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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI.
Before: SHRI R.K. PANDA & SHRI KULDIP SINGH
(PAN : AAABB0018M) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Atul Nanawat, CA REVENUE BY : Ms. Ashima Neb, Senior DR Date of Hearing : 19.12.2018 Date of Order : 12.02.2019 O R D E R
PER KULDIP SINGH, JUDICIAL MEMBER :
The appellant, ACIT, Circle 1(1), New Delhi (hereinafter referred to as ‘the Revenue’) by filing the present appeal, sought to set aside the impugned order dated 13.07.2016 passed by Ld. CIT (Appeals)-40, New Delhi qua the Assessment Year 2012-13 on the grounds inter alia that :-
“1. Ld. CIT (A) has erred in allowing the appeal of the assessee by ignoring the fact that though the objects of the assessee seem to be charitable in nature but the activities which yielded income to the assessee are commercial in nature.
2. The society i.e. Balaji Medical and Diagnostics Research Centre which was allowed registration u/s 12A has ceased to have any effective function as far has hospital is concerned. The running of the hospital is governed by the profit motive for the benefit of Max Group; hence claim for exemption u/s 11 & 12 of the assessee is not longer justifiable.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : assessee society being registered under Societies Registration Act also accorded registration under section 12A of the Income-tax Act, 1961 vide order dated 21.08.1997 claimed exemption under sections 11 and 12 of the Act. Assessing Officer declined the exemption claimed by the assessee society under sections 11 and 12 on the ground that the assessee society is running hospital on commercial line with profit motive as is apparent from the fee structure of the hospital for VIP rooms, classic deluxe rooms, deluxe rooms etc. and moreover all the hospital activities were entirely dependent upon its agreement with Max Healthcare Institute Limited. AO also noticed that substantial fee charged from the patients for the rooms etc. shows the real intention of the assessee that it is established to earn the profit and is out of the reach of the common man. AO also observed that the assessee has not been providing any free treatment to the patients, so cannot be said to be engaged in charitable activities. AO accordingly assessed the total income of the assessee society at Rs.15,96,95,870/- under the head ‘profit and gains of business or profession’.
Assessee carried the matter by way of an appeal before the ld. CIT (A) who partly allowed the appeal. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
In order to decide the controversy at hand, it is necessary to look into the main objectives of the assessee society which are as under :-
“a. To undertake the development of research in medical filed. b. To promote, develop and improve scientific exchange of knowledge as well as technical and medical Co-operation between similar research institutions. c. To organize the technical courses, conferences and publication. d. To develop / improve methods for early detection of all diseases. e. To develop / improved medicines for treatment of disease. f. To develop new/improved surgical equipments and to make innovation in the field of Bio-medical engineering. g. To initiate the projects for the development of research centers supported by laboratories, operation theatres particularly for research and development of medical and surgical techniques. h. To provide for all facilities, including financial assistance for any medical research work.
I. To build, maintain and run necessary infrastructure including realization of any or all the objectives for realization or all the objectives of research and prevention of disease set forth above.”
Undisputedly, vide agreement dated 12.05.2005, assessee society has entered into an agreement with Max Health Care Institute Ltd. (MHC) to outsource all activities like running and operating the hospital from the MHC. It is also not in dispute that all the hospital activities like medical advisory services in medical domain, employment of nurses, depends upon recommendation and assistance from MHC. It is also not in dispute that out of the total expenses of Rs.182,94,53,917/- incurred by the assessee society, Rs.69,63,06,278/- was paid to MHC and also a loan of Rs.104,46,57,932/- were payable to MHC on 31.03.2012. It is also not in dispute that the assessee society has submitted audited financials during the assessment proceedings. It is also not in dispute that DDA has given the land to the assessee society for running hospital on concessional rate. It is also not in dispute that the ld. CIT (A) has relied upon one inspection report given by the Directorate of Health Services, wherein it is stated that the assessee’s hospital is providing free treatment to patients.
Ld. DR for the Revenue challenging the impugned order contented inter alia that the ld. CIT (A) has ignored the fact that the assessee society was no longer operating as a charitable institution within the meaning of section 2(15) of the Act; that ld. CIT (A) has also ignored the predominant object of the assessee society as profit making and in these circumstances, charitable purpose ceased to exist.
Bare perusal of the impugned order passed by the ld. CIT (A) goes to show that firstly, ld. CIT (A) has given finding on fact that MHC is not having total control over the hospital as has been held by AO, rather detail of expenditure tabulated at page 13 of the impugned order shows that out of the total expenditure incurred by the assessee society in running the hospital less than 50%, has been given to MHC.
However, at the same time, the ld. CIT (A) based his findings primarily on the fact that the in compliance to the direction issued by Hon’ble Delhi High Court, assessee society provided free / concessional treatment to OPD / IPD patients of which details were submitted to the Directorate of Health Services at regular intervals. Ld. CIT(A) has also relied upon the inspection report dated 29.02.2008 issued by the Directorate of Health Services, Government of NCT, which is available at pages 106 & 107 of the paper book.
So far as issue as to the running of the hospital by the assessee society with a profit motive for benefit of Max Group is concerned, this issue has already been decided in favour of the assessee society by the co-ordinate Bench of the Tribunal in assessee’s own case vide order dated 05.08.2016 passed in for AY 2018-19, wherein it is held that, “the findings of the AO that MHC was having de facto control of the hospital with the motive of profit earning was not based on any factual or legal ground, Rather the findings are returned on incorrect appreciation of facts.”