PRINCIPAL COMMISSIONER OF INCOME TAX -2 vs. CLIX CAPITAL SERVICES PVT. LTD. (FORMERLY GE MONEY FINANCIAL SERVICES PVT. LTD.)

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$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI %

Reserved on: 16th January, 2023 Date of decision: 26th May, 2023 + LPA 576/2018 & CM No. 42341/2018

MOOLCHAND KHARAITI RAM HOSPITAL & AYURVEDIC RESEARCH INSTITUTE

..... APPELLANT Through: Mr. Ramesh Kumar Mishra and Mr. Sandeep Pandey, Advocates.

WORKERS & OTHERS

….RESPONDENTS Through: Mr. Abinash K. Mishra, Mr. Mohit Sharma and Mr. Gaurav Kumar Pandey, Advocates.

CORAM: HON'BLE MR. JUSTICE NAJMI WAZIRI HON'BLE MR. JUSTICE SUDHIR KUMAR JAIN

J U D G M E N T SUDHIR KUMAR JAIN, J. 1. The present judgment shall decide Letter Patents Appeal filed by the appellant Hospital to impugn the judgment dated 02.07.2018 (hereinafter referred to as “the impugned judgment”) passed by the learned Single Judge in W.P.(C) bearing no. 17938/2004 titled as Moolchand Kharaiti Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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Ram Hospital & Ayurvedic Research Institute V Workmen & others upholding the Award dated 28.04.2004 (hereinafter referred to as “the Award”) passed by the Industrial Tribunal No II (hereinafter referred to as “the Tribunal”) in Industrial Dispute No 11/1999 titled as M/s Shri Moolchand Kharaiti Ram Hospital & Ayurvedic Research Institute V Workmen represented by Shri Moolchand Kharaiti Ram Hospital Karamchari Union whereby the appellant Hospital was declared to be not exempted from payment of bonus under section 32(v)(c) of the Payment of Bonus Act, 1965 (hereinafter referred to as “the Act”). 2. The Secretary (Labour), Government of National Capital Territory of Delhi referred a dispute to the Tribunal for adjudication arising between the management of the appellant Hospital and its workmen represented by Shri Moolchand Kharaiti Ram Hospital Karamchari Union (hereinafter referred to as “the respondent Union”) vide reference bearing no.F.24 (2068)/99- Lab/19704-08 dated 13.05.1999 with the following terms of reference:- Whether the workmen are entitled to the payment of Bonus for the year 1997-98, and if so, what relief are they entitled and what directions are necessary in this respect?

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managed by a Trust under the name and style of Shri Moolchand Kharaiti Ram Trust involving several eminent persons and was providing free and charitable medical services to the people. However, the management of appellant Hospital since 1990 has been converted into a commercial venture. The management of the appellant Hospital did not pay the bonus to its workers for the year 1997- 1998. The respondent Union lodged a complaint dated 22.10.1998 before the concerned authority under the Act which was got delayed due to management of the appellant Hospital. The complaint was converted into an industrial dispute. The workmen were denied bonus for the year 1997-1998 illegally by the management of the appellant Hospital. The workmen employed in the appellant Hospital are entitled for the bonus for the year 1997-98. The respondent Union being aggrieved filed the writ petition bearing no. 17938/2004 titled as Moolchand Kharaiti Ram Hospital & Ayurvedic Research Institute V Workmen & others with prayer that an award be passed for declaring the workers to be entitled for the bonus for the year 1997-1998 and the management of the appellant Hospital be directed to pay the bonus to the workers along with interest @ 24% p.a. from the date of entitlements of the bonus till the date of realisation.

Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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WW1 filed certain documents Ex. WW1/1 to WW1/7 including certain representations submitted by the respondent Union regarding denial of the bonus to the workmen. WW1 in evidence clarified the expression "profit venture" by deposing that the appellant Hospital charged fees, room rent and charges for other facilities from its patients. 7. The appellant Hospital in evidence examined M.K. Kaushik, Manager (Personnel) as MW1 who in affidavit dated 22.03.2003 tendered in evidence deposed that appellant Hospital was a non-profit organisation which did not pay dividends or profits and none of its trustees receives any benefit or salary. The senior medical personnel were the consultants discharging services and they were being recompensed for the services rendered. 7.1 MW1/M.K.Kaushik also filed additional affidavit dated 03.11.2003 in evidence to place on record various documents which are Ex. MW1/1 to Ex. MW1/9. Ex. MW1/1 was the Will of late Lala Kharati Ram who created the Moolchand Khiraiti Ram Trust. Ex. MW1/2 was a letter issued by the Income Tax Authorities registering the Moolchand Kharaiti Ram Trust under section 12A(a) of the Income Tax Act, 1961. Ex. MW1/3 was a communication from the Income Tax Authorities, granting approval to the Trust under section 10(23)(C) of the Income Tax Act, 1961. Ex. MW-1/4 Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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(collectively) were letters granting exemption to the Trust under section 80 G of the Income Tax Act, 1961. Ex. MW1/5 to MW1/9 were Income Tax assessment orders of the appellant Hospital for the Assessment Years 1995- 1996 to 1999-2000. Ex. MW1/10 was a statement showing receipts, expenditure, capital expenditure and resultant surplus of the appellant Hospital for the years 1991-1992 to 2000-2001. 7.2 MW1/M.K. Kaushik during cross-examination deposed that the appellant hospital was owned and operated by a Trust which was a non-profit organisation and it never paid any profit to anyone. The appellant Hospital was not established for the purposes of profit. MW1 during cross examination denied that the appellant Hospital worked as a commercial entity and generated large profits. MW1 admitted that there was no fixed ratio for providing free treatment or hospitalisation to needy patients which varied from time to time and from patient to patient. MW1 could not tell whether the appellant Hospital generated profit or suffered losses in 1997-1998 but refuted that the appellant Hospital was working as a commercial entity and generating huge profits. 8. The Tribunal on the basis of evidence led by the concerned parties answered the issues no. 1, 2 and 3 in favour of the respondent Union and Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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against the appellant Hospital. The Tribunal regarding the issue no 4 after referring various decisions of the superior courts held as under:- “12. As discussed above in above mentioned judgements their Lordships are of the consistent opinion that the management earning the profits must grant the bonus to its workers and if the management want to have the exemption under Section 32(v)(c) of Payment of Bonus Act then the management should must obtain the same from the authorities under the Payment of Bonus Act. It has also been held by their Lordships that the management once extending the benefits to the workers by way of bonus or any other form like ex-gracia payment etc should continue to extend the benefit to the workers.

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from the competent authority before stopping the payment of the same.

Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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discontinuance, on the petitioner-Hospital. The petitioner- Hospital would be perfectly within its rights in contending that, where the Act did not require it to pay bonus to its workmen, no amount of such payment, in the past, could fasten, on it, such an extra-statutory liability for the future. It would be, however, for the petitioner Hospital to establish and prove that, in fact, the Act did not require it to pay bonus to its workmen, and not for the workmen to prove to the contrary.

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that very fact, entitled to exemption from the applicability of the Act, irrespective of whether it was actually making profit or not. Such an interpretation would effectively efface the applicability of the Act to organizations which might be making huge profits, merely by the organization showing that, at the time of its establishment, it was not intended to generate profits. The various judicial authorities cited hereinabove have, justifiably, not accepted such an interpretation, and have emphasized that, irrespective of the purpose or motive for which the institution was established, if, in fact, it was generating profits, it could not escape its liability under the Act. This interpretation coheres perfectly with the jurisprudential concept of “bonus” itself. Bonus is not a bounty or charity, given to workmen working in an institution. It is a sanctified right, relatable directly to the labour put in by the workmen, and reflective thereof. It is a statutory recognition of the liability, of the institution, to share the profits earned by it with those who are responsible for the earning of such profits. It acknowledges the fact that workmen make the enterprise, and not vice versa, and that it is the collective labour of the workmen which results in the enterprise being in a position to generate profits. It accords legal imprimatur to the basic and moral duty of the enterprise to share, with its workmen, who have put in their sweat and toil into ensuring that the enterprise makes profits, a portion of the profits so made.

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be a profit-making institution; even this assumption, however, would not be strictly accurate, as the intention could not have been to run the Hospital without making profits; at best, the intention could have been that the profits generated would not be distributed amongst the trustees of the Trust, but would be ploughed back into the corpus of the Hospital, to better its facilities and augment its quality of service. That, however, by itself would not except the petitioner-Hospital from the applicability of the provisions of the Act; neither would the non-profit making nature of the Trust – assuming that it were so – take the petitioner-Hospital itself outside the clutches of the Act, as held in Workmen of Tirumala Tirupati Devasthanam (supra).

(i) Ex. MW-1/2 was a communication from the Income Tax Officer (ITO) to the Trust, conveying the decision, of the Commissioner of Income Tax (the CIT) to accord registration to the Trust in terms of the provisions of Section 12A(a) of the IT Act. Significantly, the communication contained a Note, which read thus: “This certificate of registration u/s 12A (a) of the IT Act, 1961 does not by itself confer any right or any trust/institution to claim exemption from tax in respect of its income inasmuch as such exemption depends on the satisfaction of all other conditions in this behalf laid down in Sections 11, 12, 12A(b) and 13 of the Act.”

Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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This Note, consciously appended in the communication Ex MW-1/2, clearly indicates that the said communication merely conveyed the decision of the CIT to grant registration, to the Trust, under Section 12A(a) of the IT Act. Such grant of registration did not operate as a basis, for the Trust, to claim exemption under the said Act; still less could such registration be used as a basis for the Trust – far less, the petitioner-Hospital – to claim exemption from the applicability of the Payment of Bonus Act, an entirely different statute. (ii) Exhibit MW-1/3 was an order, dated 26th November, 2002, issued by the Central Board for Direct Taxes (CBDT), in exercise of the powers conferred vide Section 10(23C)(via) of the IT Act, approving the Trust, for the purposes of the said sub- class, for the assessment years 2000-2001 to 2002-2003. Interestingly, condition (iii), in the said Order, reads thus: “this notification will not apply in relation to any income being profits and gains of business, unless the business is incidental to the attainment of the objectives of the assessee and separate books of accounts are maintained in respect of such business”.

This caveat, as entered in the Order, itself indicates that the approval, of the Trust, under Section 10(23C)(via) of the IT Act, did not automatically go to indicate that no part of its income constituted “profits and gains of business”. xxx If one were to read Section 10 (23C)(via) of the IT Act, in conjunction with the seventh proviso thereto, two aspects become immediately apparent, viz. (i) that the “hospital or other institution”, referred to in the said sub-clause (via) has necessarily to be “existing solely for philanthropic purposes and not for purposes of profit”; this, however, would not imply, as a necessary sequitur, that no part of the income of the “hospital or other institution” constitutes “profits or gains of business”, and Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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(ii) income of the “hospital or other institution” which, despite “existing solely for philanthropic purposes and not for purposes of profit”, nevertheless, constitutes “profits or gains of business” would continue to be entitled to the benefit of Section 10(23C)(via) of the IT Act, subject only to the condition that the business is incidental to the attainment of the objectives of the “hospital or other institution”, and separate books of accounts are maintained in respect thereto. This, however, is not the position obtaining in the case of Section 32(v)(c) of the Act, as is apparent from the various judicial authority sided hereinabove; the mere fact that the hospital garners profits, and is run on commercial lines, would itself disentitle it from the benefit of the said provision. Clearly, therefore, the scope and ambit of the benefit available to a “hospital or other institution”, under Section 10(23C)(via) of the IT Act, and under Section 32(v)(c) of the Payment of Bonus Act, are markedly distinct and different, and it would be folly, therefore, to treat the order, approving the Trust, for the purposes of Section 10(23C)(via), as ipso facto excepting the Hospital run by the Trust, from the rigour of the Payment of Bonus Act. (iii) Ex. MW-1/4 to MW-1/7 relate to the benefit, granted to the Trust, of Section 80-G(5) of the IT Act. For the reasons already set out, in detail, in my earlier decision in Batra Hospital Employees Union (supra), grant of exemption, under Section 80-G(5) of the IT Act cannot, in any manner, serve as a basis for the Hospital to claim the benefit of Section 32(v)(c) of the Payment of Bonus Act, especially in view of the distinct definition of “charitable purpose”, as contained in Section 2(15) of the IT Act. (iv) Ex MW-1/8 and MW-1/9 were assessment orders, issued by the Income Tax authorities, for the Assessment Years 1995- 1996 and 1996-1997, respectively. These Assessment Orders extend, to the petitioner-Hospital, the benefit of Section 10(22- A) of the IT Act, which was worded identically to Section 10(23C)(via). As such, they cannot assist the appellant, in its claim for being extended the benefit of Section 32(v)(c) of the Act. Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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(v) Ex MW-1/10 was a statement, showing receipts, expenditure, capital expenditure and result in surplus/deficit of the petitioner-Hospital, for the years 1991-92 to 2000-2001. A glance at the said chart makes it clear that the petitioner Hospital was, in certain years, earning profits, and in others, sustaining losses, and was, overall, being run as a commercial enterprise, with all the risks and rewards attending the running of such an institution. This single exhibit, by itself, would be sufficient to indicate that the petitioner-Hospital cannot regard itself as a hospital established “not for the purpose of profit”, so as to be insulated against the liability cost by the Act, to pay bonus to its workmen.

