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Facts
The assessee, Jeevan Rekha Trust, obtained a building to run a hospital but outsourced its operation to Blue Sapphire Healthcare Private Limited, receiving 3% of the turnover as consideration. The assessee also ran two medical shops within the hospital premises, which were incurring losses.
Held
The Tribunal held that the outsourcing of the hospital building for running a hospital on a percentage of turnover basis is a commercial activity and not a charitable activity, as per the Supreme Court's interpretation in M/s. New Noble Educational Society. The assessee failed to demonstrate charitable activities or utilization of services for purely charitable purposes.
Key Issues
Whether the assessee's activities of outsourcing a hospital and running medical shops constitute charitable activities for the purpose of recognition under Section 80G of the Income Tax Act.
Sections Cited
80G, 194JB, 10(23C)
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN, JM & SHRI RATNESH NANDAN SAHAY, AM
O R D E R Per Bench : These two appeals are filed by the assessee against the separate orders passed by the ld.CIT(E), Patna, dated 30.11.2024, thereby refusing to grant the assessee recognition u/s.80G of the Act, for the assessment year 2023-2024 & 2024-2025.
It was submitted by the Ld.AR that the assessee has obtained a building for running a hospital. It was submission that as the assessee found that it was unable to run the hospital. It had outsourced the hospital function to another trust under the name Blue Sapphire Healthcare Private Limited. It was submitted that the assessee was also running two medical shops in the said hospital, where generic medicines were sold. It was submission that the assessee was receiving consideration in the form of 3% of the total turnover of Blue Sapphire Healthcare Private Limited. It was submission that the running of the medical shops itself was incurring losses.
It was submission that the assessee was engaged in charitable activities. It was submission that the Ld.CIT(Exemption) should be directed to grant the assessee to recognition u/s.80G of the Act.
In reply, ld. CIT-DR submitted that the assessee has a building in which a Super Speciality Hospital is operating. Ld. CIT-DR drew our attention to the page 5 of the order of the ld. CIT(E), Patna to submit that the surplus generated were substantial. It was the submission that the assessee was receiving fee for professional and technical services, insofar as the TDS was being deducted u/s.194JB of the Act. It was the submission that the assessee has not shown any charitable activities. It was the submission that the provision of Section 80G of the Act for recognition is in regard to a receipt which is used for charitable purposes. It was the submission that the assessee is receiving fee for professional services, which is evident that TDS being deducted and its rental income under the guise of professional receipts at a percentage of total turnover of the Super Speciality Hospital. It was the submission that this is purely a commercial activity and the assessee is not entitled to the recognition u/s.80G of the Act. He placed reliance on the decision of the Hon’ble Supreme Court in the case of M/s. New Noble Educational Society, v. The Chief Commissioner of Income Tax 1 [Civil appeal no. 3795 of 2014 dated October 19, 2022].
We have considered the rival submissions. The facts in present case clearly shows that the Hon’ble Supreme Court in the case of M/s. New Noble Educational Society, v. The Chief Commissioner of Income Tax 1 appeal no. 3795 of 2014 dated October 19, 2022], has laid down the principle in regard to educational institution claiming exemption u/s.10(23C) of the Act. The Hon’ble Supreme Court has in the orbiter dictum given interpretation to charitable activities. The Hon’ble Supreme Court has categorically brought out the fact that charitable activities are not commercial activities. In the impugned appeals, the facts clearly show that the outsourcing of the building of the assessee for the purpose of running a hospital is clearly not a charitable activity. The income generated by the assessee from the outsourcing of the building of the assessee for the purpose of running a hospital is at a percentage of the turnover of the hospital. The TDS in respect of remuneration or amount received by the assessee from the outsourcing of the building is being made u/s.194JB of the Act. The ld. CIT(E) has also brought out the fact that the mergers being the surplus is huge year after year. The assessee has not been able to show any utilization of the services for pure charitable activities. Ld. CIT(E) has also brought out the fact that the assessee is not following its objects insofar as the objectives were clearly for the purpose of a running hospital, clinic etc. ld. CIT(E) in page 4 has also brought out that the relief to the patients is barely Rs.30 lakhs to a maximum in the financial year 2022-2023 though the income is more than a crore. The assessee has not been able to dislodge any of these findings of fact as has been recorded by the ld. CIT(E). This being so, as it is noticed that the assessee is not having any charitable activity nor has been able to prove its charitable activity, the denial of the recognition u/s.80G of the Act by the ld. CIT(E) in both the appeals of the assessee is found to be in order and both appeals filed by the assessee stand dismissed.
In the result, both appeals of the assessee are dismissed. Order dictated and pronounced in the open court on 05/01/2026.