Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B” BENCH, PUNE
आदेश / ORDER
PER D. KARUNAKARA RAO, AM :
This appeal filed by Revenue is directed against the order of Commissioner of Income Tax (Appeals), Pune-10 dated 29.02.2016 for assessment year 2012-13.
The Revenue has raised following grounds in appeal:
2 ITA No.700 /PUN/2016 A.Y. 2012-13
“1.Whether on the facts and in the circumstances of the case and in law the Ld.CIT (A) was right in allowing the benefit of exemption when it is clear that the trust is not fulfilling any of its objects which includes running of hospitals. 2. Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) was right in allowing the benefit of exemption when it is clear that the trust has entered into a commercial arrangement with a company wherein persons covered under section 13(3), including settlers are interested; 3. Whether on the facts and in the Circumstances of the case and in law the Ld.CIT(A) was right in allowing the benefit of exemption by placing reliance on the clause of MOU which cannot be given credence/ evidentiary value being a self serving documents signed by persons covered under section 13(3) and settler representing both the sides. 4. Whether on the facts and in the circumstances of the case and in law the Ld.CIT (A) was right in allowing the benefit of exemption when it is apparent that the entire trust property having a value of more than Rs.7.5 crores was let out to M/S. Yashodhan Super Specialty Hospitals Pvt. Ltd., a company in which relatives of the Trustees of the assessee trust are the Directors, for less than the normal returns on investment. 5. The appellant craves to leave, to add, alter, amend or delete any of the above grounds of appeal.”
Before us, at the outset, the Ld. Counsel for the assessee filed copy of
order of Tribunal in assessee’s own case for assessment year 2010-11 and
2011-12 dated 06.04.2018 in ITA No.117/PUN/2015 and ITA
No.1248/PUN/2015 and mentioned that the grounds raised by the Revenue
in its appeal are exactly identical to that of above extracted grounds for the
assessment year 2012-13 under consideration. Referring to the contents of
Para 3 of the Tribunal’s order which is brief facts of the issue and where the
Assessing Officer invoked the provision of section 13(1)(c) of the Income Tax
Act, 1961 ( hereinafter referred to as the ‘Act’) for denial of claim of
exemption u/s. 11 of the Act. The Ld. Counsel submitted that all the
grounds of appeal raised by Revenue are dismissed by the Tribunal and in
favour of assessee. In this regard, the Ld. Counsel read out the relevant Para
Nos. 11 to 16 of the Tribunal’s order and submitted that Tribunal has
3 ITA No.700 /PUN/2016 A.Y. 2012-13
analysed each of the issue raised in the grounds of appeal by Revenue and
dismissed the appeals of the Revenue.
On the other hand, the Ld. DR vehemently supported the order of
Assessing Officer.
We have heard both the parties and have perused the para Nos. 11 to
16 of the Tribunal’s order. For the sake of completeness, the relevant
paragraphs are extracted herein below:
“11. We heard both the parties on the issues raised by the Department, findings of Assessing Officer, adjudication of CIT(A) and argument advanced by both the Counsels. We find there are four grounds which required for adjudication. The first issue raised in ground No. 1 relates to allegation of not fulfilling any of the objects of trust in running the hospital. It is fact that the arrangements between the assessee-trust and the company constitute a compromise on the objects of the trust.
On hearing both the sides, we perused the relevant clause of the MOU, copy of which is placed at page No. 1 to 9 of the paper book. At Page 2 of MOU dated 1st April, 2009, the main objects of the trust were explained. The valuation of the building as well as fixed asset was also discussed. The charitable nature of activities and applicability of Bombay Public Trust Act, 1950 were also mentioned before binding the company to follow the charitable objects of the trust. The payment of Rs. 20,00,000/- or 15% of the receipts, whichever is higher, were also mentioned categorically in Clause-10 of the MOU. The requirements to comply with the agreement set out u/s.41AA of the Bombay Public Trust Act for the poor and indigent patients were also discussed clearly. We have also examined the Clause-6 to 8 of the MOU which clearly states the medical treatment towards poor and indigent patients. In Clause-12 of the MOU, it is clearly mentioned the endeavour to utilize the poor and indigent patients funds for the objects of the scheme and share of revenue received by the trust for the purpose of poor and indigent patients as well as other needy patients. The balance will be used to construct other hospitals in the district of Solapur and to provide other medical aid to deserving patients. Conditions and other procedure to give medical services were also highlighted in the said MOU. As such, Assessing Officer has not brought any solitary instance to demonstrate irregular diversion of trust funds or exploitation of property trust for the benefit of the trustees or the company. Therefore, in our view, the order of CIT(A) on this issue is fair and reasonable and does not call for any interference. Hence, ground No.1 raised in appeal by Revenue is dismissed.
