Tax Search Authorities

Notification: Amendment in Appendix 3 (SCOMET items) to Schedule- 2 of ITC (HS) Classification of Export and Import Items 2012

Notification: The Customs and Central Excise Duties Drawback Rules, 2017

Circular: The Customs and Central Excise Duties Drawback Rules, 2017 and All Industry Rates (AIRs) of Drawback related changes -reg.



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version