TMI Blog2017 (5) TMI 850X X X X Extracts X X X X X X X X Extracts X X X X ..... at an error in interpreting Explanation I to Clause 1 of Section 3 of the Act has occurred in not noticing that it contains the word “includes” and not “means”. This error led to holding that ‘charitable purpose’ meant only ‘relief of the poor and free medical relief’. Relief to the poor and free medical relief is only one of the facets of charitable purpose and Explanation simply clarifies that too be a charitable purpose. However, the inclusive definition points out that relief to poor and free medical relief is not exhaustive as to what charitable purpose would mean. Thus, in order to find out the true scope of charitable purpose, one will have to look into the judgments of this Court, even if this very expression is examined in the context of the Income Tax Act. We respectfully disagree with the opinion of the Division Bench in S.H. Medical Centre Hospital [2014 (3) TMI 187 - SUPREME COURT]. The matter, thus, requires consideration by a Larger Bench. - CIVIL APPEAL NO. 6799 OF 2017, (ARISING OUT OF SLP(C) NO(S). 31682 OF 2016) - - - Dated:- 9-5-2017 - Mr . A . K . Sikri And Mr . Ashok Bhushan JJ . For the Petitioner : Mr . M . T . George, Adv . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over (when handed over) the management of Lisie Hospital or any other institution or to own, start and manage any other such institutions. (b) The ancillary object of the Trust is to extend financial help to the poor either directly or through other institutions, either for medical relief or in extreme necessity for other charitable purposes. It is claimed that the Trust Deed itself shows that the predominant and ancillary objectives of the Trust is charitable purpose alone, with no intention of whatsoever nature to earn or make any profit at any time, but only philanthropic purposes to serve the humanity. Thus each and every act contemplated under the Deed of Trust is advancement of charity which is not restricted to any class, caste or religion. 3) In Kerala, building tax is leviable under the Act. Under Section 5 of the Act, it is provided that on every building the construction of which is completed on or after 10.02.1992, shall be charged building tax based on the plinth area at the rate specified in the Schedule to the Act. Section 3 of the Act provides for exemptions from the application of the provisions of the Act itself. Since Section 3 of the Act is of real im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding is principally used for any of the said three purposes, that building is not amenable for building tax under the Act. 5) The Commissioner of Income Tax, Cochin by his order dated 21.06.2000 has treated the appellant as a charitable trust under Section 12A of the Income Tax Act, 1961. As a result, the appellant is getting requisite relief insofar as income tax is concerned. However, insofar as payment of building tax is concerned, the respondent authorities think otherwise. The Assessing Officer issued notice dated 08.10.2014 to the appellant under Sections 9(2) and 9(4) of the Act directing the Director of the appellant institution to be present with documents for making assessments of the building in question. The appellant claimed exemption from the payment of building tax under the purview of the Act. However, its plea did not find favour with the respondent resulting in passing the assessment order dated 17.11.2004, thereby assessing the property to tax. The appeal filed by the appellant under Section 11 of the Act was dismissed on 25.04.2015. Thereafter, the appellant made a representation to the Chief Minister under Section 3(2) of the Act on 27.10.2015 which was rej ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 3(1) of the Act defines charitable purpose in the following terms: Explanation I. For the purposes of this sub-section, charitable purpose includes relief of the poor and free medical relief. 9) Learned senior counsel emphasised that as per this Explanation, charitable purpose includes relief of the poor and free medical relief. According to him, the word includes is ignored and misread as means in S . H . Medical Centre Hospital judgment which is clear from the following observations: 17. The High Court has correctly interpreted the Explanation clause to Section 3(1) of the Act to hold that charitable purpose means relief of the poor and free medical relief . 10) According to Mr. Nariman, this apparent mistake led to erroneous interpretation of Explanation I, by holding that the purpose would be charitable only when relief of poor and free medical relief is given. On the contrary, the word includes in Explanation I simply clarifies that relief of the poor and free medical relief is also a charitable purpose, meaning thereby there may be various other activities which can be regarded as charitable. Mr. Nariman submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not be submerged by the profit making motive, the latter should not masquerade under the guise of the former. The purpose of the trust must be essentially charitable in nature and it must not be a cover for carrying on an activity which has profit making as its predominant object. 11) He also argued that this Court has consistently followed the dominant object test for determining the charitable purpose of the institution. Reliance is placed in the case of Queens Educational Society v. CIT , (2015) 8 SCC 47. Submission of Mr. Nariman was that since the Act does not define the term charitable purpose , the definition or its requisites laid down by this Court in aforesaid judgments would be applicable, even when these cases are under the Income Tax Act. 12) Referring to the activities of the appellant hospital, it was submitted that the hospital and its infrastructural facilities are entirely and exclusively dedicated to charity. 13) Mr. Giri, learned senior counsel appearing for the respondents, on the other hand, referred to the order dated 17.03.2016 passed by the Government of Kerala wherein it was recorded that only 4.23% of the total income was expe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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