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2017 (5) TMI 850 - SUPREME COURT OF INDIA

2017 (5) TMI 850 - SUPREME COURT OF INDIA - TMI - Exemption from liability of paying building tax under the Kerala Building Tax Act, 1975 - charitable institution - Held that:- The Hospital at present conducts heart-transplant surgeries, kidney-transplant surgeries etc. It conducts a number of camps in rural areas as its health check-up programs for creating awareness on blood donation, organ donation, pain and palliative care, free home-care treatment to patients belonging to BPL, free dialysis .....

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nch which rendered the judgment in S.H. Medical Centre Hospital [2014 (3) TMI 187 - SUPREME COURT], it appears that 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 cla .....

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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. For the Respondent : Mr. C. K. Sasi, Adv. JUDGMENT A.K. SIKRI, J. This appeal is preferred against the order dated 18.07.2016 passed by the Division Bench of the High Court in Writ Appeal No. 1386 of 2016 which was filed by the appel .....

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facts would suffice, which is as follows: The appellant M/s. Lisie Medical Institutions was constituted under a Registered Trust Deed, executed on 03.04.1990 by the Archdiocese of Ernakulam, appointing Rev. Msgr. Parackel as the trustee of the Trust. The appellant-trust is only an instrumentality of its settler, the Church. His Excellency Mar Sebastian Adayantharath (Chairman), Auxiliary Bishop of Ernakulam - Angamaly Archdiocese, His Excellency Mar Jose Puthenveettil Auxiliary Bishop of Ernakul .....

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e), and Fr. Jimmy Kunnathoor, (Asst. Executive Trustee), constitute its present Board of Trustees. The Trust was constituted inter alia for achieving the following main and ancillary objects: (a) The main object of the Trust is the reception and Treatment of persons suffering from illness, or mental defectiveness, or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation solely for philanthropic purposes and not for purposes of .....

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t 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 .....

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ent of India or any local authority; and (b) buildings used principally for religious, charitable or educational purposes or as factories or workshops or cattle/pig/poultry farms or poly houses. Explanation I. - For the purposes of this sub-section, charitable purpose includes relief of the poor and free medical relief. Explanation II. - For the purposes of this sub-section, - (i) cattle/pig/poultry farms shall have the same meanings as assigned to them in Clauses (d), (m) and (n) respectively i .....

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sub-section (1) or under Section 3A, it shall be referred to the Government and the Government shall decide the question after giving the interested parties an opportunity to present their case. (3) A decision of the Government under sub-section (2) shall be final and shall not be called in question in any Court of law. 4) It is the submission of the appellant that a plain reading of the clauses (a) and (b) makes it very clear that in providing exemption from the operation of the said Act, the l .....

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or classes of activities viz. (a) religious, (b) charitable or (c) educational purposes. The appellant s case is that if any building 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 .....

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spondent 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 rejected vide order dated 17.03.2016 passed under Section 3(1)(b) of the Act on the ground that the entire medical relief is not rendered free of cost. Challenging that order, t .....

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ct as the petitioner is running a charitable institution. The issue is covered by the judgment of the Apex Court in S.H. Medical Centre Hospital v. State of Kerala [2014(1)KHC222]. 2. In the light of the aforesaid judgment, I do not think that the authorities under the Act had committed any error in passing the assessment orders. This writ petition is hence dismissed. 6) It is against this order writ appeal was filed by the appellant which has again dismissed with the sole observation that case .....

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. Appeal fails and it is dismissed accordingly. 7) It is clear from the order of the learned single Judge as well as the Division Bench that on the ground that the matter is covered by the judgment of this Court, the plea of the appellant is rejected. 8) Mr. Nariman, learned senior counsel appearing for the appellant, read out the relevant portions from the judgment in S.H. Medical Centre Hospital and submitted that there was an apparent error committed in the said case while interpreting the pr .....

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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 wor .....

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request of the appellant for exemption from payment of building tax was rejected. In that order, the Government has accepted the fact that appellant hospital functioning at Ernakulam was doing all sort of efforts to improve the subsidised medical treatment and medicines to patients from lower strata of the society, as well as charging affordable rates compared to some other Hi-Tech hospitals elsewhere in the State. He also submitted that a Constitution Bench of this Court in the case of Additio .....

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ugh that as a matter of fact an activity results in profit but it must be carried on with the object of earning profit. Profit making must be the end to which the activity must be directed or in other words, the predominant object of the activity must be making a profit. Where an activity is not pervaded by profit motive, but is carried on primarily for serving the charitable purpose, it would not be correct to describe it as an activity for profit. But where on the other hand, an activity is ca .....

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t of such activity must be to subserve the charitable purpose, and not to earn profit. The charitable purpose 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 .....

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lities 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 expended for charity in the year 2013-2014, whereas this figure was only 4.56% in the year 2014-2015, Mr. Nariman s reply was that this argument ignored the fact that apart from spending aforesaid amount entirely on c .....

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ary objectives. That is why the hospital started with only 3 doctors and housed in few residential buildings with only 24 beds in the year 1956, has become a super speciality hospital in the passage of time with 150 doctors working in 25 departments with a bed-strength of 1000, taking care of the needs of lakhs of people. The Hospital at present conducts heart-transplant surgeries, kidney-transplant surgeries etc. It conducts a number of camps in rural areas as its health check-up programs for c .....

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