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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI N. K. SAINI & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM These appeals are filed by the assessee against the order dated 26/05/2015 passed by CIT (A)- 40 (E), New Delhi.
The grounds of appeal are as under:-
“ On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in allowing the exemption u/s 11 disregarding the facts of the case.
On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law in allowing the exemption u/s 11(1) of the Act by ignoring the fact that as the assessee being assessee as AOP under the head “Business & Profession” and disclosed method of accounting was followed by the assessee, so accrued interest income be treated as part of income of the year.
2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in completely relying on the findings of Hon’ble ITAT and Hon'ble High Court that the charitable status of the assessee has been settled without adjudicating individual additions made by the A.O which was subject matter of appeal before him.”
The assessee is a charitable society registered under the Societies Registration Act, 1860 on 24/03/1969 and is also registered u/s 12AA(1) dated 18/02/1974. The society is running a hospital in the name of St. Stephen's Hospital in Tis Hazari, old Delhi. The hospital was established on 31/10/1885 and opened by the then Lady Dafferin. The establishment of the present hospital was started by a young English lady Ms. Priscilla Winter aged 22 years in the year 1864 through a small dispensary on the banks of river Yamuna for the poor and the destitute as there was lack of medical facilities in those days. The dispensary was subsequently shifted to the present location at Tis Hazari and the new block of the hospital was established in 1891. The society is running the hospital and is also running a nursing college. The assessee provides the medical services like medical treatment, pathological tests and surgery etc. at very reasonable or subsidised cost and the income of the assessee is mostly from the collection of the fees from the patients as the assessee generally does not receive any donation for its charitable activities. The assessee was getting benefit of the exemption u/s 11(1) of the Act from the very beginning and up to A.Y 2007-08. There were scrutiny assessments earlier and the last one was in the A.Y 2007-08 vide order dated 07/12/2009. The case for A.Y 2008-09 was also taken up for scrutiny but the case was finally referred for special audit u/s 142(2A) of the Act. The assessment was completed by the Assessing Officer and the exemption u/s 11(1) was denied by invoking the Proviso of section 2(15) and the various additions were made mainly on the ground that the assessee is running the hospital with the motive of profit. Subsequently the registration u/s 12AA(1) of the Act was cancelled u/s 12AA(3) of the Act by the DIT(Exemption) relying on the order of the AO for the A.Y 2008-09. The assessee appealed against the order of the DIT(Exemption). The Tribunal restored the registration vide the order dated 11/05/2012 in ITA No. 913/Del/2012. The department filed the appeal against the order of the Tribunal, the same was dismissed by the Hon'ble High Court vide order dated 26/09/2013 in ITA No. 37/2013.
The assessee also applied for exemption u/s 10(23C) of the Act and the same was rejected by the DGIT(Exemption). The assessee appealed against this order and the Hon'ble High Court allowed the appeal vide order dated 05/03/2014 in WP(C) 6417/2012 with a direction to deal with the matter as per its own order dated 26/09/2013 in ITA No. 37/2013. The Assessing Officer denied the exemption u/s 11(1) of the Act for the A.Y 2009-10 on the similar ground of A.Y 2008-09 by invoking the Proviso of section 2(15) mainly on the ground that the assessee is not doing any charitable work and the hospital is being run for profit.
The assessee filed appeal against the order of the Assessing Officer before the CIT(A) and submitted that the Assessing Officer was not justified to deny the exemption u/s 11(1) of the Act, as the assessee is a charitable institution and is not involved in any trade, commerce or business and there is no justification to invoke the mischief of the Proviso of section 2(15) as mere receipt of income or fees cannot be said that the assessee is involved in any trade, commerce or business as there is no profit motive and no income or profit was used or diverted for any personal benefit and the assessee. The CIT(A) allowed the appeal of the assessee.
The Department is before us.
The Ld. DR relied upon the order of the Assessing Officer and submitted that proper documents were not produced before the Assessing Officer. Therefore, the Assessing Officer rejected the exemption u/s 11(1) of the Act as the assessee being assessed as AOP under the head business and profession.
The Ld. AR submitted that all the documents were before the Assessing Officer as well as before the CIT(A). In-fact, the Tribunal as well as the Hon'ble High Court vide order dated 26.09.2013 has given a detailed finding that there was no change in object and functions of the assessee. Therefore, rejection of the exemption u/s 11(1) of the Act was not right on part of Assessing Officer.
We have heard both the parties and perused the material available on record. It is submitted that in earlier Assessment Years the Exemption was granted by the Department which was taken into cognizance by the CIT(A) in his order. There is no need to interfere with the order of the CIT(A). As per the decision in assessee’s own case passed by the ITAT and confirmed by the Hon'ble High Court, the issue is squarely covered in favour of the assessee. The Hon’ble High Court held as under:
“…(vii) On the question of alteration in Memorandum of Association and communication to the Revenue authorities, the Tribunal has examined the changes/amendments and held that these were minor in nature and did not detract or alter the main/basic purpose which was to provide medical relief.”
Thus, there was no change in the object and purpose of the assessee. The CIT(A) rightly held as under:
“5.8 Recently the Hon’ble Delhi High Court in the case of India Trade Promotion Organization vs. DGIT(E), 53 Taxmann.com 404(Delhi) 2015 (order dated 22/01/2015) has upheld the constitution validity of the proviso of section 2(15) which was under challenge being discriminatory in view of the Article 14 (Equality before law) of the Constitution of India but the Hon’ble High Court has read down the strict and literal interpretation of the Proviso of section 2(15) and has held that mere receipt of fee or charge cannot be said that the assessee is involved in any trade, commerce or business and has accordingly allowed the relief to the ITPO case vide Para 58 and 59 of the order.
5.9 After considering all the facts and circumstances of the case, I am of the view that the matter of the charitable activities has been examined by the Hon’ble Tribunal and the Hon’ble High Court and there is no adverse finding against the assessee on any matters and as such it is difficult to sustain the order of the AO denying the exemption u/s 11(1) to the assessee and accordingly following the order of the Hon’ble Tribunal and the Hon’ble High Court the AO is directed to allow the exemption u/s 11(1) with all the consequential benefits and all the additions made by the AO are also consequently deleted.”
Thus, there is no need to interfere with the order of the CIT(A). For all the three assessment years the issues are identical, therefore, all the appeals of the Revenue stands dismissed.
In result, all the appeals of the Revenue are dismissed.
Order pronounced in the Open Court on 08th November, 2017.