Conclusion

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erroneously placed the onus on the appellant hospital to prove that it was not run primarily for the purpose of profit. The appellant Hospital satisfied the prima facie requirement that the establishment was not being run for profit by exhibiting documents. The learned Single Judge in the absence of evidence incorrectly assumed that profit earning is the appellant hospital‟s predominant purpose and completely negates the concept of enterprises operating on a no-profit, no-loss basis. It was erroneously decided that the non-profit making nature of the Trust will not exclude the appellant hospital from the applicability of the Act. The ratio as laid down in Workmen of Tirumala Tirupathi Devasthanam V Management and others,(1980) 1 SCC 583 was not applied in right perspective. The appellant Hospital was neither established for profit nor is running for the purposes of profit as no profit has ever been distributed to any person including the trustees. The statement showing receipts, expenditures, capital expenditures and the resultant surplus/deficit of the appellant hospital from 1991-1992 to 2000- 2001 showed a deficit with capital expenditure in every year except 1993- 1994. The appellant Hospital has satisfied conditions required under section 80G of the Income Tax Act,1961 and provisions of Income Tax Act,1961 for ascertaining whether an institution is running “for charitable purpose or Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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not” are far more stringent than the provision under the Act which requires that the enterprise is „not established for the purpose of profit‟. 12. The learned counsel for the appellant advanced oral arguments and also submitted written arguments. The learned counsel for the appellant argued that the learned Single Judge while upholding the order passed by the Tribunal held the appellant Hospital liable for payment of bonus but has not upheld the reasoning of the Tribunal as mentioned in the Award. The learned Single Judge has relied on the guidelines as mentioned in Clause (ii), (v), (vi) and (vii) of para 46 of the Batra Hospital Employees Union V Batra Hospital and Medical Research, 2018 (168) DRJ 21 which are legally erroneous as these guidelines exclude every institution which runs on commercial lines and has the potential of earning surplus from exemption from payment of bonus under section 32(v)(c) of the Act and because of the guidelines that establishments running on “no profit no loss” basis or establishments whose profit cannot be shared will not be treated as establishments “not for purposes of profit”. The learned counsel for the appellant relied upon the judgment of the Supreme Court titled as Workmen of Tirumala Tirupati Devsthanam V Management And Another, 1980 (1) SCC 583 which supports the view that the test of “dominant purpose” is the Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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correct test in law. 12.1 The learned counsel for the appellant Hospital further argued that activities of the Trust that surplus income will not change the charitable character of the Trust and the dominant purpose of each establishment would be determined on basis of its peculiar facts and circumstances. If the primary objective of an establishment is to carry out a charitable activity rather than making profits then character of charitable purpose would not be lost merely because the establishment earn some profits from its activities. The learned counsel for the appellant has placed reliance on the case of Additional commissioner of Income Tax, Gujarat Ahmedabad V Surat Art Silk Cloth Manufacturers Association, Surat, AIR (1980) 2 SCC 31. 12.2 The evidence led on behalf of the appellant Hospital proved that the Trust is a non-profit making organisation and none of the trustees draws any salary or benefits from the Trust. The Trust is approved by the Income Tax Department under section 10(23C) of the Income Tax Act, 1961 and was granted exemption under section 80G of the Income Tax Act, 1961 and Trust was not deriving any profit as per Income Tax Assessment orders. 13. The learned counsel for the respondents submit that once an organisation begins to pay bonus, it cannot stop payment of bonus without seeking Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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exemption from the competent authorities and without providing opportunities to the workers. This procedure must be followed to preserve industrial harmony and peace. 14. It is apparent that the appellant Hospital was paying bonus to its workmen and had paid the bonus prior to 1997-98. The appellant Hospital did not pay the bonus to its workers for the year 1997-98. The issue which needs judicial consideration and assessment is that whether the appellant Hospital is entitled to be exempted from the applicability of the Act for year 1997-98 and is not liable to pay bonus to its workmen being established not for purpose of profit. 15. The Act was enacted with objective to provide for the payment of bonus to persons employed in certain establishments on the basis of profits or on the basis of production or productivity. Section 1 of the Act provides that the Act shall apply to every factory and every other establishment in which twenty or more persons are employed on any day during an accounting year. Section 32 of the Act exempts certain classes of employees from their entitlement to bonus. The hospitals which are “established not for the purposes of profit” are exempted from the applicability of the Act by virtue of sub-clause (c) of clause (v) of section 32 which reads as under:- Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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“32. Act not to apply to certain classes of employees. – Nothing in this Act shall apply to - (i) xxxxxxx; (ii) xxxxxxx; (iii) xxxxxxx; (iv) xxxxxxx; (v) employees employed by- (a) the India Red Cross Society or any other institution of a like nature (including its branches); (b) universities and other educational institutions; (c) institutions {including hospitals, chambers of commerce and social welfare institutions) established not for purposes of profit.”

