TMI Blog2014 (1) TMI 1754X X X X Extracts X X X X X X X X Extracts X X X X ..... r that the pharmacy is run by the assessee-society only for the purpose of running the hospital. The hospital cannot be run without a pharmacy attached to it. If an assessee wants to run a hospital, running of the pharmacy is also a must. Therefore, running of the pharmacy by the assessee-society is not an activity carried on by the assessee incidental to the running of the hospital; but, on the other hand, it is an integral part of the hospital run by the assessee. The Assessing Officer has observed that the assessee-society has maintained separate accounts for the pharmacy section. Maintaining accounts separately for pharmacy section does not decide the nature of the activities carried on by the assessee through running of the pharmacy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al is directed against the order of Commissioner of Income Tax (Appeals)-VII at Chennai, passed on 3.10.2013. The appeal arises out of the assessment completed under Section 143(3) of Income-tax Act, 1961. 2. The assessee is a society registered under the Societies Registration Act, 1860, on 26th February, 1955. The society is also granted registration under Section 12A, as a charitable institution, through an order of the Commissioner of Income Tax, Tamil Nadu V, on 9.8.1973. The assessee-society is also registered with Ministry of Home Affairs, Government of India, for the purpose of reporting details and utilization of funds received from outside India. 3. As per the records available before us, the object of the assessee-society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1,04,650 (3) Working Women s Hostel : Rs.5,44,350 (4) Creche : Rs.56,000 6. In the case of pharmacy, the Assessing Officer observed that it is annexed to the St. Thomas Hospital and engaged in sale of medicine to public which amounts to business activity. Separate books of accounts are maintained for the pharmacy business. In the case of typewriting institute, the Assessing Officer has observed that assessee was collecting fees from students undergoing the training. Therefore, it is commercial in nature. In respect of working women s hostel, again the Assessing Officer has observed that facilities are provided against payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1.3) The finding of the Commissioner of Income Tax (Appeals) that the appellant did not deny selling of medicines to outsiders. Even assuming so, sale of medicines is only an object of providing medical relief to the poor virtually at cost and would not make it an object of profit. (1.4) The Commissioner of Income Tax (Appeals) went wrong in holding that the appellant runs dispensaries in two places in a commercial manner, which finding is perverse; and in any event providing medical relief is covered in the first two limbs of Sec.2(15). (2.1) The Commissioner of Income Tax (Appeals) went confirming the disallowance of depreciation and that it amounts to double deduction. (2.2) The Commissioner of Income Tax (Appeals) failed to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety. The purchase of medicines by the public is absolutely negligible. That negligible amount of sales, if any, cannot decide the nature of activities carried on by the assessee in running the pharmacy in its hospital premises. The pharmacy is not situated in any commercial area or outside the hospital compound with the intention to invite the public at large to purchase medicines from the pharmacy run by the assessee-society. The assesseesociety is running the pharmacy within the premises of the hospital and as part of the hospital itself. It is clear that the pharmacy is run by the assessee-society only for the purpose of running the hospital. The hospital cannot be run without a pharmacy attached to it. If an assessee wants to run a hos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmacy section cannot be excluded from computing the income eligible for exemption under Section 11 of the Income-tax Act, 1961. The pharmacy collection also forms part of the collections accounted by the assessee from its charitable activities. Therefore, Assessing Officer is directed to give exemption under Section 11 in respect of the pharmacy collection as well. 15. Once the pharmacy collection is treated as part of its charitable activities, the total of the remaining items work out to less than ₹ 10 lakhs. The law has provided as on date an exclusion of ₹ 10 lakhs from the rigours of denying exemption under Section 11, in respect of activities involving carrying on business or similar activities. The total of collection ..... X X X X Extracts X X X X X X X X Extracts X X X X
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