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Facts
The Assessing Officer denied exemption claimed by Balaji Medical and Diagnostic Research Centre under sections 11 & 12, assessing its income as 'Profits and Gains from Business and Profession' and disallowing expenditures. The AO alleged that the assessee was running a hospital on commercial lines with a profit motive, despite its 12A registration. The CIT(A) allowed the assessee's appeal, relying on previous ITAT orders for earlier assessment years which had affirmed the assessee's charitable nature and eligibility for exemption.
Held
The Tribunal determined that the issue of the assessee's eligibility for exemption under Sections 11 & 12 was fully covered by earlier decisions of the ITAT and the Delhi High Court in the assessee's own case for previous assessment years. Adhering to the principle of consistency, and finding no material change in facts, the Tribunal upheld the CIT(A)'s decision. Consequently, the Revenue's appeals were dismissed, confirming the assessee's entitlement to exemption.
Key Issues
Whether Balaji Medical and Diagnostic Research Centre's hospital activities are commercial in nature, disentitling it to exemption under Sections 11 & 12 of the Income Tax Act, despite its 12A registration and previous tribunal/court rulings affirming its charitable purpose.
Sections Cited
Section 11, Section 12, Section 12A, Section 2(15)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’ : NEW DELHI
Before: SHRI SHAMIM YAHYA & SHRI SUDHIR PAREEK
Order : 08.05.2024 ORDER PER SHAMIM YAHYA, ACCOUNTANT MEMBER : These appeals by the Revenue are directed against the respective orders of the ld. CIT (Appeals) for the concerned assessment years. 2. Since the issues are common and connected, these are being disposed of by this common order. 3. Since the facts are identical, we are referring to facts and figures of for AY 2016-17. Grounds of appeal taken by the assessee in AY 2016-17 read as under :-
2 & 195/DEL/2024 “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in allowing the appeal of the assessee by ignoring the facts that even though the objects of the society may have been charitable but the activities carried out by the society which yielded income to the society were commercial in nature.
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 as hospital is concerned. Whether the Ld. CIT(A) has erred in ignoring that running of the hospital is governed by the profit motive for the benefit of Max Group and hence, claim for exemption u/s 11 & 12 of the assessee is not longer justifiable.”
Brief facts of the case are that Assessing Officer had denied exemption claimed by the assessee under section 11 & 12 of the Income-tax Act, 1961 (for short ‘the Act) and consequently completed the assessment of the assessee as an “BOI” at an income of Rs.35,76,51,706/- under the head ‘Profits and Gains from Business and Profession’. Assessing Officer also disallowed of expenditure by an amount of Rs.12,41,79,658/- which amount was included in Rs.35,76,51,706/-. The Assessing Officer held as under : “The sum and substance of discussion made in above paras leads to a conclusion that the assessee is simply wearing a mask of charity, whereas it is actually running Max Balaji Hospital on commercial lines and with commercial expediency only as per agreement made with Max Health Care Institute Ltd. I am included to quote the judgment of Hon’ble ITAT Delhi Bench dated 31.03.2015 where the case of M/s. Devki Devi Foundation on similar facts and grounds was discussed at length which formed the basis of computation of income. In a very elaborate judgment, Hon’ble ITAT Delhi Bench has postulated certain principles/tests for an entity to be considered as charitable. In view of the above and relying on previous assessment orders, since there is no substantial change in the facts of the case and activities of the assessee, the claim for exemption u/s 11 & 12 for the assessee is no longer justifiable. Hence, the assessee is not allowed exemption of income u/s 11 & 12 as activities of the assessee do not fall within the ambit of charitable purpose u/s 2(15) of the Act.”
Upon assessee’s appeal, ld. CIT (A) referred to assessee’s appeal for AY 2014-15 and granted relief to the assessee. We may gainfully refer to the ld. CIT (A)’s order as under :-
Against the above order, Revenue is in appeal before us. We have heard both the parties and perused the records.
Ld. Counsel for the assessee stated that the issue is duly covered by the decision of ITAT in for AY 2014-15 vide order dated 08.02.2022. Furthermore, he pleaded that the aforesaid ITAT order has been duly upheld by the Hon’ble Delhi High Court in ITA 430/2023 vide order dated 15.04.2024. 8. Per contra, ld. DR for the Revenue did not dispute the proposition that the issues are covered in favour of the assessee. 9. Upon careful consideration, we find that the issue is squarely covered by the decision of the ITAT, as referred in the order of ld. CIT (A) above. Furthermore, one of the orders of ITAT was even upheld by the Hon’ble Delhi 7 ITA Nos.192 & 195/DEL/2024 High Court. In this view of the matter, we do not find any infirmity in the order of ld. CIT (A), hence we upheld the same. 10. Our above order applies mutatis mutandis to both the assessment years. 11. In the result, both the appeals of the Revenue are dismissed. Order pronounced in the open court on this 8th day of May, 2024.