M/S. SHREE MEDICAL FOUNDATION,,PUNE vs. INCOME-TAX OFFICER,,

आदेश / ORDER PER BENCH :

These three appeals by the assessee relate to the assessment years 2011-12, 2007-08 and 2008-09. Since common issue is raised in all these appeals, we, therefore, are proceeding to dispose them off by this consolidated order for the sake of convenience.

2 M/s. Shree Medical Foundation

A.Y. 2011-12 :

disallowance of certain amounts paid to the persons specified in

section 13(3) of the Income-tax Act, 1961 (hereinafter also called

`the Act’).

trust registered under Bombay Public Trust Act, which was granted

registration under the Income-tax Act vide order dated 17-01-1981.

Main object of the assessee trust is to give medical relief to the

patients requiring medical attention and rehabilitation. During the

year under consideration, the assessee declared gross receipts

amounting to Rs.4.11 crore, which included receipts from the

hospital to the tune of Rs.3.90 crore. On perusal of details of

payments, the Assessing Officer (AO) observed that the assessee

paid an honorarium of Rs.30 lakh to Dr. Shirish Prayag;

Rs.34,99,854/- to Dr. Aarti Prayag; and Rs.1,80,000/- to Mrs.

Usha Prayag. On being called upon to justify such payments, the

assessee stated that Dr. Shirish Prayag is Chief Medical Officer of

Prayag Hospital (Shree Medical Foundation) who is a qualified

MBBS and MD, practising since 1986. He set up a Medical ICU,

i.e. Shree Medical Foundation which is a first critical care unit in

3 M/s. Shree Medical Foundation

Pune city. Dr. Shirish Prayag was stated to have received number

of academic awards and honours, who also served as President and

Chairman of National and International Critical Care Associations.

As regards the payments made to Dr. Aarti Shirish Prayag

amounting to Rs.34,99,854/-, it was stated that she is a Chief

Consultant in Department of Pathology and Microbiology having

qualified MBBS and DCP from B.J. Medical College, Pune and

practising as Senior Pathologist for last 32 years. Assessee

submitted that she was paid @ Rs.50,000/- per month plus 25% of

IPD and OPD collections of Pathology laboratory. As regards the

payments made to Smt. Usha Prayag, it was stated that she was

looking after the entire administration of the hospital for which she

was paid a sum of Rs.15,000/- per month. The AO, after

considering the assessee’s justification of payments, came to

disallow a sum of Rs.12 lakhs from payments made to Dr. Shirish

Prayag; Rs.25,59,854/- from payments made to Dr. Aarti Prayag

and Rs.1,25,000/- from payments made to Smt. Usha Prayag. The

ld. CIT(A) sustained the additions, against which the assessee has

come up in appeal before the Tribunal.

material on record. It is noticed that all the three persons to whom

4 M/s. Shree Medical Foundation

the assessee paid salary etc. are admittedly covered under sub-

section (3) of section 13. Controversy as to the characterization of

the amounts paid to the above three persons as the same being

salary or honorarium, was not pressed by the ld. AR in appeal

before the Tribunal. Section 11 provides exemption in respect of

income from property held for charitable and religious purposes.

Section 13 provides that section 11 shall not be applied in certain

cases, meaning thereby, that the exemption otherwise eligible will

not be allowed if the conditions as set out in section 13 namely, the

payments made to the persons specified u/s.13(3) are in

contravention of the provisions contained in other parts of section

allowed in respect of any income or property applied for the

benefit of persons referred to in sub-section 3). Certain situations

have been contemplated, which are set out through clauses (a) to

(h) of sub-section (2), in which the benefit of exemption will not be

allowed. Clause (c) of section 13(2), which is material for our

purpose, provides for not allowing exemption : `if any amount is

paid by way of salary, allowance or otherwise during the previous

year to any person referred to in sub-section (3) out of the

resources of the trust or institution for services rendered by that

5 M/s. Shree Medical Foundation

person to such trust or institution and the amount so paid is in

excess of what may be reasonably paid for such services’.

that if any amount is paid by way of any salary, allowance or

otherwise etc. to a person specified u/s.13(3), then no exemption

will be allowed in respect of “the amount so paid is in excess or

what may be reasonably paid for the services”. It, therefore,

transpires that exemption is to be denied for any payment made by

way of salary etc. paid to the persons referred in section 13(3) to

the extent it is excessive or unreasonable. Under these

circumstances, a question arises as to whether the payment made

by the assessee to the above referred three persons can be

construed as unreasonable?

assessee gave elaborate submissions justifying the reasonableness

of the amount paid to the persons specified u/s.13(3). We have set

out in detail the experience of Dr. Shirish Prayag and Dr. Aarti

Prayag. The AO has considered a part of the amount paid to Dr.

