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Facts
The assessee, Nazareth Hospital Society, registered u/s 12AA, claimed expenditure for 'free care' services for AY 2014-15. The AO disallowed this and treated it as unexplained expenditure under Section 69C due to lack of proper records. The CIT(A) partly allowed the assessee's appeal, granting 50% of the claimed free care expenditure and allowing corpus donations. The Revenue appealed against this partial allowance.
Held
The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. It found that the CIT(A) had properly considered both the assessee's inability to provide full evidence for the 'free care' expenditure and the charitable nature of a hospital in a remote area, leading to a justified partial allowance in the interest of justice.
Key Issues
1. Whether the CIT(A) was justified in partly allowing free health care expenditure despite inadequate documentation. 2. Whether the CIT(A) erred in allowing corpus donations without specific donor directions.
Sections Cited
Section 250, Section 11(1)(d), Section 69C, Section 12AA
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Income Tax Appellate Tribunal, : GAUHATI BENCH: GUWAHATI
Before: SHRI RAJESH KUMAR, HON’BLE & SHRI MANOMOHAN DAS, HON’BLE
ORDER
PER MANOMOHAN DAS, JM
The Revenue filed this appeal against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi (hereinafter referred to as the (“CIT(A)” dated 31.01.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) and pertains to the Assessment Year 2014-15.
Page 1 of 4 DCIT -Vs- Nazareth Hospital Society AY : 2014-15 The grounds of the Revenue are as under: (i) That on the facts and circumstances of the case, the ld. CIT(A) erred in partly allowing free health care expenditure @ 50% of the expenditure claimed to have incurred, which comes to Rs. 112,22,891/-. However, the ld. CIT(A) stated in his order vide para 6.19 and 6.20 at page no. 15 that “ I concur with the AO that the appellant has not established that the amount claimed as expenditure towards free care has been truly incurred for that purpose”. (ii) That on the facts and circumstances of the case, the ld. CIT(A) erred in partly allowing free health care expenditure on the basis of assumption and stated that a hospital working in a remote hilly region would invariably provide some free care to needy patients. (iii) That on the facts and circumstances of the case, the ld. CIT(A) erred in allowing corpus donation despite the facts there was no specific direction from the donor. Thereby violating the ‘provisions of section 11(1)(d) of the Income Tax Act, 1961.
The brief facts of the case are that, the assessee is a registered as a society. It is engaged in running of a hospital called Nazareth Hospital at Laitumkhrah, Shillong in Meghalaya. The assessee is approved u/s 12AA. The return of income for AY 2014-15 was filed on 13.12.2014 declaring Nil income. The case was selected for scrutiny and scrutiny assessment was completed on 08.12.2016. While assessing the income of the assessee, the learned Assessing Officer inter alia has treated expenditures for ‘free care’ amounting to Rs. 2,24,45,781/- from the purview of expenses on account of non- maintenance of proper records. The AO further treated the same as unexplained expenditure deemed the same for tax u/s 69C assessing total income at Rs. 4,79,78,490/-. Being aggrieved, the assessee filed 1st appeal before the learned 3. CIT(A). The ld. CIT(A) vide order dated 31.01.2024 partly allowed the appeal of the assessee.
Page 2 of 4 DCIT -Vs- Nazareth Hospital Society AY : 2014-15 4. Being aggrieved, the Revenue filed the present appeal before the Tribunal.
The ld. CIT(A) concurred with the findings of the ld. AO that the assessee has not established the amount claimed as expenditure towards free care has been truly incurred for that purpose. Such expenditure cannot be treated as application of income. However, the ld. CIT(A) gave relief to the assessee partly by citing the reason that a hospital working in a remote hilly region will invariably provide some free care to needy patients.
We observe that, there is no dispute regarding the status of the assessee as a society. It is registered u/s 12AA of the Act. There is no dispute about the ‘free care’ service to needy patients. Therefore, the ld. CIT(A) considered the case of the assessee and find that, the claim of the assessee on the issue of giving ‘free care’ to needy persons cannot be denied straight way. The ld. CIT(A) gave relief partly to the assessee in the interest of justice. The entire claim of the assessee has not been accepted by the ld. CIT(A) as correct one in absence of proper evidence regarding the expenditure incurred in giving free care to needy patients by the assessee.
We observe that, the ld. CIT(A) given proper reasons while partly allowing the appeal of the assessee. The assessee is a registered society. It may have certain objects for giving ‘free care’ service to needy patients although the assessee could not furnish evidences in respect of its claim. The notable point is that, the appeal of the assessee was allowed partly not wholly. Therefore, in our opinion, the order of the ld. CIT(A) invites no interference from us. Although the assessee was unable to prove his claims on ‘free care’, such claims may be true one. However, the ld. CIT(A) had kept in mind the failure of the assessee to prove his claims by furnishing proper evidences and did not allow the entire claim of the assessee. The reasons given by the ld. CIT(A) while allowing the claims of the assessee partly, needs no Page 3 of 4 DCIT -Vs- Nazareth Hospital Society AY : 2014-15 interference. Accordingly, we uphold the order of the ld. CIT(A) and dismiss the appeal of the Revenue. Thus, we dismiss the appeal of the Revenue.