THE COMMISSIONER OF INCOME TAX vs. M/S.PULICKAL MEDICAL FOUNDATION

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ITR/192/1999HC KeralaKLHC01014160199926 November 2018Bench: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court declined to answer the questions of law referred. While acknowledging the dictum from Aditanar Educational Institution that exemption under Section 10(22) must be examined each year, the Court noted that the Assessing Officer for the assessment year 1991-92 had not made any factual consideration for the denial of exemption for that specific year. The Assessing Officer's order merely mentioned the pending Special Leave Petition before the Supreme Court. The Court observed that the Supreme Court had subsequently affirmed the High Court's decision in Pulikkal Medical Foundation P. Ltd. in Civil Appeal No.6098-99/1994, vide order dated 25.02.1999. Therefore, as the questions of law did not arise from the specific factual matrix of the assessment year under consideration, the reference was closed without answering them. No specific issue was left undecided; rather, the Court found the questions not arising from the order.

What were the facts?

This is an Income Tax Reference filed by the Commissioner of Income Tax, Cochin, against an order of the Income Tax Appellate Tribunal, Cochin Bench, for the assessment year 1991-92. The Tribunal had granted the assessee, M/s. Pulickal Medical Foundation, exemption under Section 10(22A) of the Income Tax Act, 1961. The assessee had previously been granted similar exemption by a Division Bench of the Kerala High Court in a prior case. The Assessing Officer had noted that the Department had filed a Special Leave Petition before the Supreme Court against the earlier High Court decision, implying a potential denial of exemption for the current year if the Supreme Court ruled in favour of the Department. However, the Assessing Officer did not make any specific factual consideration for the denial of exemption for the assessment year 1991-92.

What were the issues?

The High Court was asked to decide two questions of law: 1. Whether, on the facts and circumstances of the case, the Tribunal was right in law and fact in holding that the assessee is entitled to the exemption under Section 10(22A) of the Income Tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case and also in view of the finding by the High Court in 210 ITR 299 at 312 that 'the assessee is running the hospital on commercial lines'; 'the assessee may carry on any activity for profit', the Tribunal was justified and correct in confirming the order of the CIT (Appeals) and in allowing the exemption under Section 10(22A) of the Income Tax Act, 1961? The Revenue, through its learned Senior Counsel, relied on the Supreme Court decision in Aditanar Educational Institution v. Addl. C.I.T. [(1997) 224 ITR 310 (SC)] to argue that the availability of exemption under Section 10(22) of the Act should be evaluated each year. The assessee's contentions are not explicitly recorded, but the Tribunal's decision in favour of the assessee implies they argued for the continued applicability of the exemption.

Which sections of the Income-tax Act were involved?

Section 10(22A),Section 10(22)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN.

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY, THE 26TH DAY OF NOVEMBER 2018 / 5TH AGRAHAYANA, 1940 I.T.R.No.192 of 1999 ARISING FROM R.A.NO.282(COCH)/1999 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH, COCHIN. [ASSESSMENT YEAR 1991-92] APPLICANT: THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS. SRI.P.K.R.MENON, SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, STANDING COUNSEL FOR GOI (TAXES) RESPONDENT: M/S.PULICKAL MEDICAL FOUNDATION, XXXV/2570, M.G. ROAD, COCHIN-16 BY ADVS. SMT.PREETHA S.NAIR SRI.E.K.NANDAKUMAR (SR.) SRI.P.GOPINATH THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON 26.11.2018, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:

ITR.NO.192 of 1999 - 2 - ORDER Vinod Chandran, J: The reference is from an order of the Tribunal for the assessment year 1991-92. The Tribunal found the assessee to be entitled to the exemption under Section 10(22A) of the Income Tax Act, 1961 [for brevity “the Act”] following the decision of a Division Bench of this Court in C.I.T. v. Pulikkal Medical Foundation P. Ltd. [(1994) 210 ITR 299 (Ker.)]. The questions of law referred for our consideration and decision are the following: "1. Whether, on the facts and the circumstances of the case, the Tribunal is right in law and fact in holding that the assessee is entitled to the exemption under section 10(22A) of the Income Tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case and also in view of the finding by the High Court in 210 ITR 299 at 312 that "the assessee is running the hospital on commercial lines"; "the assessee may carry on any activity for profit", the Tribunal is justified and correct in confirming the order of the CIT (Appeals) and in allowing the exemption under section 10(22A) of the Income Tax Act, 1961?" 2. The learned Senior Counsel for Government of India (Taxes) relies on Aditanar Educational Institution v. Addl. C.I.T. [(1997) 224 ITR 310 (SC)] to contend that the

ITR.NO.192 of 1999 - 3 - availability of exemption under Section 10(22) of the Act can be considered by the Department in each year when the assessment is brought before the Officer. Specific reference is made to the following sentence: “We may state that the language of section 10(22) of the Act is plain and clear and the availability of the exemption should be evaluated each year to find out whether the institution existed during the relevant year solely for educational purposes and not for purposes of profit”. 3. We have no dispute on the said dictum; but, however, we see that there is no such consideration made by the Assessing Officer for the year 1991-92, which is subject here. Annexure-A order of the Assessing Officer merely states that for the earlier years though the High Court in the cited decision had allowed the claim, the Department has filed a Special Leave Petition before the Supreme Court. Hence, even the Assessing Officer went on the understanding that if the Supreme Court holds in favour of the Department, then there could be a denial of such exemption for the present year. We note the afore extracted dictum wherein the Supreme Court only declared that the exemption under Section 10(22) has to be examined in each year in which it is claimed and grant of such exemption in the previous year would not, by that alone,

ITR.NO.192 of 1999 - 4 - enure to the benefit of the assessee in the next or subsequent years. However, that question does not arise from the order of the Tribunal, since the Assessing Officer has not made any consideration on factual aspects as to denial of exemption for that particular year. We also find that the Hon'ble Supreme Court has affirmed the decision of the High Court in Pulikkal Medical Foundation P. Ltd. in Civil Appeal No.6098-99/1994, vide order dated 25.02.1999. In the above circumstance, the reference is closed declining to answer the questions of law raised, for those not arising in the particular year. Sd/- K.VINOD CHANDRAN JUDGE Sd/- ASHOK MENON JUDGE

ITR.NO.192 of 1999 - 5 - APPENDIX APPLICANT'S ANNEXURES: ANNEXURE A COPY OF ASSESSMENT ORDER DATED 21.3.1994 FOR THE A.Y 1991-92. ANNEXURE B COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 COCHIN DATED 8.7.1994. ANNEXURE C COPY OF THE ORDER OF THE TRIBUNAL DATED 16.7.1998 IN ITA NO. 627(COCH)/1994 Vku/- [ true copy ]

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