Shirish Prayag as reasonable and treated the entire amount paid to

Dr. Aarti Prayag and Smt. Usha Prayag as unreasonable. When we

consider the totality of the facts and circumstances of the case, it

6 M/s. Shree Medical Foundation

emerges that such payments are neither unreasonable nor

excessive. Here is a case in which Dr. Shirish Prayag is a qualified

MBBS, MD practising since 1986. His academic achievements

have been set out in the assessment order. When we consider the

amount of Rs.30 lakhs paid to him, namely, Rs.2,50,000/- per

month as salary, the same cannot be termed as excessive in the

backdrop of the hospital receipts of Rs.3.90 crore. The AO has

compared his remuneration with certain other part time doctors

visiting the assessee-trust on call, which is not a good comparison.

It is further relevant to note that the assessee was continuously

paying remuneration to Dr. Shirish Prayag. A chart of has been

placed on record, which shows that for the A.Y. 2007-08, assessee

paid a sum of Rs.18 lakhs to Dr. Shirish Prayag, that got allowed

by the AO. For the A.Y. 2008-09, he was again paid a sum of

Rs.18 lakhs which was also allowed by the AO. For the A.Y.

2010-11, he was paid a sum of Rs.24 lakhs. The AO in his

assessment made u/s.143(3), has allowed deduction of Rs.24 lakhs

paid to Dr. Shirish Prayag vide his order dated 28-12-2012, a copy

of which is available on page 92 onwards of the paper book. In

this shade of the matter, a reasonable increase of Rs.50,000/- per

month during the year under consideration, in our considered

7 M/s. Shree Medical Foundation

opinion, cannot be termed as unreasonable or excessive. We,

therefore, order to delete the addition to this extent.

above that she is a qualified MBBS and DCP from B.J. Medical

College, Pune and working as Senior Pathologist for last 32 years.

The remuneration paid to her during the year has been Rs.50,000/-

per month plus 25% of IPD and OPD collection of Pathology Lab.

It is pertinent to note that the assessee paid a sum of Rs.25,91,597/-

to Dr.Aarti Prayag during the previous year relevant to the A.Y.

2010-11. The AO vide his aforesaid assessment order has allowed

full deduction. When we consider the quantum of amount paid by

the assessee during the year vis-à-vis the amount paid and allowed

in the immediately preceding assessment year, the payment during

the year cannot be termed as unreasonable or excessive. Taking a

holistic view of the matter, we hold that the payment of Rs.34.99

lakhs made by the assessee to Dr. Aarti Prayag is reasonable and

does not call for any disallowance.

Rs.1,80,000/-, namely, Rs.15,000/- per month. She was looking

after the administration of the hospital since the inception of the

trust and was handling safe-keeping of cash, supervision of

8 M/s. Shree Medical Foundation

banking transactions and also supervision of shift duties of staff

nurses etc. She was also responsible for co-ordination between

doctor-trustees and other trustees since beginning of the trust and

her duties have been set out in the assessment order itself. When

we consider the overall supervision of the hospital by Smt. Usha

Prayag and payment of Rs.15,000/- per month, the same appears to

be quite reasonable and not excessive or reasonable in any manner.

We, therefore, order to delete this addition.

A.Yrs. 2007-08 and 2008-09 :

respect of payment made to Dr. Aarti Prayag. Assessee paid a sum

of Rs.16,91,847/- to Dr. Aarti Prayag. The AO disallowed a sum

of Rs.10,19,847/- which disallowance was reduced by the ld.

CIT(A) to Rs.7,91,847/-. For the A.Y. 2008-09, Dr. Aarti Prayag

was paid a sum of Rs.17.91 lakhs, out of which the AO disallowed

a sum of Rs.8,95,250/-, which disallowance came to be sustained

in the first appeal.

discussed above in relation to the A.Y. 2011-12 for which we have

held that no disallowance is called for, we hold that the payments

9 M/s. Shree Medical Foundation

made to Dr. Aarti Prayag for the years under consideration are reasonable and not excessive on consideration of her qualification and experience. We, therefore, order to delete these additions.

Order pronounced in the Open Court on 22nd January, 2019.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 22nd January, 2019 सतीश आदेश क� क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: अ�ेिषत आदेश आदेश आदेश 1. अपीलाथ� / The Appellant; 2. ��यथ� / The Respondent; 3. आयकर आयु�(अपील) / The CIT (Appeals)-10, Pune 4. The Pr.CCIT, Pune िवभागीय �ितिनिध, आयकर अपीलीय 5. अिधकरण, पुणे “बी” / DR ‘B’, ITAT, Pune; 6. गाड� फाईल / Guard file. // True copy // आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

M/s. Shree Medical Foundation

Date 1. Draft dictated on 21-01-2019 Sr.PS 2. Draft placed before author 21-01-2019 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *