DCIT`, NEW DELHI vs. FLT, LT. RAJAN DHALL CHARITABLE TRUST (REGD.),, NEW DELHI

Brief facts of the case are that the assessee is a charitable society registered under the Societies Registration Act, 1860 vide order dated 2 23.9.1971. Assessee has also registered u/s 12AA(1) of the Income-tax Act, 1961 (“the Act”) on 12.2.1997. The assessee is running a charitable hospital at Vasant Kunj, New Delhi in the name of Flt. Lt. Rajan Dhall Charitable Trust, which provides medical relief to the general public.

Assessee filed their return of income on 23.9.2011 declaring nil income but the assessment was completed by an order dated 12.2.2014 at Rs.12,84,20,473/- by making certain additions while disallowing the claim of the assessee for exemption u/s 11(1) of the Act by treating the assesse’s contract with the Fortis Hospital for running hospital as commercial activity.

Learned CIT(A) considered the plea of the assessee that the assessee has been running a charitable hospital providing medical relief to the general public and for both earlier and subsequent years, the claim of the assessee for exemption u/s 11(1) of the Act is allowed by AO for some years and first appellate authority for some years confirmed by the Tribunal, and allowed the appeal directing the learned AO to allow exemption u/s 11(1) of the Act to the assessee.

Revenue is, therefore, in this appeal stating that the learned CIT(A) erred in ignoring the activities of the assessee trust and allowing the benefits of Section 11 & 12 of the Income-tax Act, 1961 (“the Act”). It is further contended by the revenue that as per various clauses of “Operational and Management agreement”, it is established that Rajan Dhall Charitable Trust, Vasant Kunj, New Delhi has been transferred to M/s Fortis Hospital Pvt. Ltd. And the Society has no concern with the activities of the hospital and in view 3 of the judgment of a coordinate bench of this Tribunal in the case of M/s Devki Devi Foundation, dated 31.3.2015, the benefit of Section 11 & 12 should not have been allowed to the assessee.

It is the argument of the learned DR that in the assessment order Ld. AO enumerated the reasons for disallowing the claim of the assessee u/s 11(1) of the Act and more particularly, the fact that the assessee is getting rental income and Fortis Hospital has paid an amount of Rs.35 crores to Vaitalik on behalf of the assessee society. She specifically brought to our attention para 7 (iii) of the assessment order which states that the assessee has entered into an agreement by which if the plan of share of surplus has not been fulfilled, assessee will be liable to pay entire money spent by OBPL including the amount paid to Vaitalik along with interest @ 12% p.a within 30 days of such breach of agreement to Fortis Pvt. Ltd. According to the learned AO, this clause has totally ended the basic charitable nature of the trust and made it in full control of the private company which is purely working on commercial lines and earning the major share of income of the charitable organization. Likewise, the assessee is earning rental income from erecting Airtel, Hutchison towers, Idea cellular in its hospital, which is not at all incidental to any activities of the assessee society. Further, learned DR submitted that the AO recorded that the assessee has earned income from book café and visitor café, business centers, parking area, which are all purely on commercial lines and not related or incidental to the activities of the assessee. Learned DR submitting that in view of this business and commercial activities, AO is justified in denying the exemption u/s 11(1) of 4 the Act and inasmuch as the learned CIT(A) did not consider these factors, the impugned order cannot be sustained. Learned DR placed reliance on a decision of a coordinate bench in the case of M/s Devki Foundation, dated 31.3.2015, to show that the contract of the trust with Max group of hospitals is a commercial activity.

Per contra, it is the argument of the learned AR that all the activities enumerated by the learned AO in para 7 of the assessment order are nothing new but have been in place since its inception, as such, merely because some activities are recorded in the assessment order for some years and some activities are recorded in some other year, does not convert the charitable nature of the assessee into a commercial entity and as a matter of fact, considering all these factors only both the AO and the first appellate authority have allowed exemption u/s 11(1) of the Act of which assessee right from the year 2007-08 to 2014-15. Learned AR submitted that learned CIT(A) has rightly followed the rule of consistency and the appeal of the revenue is devoid of merits. He further submitted that the order of the Tribunal in M/s Devki Foundation, ITA No.1027/Del/2012 dated 31.3.2015 was set aside by the Hon’ble Delhi High Court and the matter is restored to the Tribunal for deciding afresh, and hence, such a decision cannot be a precedent.

We have gone through the record. Though the learned DR brought to our notice that vide para 7 of the assessment order, the learned AO enumerated certain activities to say that they are not charitable in nature