TMI Blog1998 (7) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... income amounting to Rs. 21,19,608. The Assessing Officer started assessment proceedings and during the assessment proceedings, examined various books of account which has given birth to the controversy in this case. The Assessing Officer has examined the following registers: (i) New Out Patient Free Treatment Register; (ii) Out Patient Free Treatment Re-visit Register; (iii) Out Patient Master Register (New); and (iv) Admission/Discharge Register. 4. The Assessing Officer has observed certain discrepancies according to his perception and asked the assessee to file the reply explaining discrepancies. The discrepancies were of the nature of name and address of the patient, which according to the Assessing Officer were not indicating full names, full postal address, no categorisation regarding allotment of MR. No. in case of free patients and lack of maintenance of Registration No. in case of free patients. The Assessing Officer asked the assessee to explain the reason why the name of the doctor attending the free patients is not mentioned. Similarly the medicine administered to each free patient is not mentioned. The assessee filed explanation and explained all the objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tics compiled by the Government of India. As per these standards, the list of tariff of the hospital is too prohibitive. It caters only to rich class of the society. I, therefore, do not agree that it covers the definition of 'general public utility' as envisaged in section 2(15) of the Act. The assessee hospital does not fulfil the test of general public utility in terms of various judgments including Jamal Mohd. Sahib case [1941] 9 ITR 375 (Mad.) and [1939] 7 ITR 415, 422 (PC). In another case CIT v. Hyderabad Sikanderabad Foodgrains Association Ltd [1989] 175 ITR 574/576 (AP), it has been held that the exemptions in the charitable nature are not automatic. I, therefore, hold that the assessee is not entitled to the benefit provided in sections 11, 12 12A. The position reflected by the assessee hospital, is, therefore, accepted on protective basis only." 5. Aggrieved with the order of the Assessing Officer the assessee filed appeal before the CIT(A) and the CIT(A) has given his observation at page 9 of his order which is reproduced below: "After hearing the ld. counsel and the ld. Assessing Officer and careful consideration of the factual and legal position, I hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant is entitled to exemption under section 11 of the Act will have to be seen on the facts and circumstances for that year only. A decision cannot be taken in this regard on any future possibility or presumption. I, therefore, hold that the appellant deserves the benefit of exemption under section 11 of the Act. The Assessing Officer is directed to allow the relief accordingly. In the result, the appeal is allowed." The learned D.R. relied on the order passed by Assessing Officer. 6. The ld. counsel of the appellant has taken plea that the appellant is a charitable trust which is registered under the Registration of Societies, under Registration No. 433-B of 1979. The ld. counsel has filed a copy of the assessment order where Assessing Officer has accepted that the appellant trust is a charitable trust which is running Research Medical Centre at New Delhi. The same status is maintained by the department for the assessment years 1986-87, 1987-88 and 1988-89. The ld. counsel has also submitted that the CIT(A) has recognised the trust as charitable trust which is indicated by the certificate under section 80-G granted upto 31-3-85, 31-3-91 and 31-3-1996. The ld. counsel p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Medical relief in such manner as the trustees may think fit, including:--- 1. Setting up of hospitals or other medical institutions, managing of hospitals or other medical institutions or granting of subscriptions and donations to the Hospitals, Dispensaries, Convalescent Homes, Asylums, Nursing Homes and other public institutions for administering medical relief to needy. 2. Carrying out medical and clinical research. 3. Endowments to and help or support to Hospitals, Maternity Homes, Sanatoriums and Dispensaries. 4. Grant of medical help to the poor and grant of medical help to persons affected during epidemics, famine, flood, earthquake or any unforeseen calamity or war/war-like operations." In pursuing the object the Trust has undertaken three main activities namely, the first activity was achieved by establishing hospitals - namely Batra Hospital, the second activity was to develop the medical education which was carried in the hospital itself, the third was medical and clinical research which was carried by the doctors in the hospital and the last activity was to grant medical help to poor. 8. We do not find that the trust has deviated from the objects in any man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration is for charitable purpose. The charitable purpose is defined in section 2(15) of the Income-tax Act which includes medical relief as one of the objects apart from other objects like education, relief to the poor and the advancement of any other object of general public utility. In the case of the assessee, not only clause 3 of the objects are in tune with the definition mentioned in section 2(15) but in practice the relief to the poor has been given, medical education by imparting training to the Nurses have been established and medical relief is an on going activity along with the medical research. 11. It is important to note that prior to 1-4-1984, if an activity was related to the advancement of any other object of general public relief then the same activity should not have been involving the carrying on of any activity for profit. However, from 1-4-1984, the legislature has dropped the words "not involving the carrying on of any activity for profit". Similarly, in section 13, sub-clause (1), clause (bb) was introduced which reads as follows: "(bb) in the case of charitable trust or institution for the relief of the poor, education or medical relief, which ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held in trust had been exclusively applied for achieving the charitable purposes for which the trust had been created, under these circumstances the trust will get the benefits provided under section 11(1)(a) of the Act. 14. The Hon'ble Karnataka High Court in the case of CIT v. Bel Employees Death Relief Fund Service Benefit Fund Association [1997] 225 ITR 270 has dealt with the issue of conducting the business and its impact on the definition of 'charitable purpose' under section 2(15). The Hon'ble High Court has held that if the rules of the assessee-association unambiguously indicated that the benefit of the scheme or the alleged charitable purpose could be utilised only by specified persons who were required to be the subscribers or their dependents then the contributions to the fund allegedly collected for their personal benefits could not be held to be forming an association for charitable purpose. The interpretation of the decision is that if the business activity is not for the charitable goals and aims but for the benefit of the trustees or for the benefit of the Members of the Associations and the profits are transmitted directly or indirectly to the members or trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the charitable purpose or to earn profit. Where profit making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and A. There is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle of management. We, therefore, agree with Beg, J. when he said the Sole Trustee, Loka Sikhasana Trust's case [1975] 101 ITR 234, 256 (SC) that: 'If the profits must necessarily feed a charitable B. purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter the charitable character of the trust. The t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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