BREACH CANDY HOSPITAL TRUST vs. CHIEF COMMISSIONER OF INCOME TAX,

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WP/1051/2013HC Bombay12 October 2026Author: HON'BLE SHRI JUSTICE B.P. COLABAWALLA HON'BLE SHRI JUSTICE FARHAN P. DUBASH55 pages
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What did the High Court hold?

The High Court held that the existence of surpluses, by itself, does not establish that the hospital existed for profit. It reasoned that the Petitioner's objects, actual activities, and the use of funds during the period in question clearly demonstrated that it existed solely for philanthropic purposes and not for profit. The Court found that the Respondent No. 1's grounds for rejecting the applications were not sustainable. Consequently, the impugned orders rejecting the Petitioner's applications for approval under Section 10(23C)(via) were quashed and set aside. The Court directed Respondent No. 1, or the competent authority, to issue the requisite approval orders for AYs 2002-03 to 2010-11 and AYs 2011-12 to 2021-22 within eight weeks of the judgment's upload. The ratio decidendi is that the overall conduct and application of funds, in line with stated philanthropic objects, are paramount in determining if an institution exists solely for philanthropic purposes, rather than solely on the generation of surplus.

What were the facts?

The Breach Candy Hospital Trust (Petitioner) filed two writ petitions challenging orders dated April 15, 2010, and September 28, 2012, passed by the Chief Commissioner of Income-tax (Respondent No. 1). These orders rejected the Petitioner's applications for approval under Section 10(23C)(via) of the Income-tax Act, 1961, for Assessment Years (AYs) 2002-03 to 2010-11 and AY 2011-12 onwards, respectively. The core issue is whether the hospital exists solely for philanthropic purposes and not for profit, a condition for exemption under the said section. The Petitioner was incorporated in 1946 and has consistently claimed exemption, which was allowed for earlier AYs, but denied for AYs 1996-97 to 1998-99 and subsequently for the AYs under challenge.

What were the issues?

1. Whether the Petitioner hospital satisfies the requirement of existing 'solely for philanthropic purposes and not for purposes of profit' under Section 10(23C)(via) of the Income-tax Act, 1961, for the Assessment Years 2002-03 to 2010-11 and AY 2011-12 onwards. Assessee's Contentions: The Petitioner argued that its Memorandum and Articles of Association clearly state its objects are philanthropic and not for profit. It contended that the surpluses generated were applied towards its objects, including capital expenditure and maintaining reserves, and that the existence of surpluses does not, by itself, indicate a profit motive. The Petitioner also submitted that for determining whether it existed for profit, only income from its core hospital activities should be considered. Revenue's Contentions: The Respondent (Chief Commissioner of Income-tax) rejected the applications, primarily relying on the substantial surpluses generated by the hospital, the proportion of expenditure on poor patients, and profits from ancillary activities like the sale of medical supplies. The Respondent's calculation of surplus, which did not deduct all expenses including treasury income and investment profits, resulted in a significant positive figure, leading to the conclusion that the hospital was run for profit.

Which sections of the Income-tax Act were involved?

Section 10(23C)(via),Section 10(22A)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, disposed of

Heard together (2 matters)

WP/2462/2010
WP/1051/2013

Read from the judgment's own cause title. This page is filed under one of them.

89.

For all the above reasons, Rule is made absolute in both petitions, which are accordingly allowed in terms of the following order: (a) The order dated 15ᵗʰ April 2010 passed by Respondent No. 1, impugned in Writ Petition No. 2462 of 2010, rejecting the Petitioner’s application for approval under section 10(23C)(via) of the Act for Assessment Years 2002-03 to 2010-11 is hereby quashed and set aside. (b) Respondent No. 1, or the authority presently competent to grant such approval, shall issue the requisite order granting approval under Section 10(23C)(via) of the Income-tax Act, 1961 for Assessment Years 2002-03 to 2010-11 to the Petitioner pursuant to the applications forming the subject matter of the first petition, consistent with the findings recorded in this judgment. This order shall be issued within eight weeks from the Uploaded on - 12/10/2026 Downloaded on - 27/10/2026 22:25:34

WP/2462/2010 & WP/1051/2013 Breach Candy Hospital Trust. v. CCIT & Ors. ---------------------------------------- Judgment dated 12th October 2026 date on which a copy of this judgment is uploaded on the website of the High Court. (c) The order dated 28ᵗʰ September 2012 passed by Respondent No. 1, impugned in Writ Petition No. 1051 of 2013, rejecting the Petitioner’s application for approval under section 10(23C)(via) of the Act for Assessment Year 2011-12 and subsequent years, is also hereby quashed and set aside. (d) Respondent No. 1, or the authority presently competent to grant such approval, shall issue the requisite order granting approval under Section 10(23C)(via) of the Income-tax Act, 1961 pursuant to the Petitioner’s application dated 22nd September 2011 forming the subject matter of the second petition, consistent with the findings recorded in this judgment. It is clarified that though the Petitioner’s said application had sought approval for Assessment Year 2011-12 and subsequent years, the requisite order granting such approval shall restrict itself to Assessment Years 2011-12 to 2021-22 only. This order shall also be issued within eight weeks from the date on which a copy of this judgment is uploaded on the website of the High Court. (e) There shall be no order as to costs. Uploaded on - 12/10/2026 Downloaded on - 27/10/2026 22:25:34

WP/2462/2010 & WP/1051/2013 Breach Candy Hospital Trust. v. CCIT & Ors. ---------------------------------------- Judgment dated 12th October 2026 (f) Though we have disposed of the two petitions, we place them on board for reporting compliance on 14th December 2026. 90. This order shall be of this Court. All concerned parties shall act upon such digitally signed copy of this order downloaded from the official website of the Bombay High Court.

(FARHAN P. DUBASH, J.)

(B. P. COLABAWALLA, J.)

Shubham Gadhavepatil SHUBHAM SHESHRAO GADHAVEPATIL SHESHRAO GADHAVEPATIL Date: 2026.10.12 15:40:14 +0530 Uploaded on - 12/10/2026 Downloaded on - 27/10/2026 22:25:34 Powered by TCPDF (www.tcpdf.org)

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