Regarding second aspect raised in ground No. 2 relating to allowing benefit of exemption when the trust has entered into a commercial arrangement with a company owned by persons covered
4 ITA No.700 /PUN/2016 A.Y. 2012-13
u/s. 13(3) of the Act. we are of the opinion that the Assessing Officer has completely carried away about the connection of Mr. and Mrs. Kolur with trust on one side and with Company on the other side. Assessing Officer ignored the settled legal position that every person is distinct and separate. In the present case of the assessee, no payment for non charity purpose, whatsoever, has been made by the trust to any person specified u/s. 13(3) of the Act. As such the Assessing Officer failed to discharge his onus to invoke the provisions of section 13(1)(c) of the Act. As such considering consulting fees paid by assessee to Dr. Mr. and Mrs. Kolur is held to be in the normal course of medical professionals. There is no question of benefit stated to have been flown directly or indirectly from the Trust to Kolur couple. In this regard, we perused the contents of Para 4.3.9 and 4.3.10 of the order of CIT(A). Thus, we find the order of CIT(A) in this regard is a plausible view and does not call for any interference. Hence, ground No. 2 raised in appeal by Revenue is dismissed.
The third ground raised in appeal relating to giving benefit of exemption by placing reliance on the clause of MOU and its evidentiary value. The case of the assessee in this regard that the said MOU cannot be self serving document when the said MOU consisted the platform binding on both purpose in the matter of running hospital on one side and figuring charitable objects of the trust on other side. As such the Assessing Officer did not bring out any evidence contrary to prove MOU is self serving document. This part of allegation is not good when there is withdrawal of exemption u/s. 11 of the Act. Accordingly, we find merit in the said argument of Ld. Counsel of the assessee and therefore, ground No. 3 raised in appeal by Revenue stands dismissed.
Ground No. 4 relates to the correctness and validity of revenue sharing formula between the assessee trust and Company mentioned in MOU. As per Revenue, payment of Rs. 20,00,000/-p.a or 15% of the receipts of the year whichever is higher is not proportionate to the investment of Rs. 7.5 crore in the building and medical purpose in fixed asset of the hospital. This aspect is discussed in detail in Para 4.3.11 of the order of CIT(A). According to him, the rate works out to 45% on the investment. In other words, receipt of Rs. 2.90 Crores in the years under consideration against investment of Rs.7.5 Crores worth of building and fixed asset are consisting of the rate of return @45%. For the sake of completeness the relevant portion is extracted as under:
“4.3.11 By making an allegation that a benefit had accrued to interested person u/s.13(3) as a result of revenue sharing agreement/M0U which is unsupported by any effort to determine that there has been any benefit derived by the company or Its Directors under, the MOU, the Assessing Officer has failed to satisfy the onus cast upon him by the statute to establish that the provisions of sec.13(1)(c) is satisfied. Looking at the activity of the trust from a commercial angle, It is seen that as against the aggregate assets of the trust of Rs.6.22 crores as on 31.03.2010, the share of revenue earned by the trust from the arrangement is to the tune of Rs.2.90 crores, which implies a return on investment of more than 45%. From this point of view also, the allegation of the Assessing Officer that the trustees have received any benefit from the arrangement is baseless and does not stand to reason. In passing, it may be mentioned
5 ITA No.700 /PUN/2016 A.Y. 2012-13
that in a very recent order dated 07.02.2014, the Hon'ble Chief Commissioner of Income-tax-II, Pune has accorded approval to Yashodhara Superspeciality Hospital Pvt. Ltd. under the proviso (ii)(b),of section 17(2) of the Income-tax Act, for the treatment of Cancer, T.B., AIDS, Surgery involving various body orqans, fractures, burn injuries, mental disorder arid the like.” In our view, the discussion given by CIT(A) in Para 4.3.11 extracted above is fair and reasonable and does not call for any interference. Accordingly, ground No. 4 raised by Revenue is dismissed.
In the result, appeal of the Revenue for A.Y.2010-11 is dismissed.”
The Tribunal upheld the order of the CIT(A) in granting relief to the
assessee on the issue relating to claim of expenditure u/s. 11 of the Act and
inapplicability of the provisions of section 13(1)(c) of the Act.
From the above, it is evident that considering the commonality of facts,
we find that the order of CIT(A) is fair and reasonable in view of the findings
of Tribunal in assessment years 2010-11 and 2011-12. There are no changes
on the facts of the instant case. Considering the same, we are of the opinion
that there is no case for invoking provisions of section 13(1)(c) of the Act and
for denial of exemption u/s. 11 of the Act. Accordingly, grounds raised by the
Revenue in appeal are dismissed.
In the result, appeal of the Revenue is dismissed. 6.
Order pronounced on Wednesday, the 23rd day of May, 2018.
Sd/- Sd/- (सुषमा चावला / Sushma Chowla ) (डी.क�णाकरा राव/D. Karunakara Rao) �या�यक सद�य /JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER
पुणे / Pune; �दनांक / Dated : 23rd May, 2018. SB
6 ITA No.700 /PUN/2016 A.Y. 2012-13
आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT(Appeals), Pune-10. 4. The CIT (Exemption), Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.
// True Copy // आदेशानुसार / BY ORDER,
�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.