15.1 The Supreme Court, in Jalan Trading Company V Mill Mazdoor Union, MANU/SC/0185/1966 while considering the vires of the Act including section 32 observed as under:- “It may be broadly stated that bonus, which was originally a voluntary payment, out of profits made, to workmen to keep them contented, acquired the character, under the bonus formula, of a right to share in the surplus profits, and enforceable through the machinery of the Industrial Disputes Act. Under the Payment of Bonus Act, liability to pay bonus has become a statutory obligation imposed upon employers covered by the Act.”

15.2 Section 32(v)(c) of the Act has come up for judicial interpretation on many occasions and referred Workmen of Tirumala Tirupathi Devasthanam V Management, AIR 1980 SC 604. In this case, the issue before the Supreme Court was whether the Transport Department of the Tirumala Tirupati Devasthanam was an institution by itself and, if so, Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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whether it was exempt from the operation of the Act by virtue of section 32(v) (c) thereof. The Supreme Court held as under:- “2.... On the other hand, there must be proof that the Transport Department (a) is an institution; (b) established not for the purpose of profit. The Tribunal has not correctly appreciated the import of this latter requirement. It has been found that profits made some years are ploughed back whatever that may mean. It is also found that the motive for running the industry of transport was to afford special facilities for the pilgrims. These by themselves do not clinch the issue whether the institution has been established not for purposes of profit, nor are we satisfied that merely because in the administrative report of the Devasthanam, there is mention of the transport establishment as a remunerative enterprise, that is decisive of the issue.

15.3 The learned Single Judge also referred T.N. Water Supply & Drainage Board V T.N. Water Supply & Drainage Board Engineers Association, (1998) 5 SCC 370 and State of Tamil Nadu V K. Sabanayagam, (1998) 1 Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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SCC 318. In T.N. Water Supply & Drainage Board, the Supreme Court observed as under:- “Learned Single Judge has referred to the functions of the Board and its powers and rightly held that the purpose behind the functions of the Board is to provide protected drinking water supply and drainage facilities, but this also cannot be disputed that the Board has got its own assets and liabilities, that it has got its method of recovery of the cost of the scheme, making investment and constituting its funds by 'all moneys received by or on behalf of the Board ..., all proceeds of land or any other kind of property sold by the Board, all charges, all interest, profits and other moneys accruing to the Board and all moneys and receipts', deposited into the public accounts of the Government under such detailed heads of accounts as may be prescribed or in the Reserve Bank of India, State Bank of India or any corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970. It has thus a scheme of profit and loss. It shall earn profit in some year and lose in another year. Thus, in its commercial activities of sort, it has got a capital structure of profit, liabilities and labour force to care for. We see reason to hold in accordance with the Rule indicated by the Supreme Court in the case of Workmen v. Tirumala Tirupathi Devasthanam that the Board is an institution designed for profit in the limited sense that when the Government's department found it difficult to run such projects departmentally, they decided to create a Board and transferred the projects to ensure that there was proper service to the community at large on the one hand and on the other, there was no pressure on the meagre revenue and other resources of the State.

Applying the test as above, we have no hesitation in holding that the learned Single Judge has fallen in error in holding that the respondent-Board is an institution established not for purposes of profit. Employees of the Board qualifying for Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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bonus under the Act, in our opinion, are entitled to minimum amount of bonus.”

15.4 The High Court of Madras in the case of Christian Medical College and Hospital V Presiding Officer, 2003 (III) LLJ 650 (Mad) analysed the applicability of section 32(v)(c) of the Act. As observed by the learned Single Judge examined issue whether the Christian Medical College & Hospital was exempted from the application of the Act by virtue of section 32(v) (c) of the Act:- “(i) The CMC was being run on commercial lines. (ii) The cost of education for a single Medical student was Rs. 64,000/- per year, whereas the fee charged from a student for a year, was only Rs. 3,000/-. This indicated that it was only from the earnings of the hospital, that subsidy could be provided for the student for their education. (iii) The minutes of the Extra Ordinary Meeting of the Association of the CMC indicated that income from patients during 1978-88 was 88%, whereas contribution from the Members was only 1.42%, collections from students amounted to 1.5%, collection from other sources was 2.5% and earnings from the division of community health was 3.4%. (iv) Of 1484 beds in the hospital, only 161 beds were assigned for free treatment, i.e. a mere 11%. 90% of the inpatients and 60% of out-patients were charged on commercial basis. (v) The CMC manufactured 144 items of medicines, sold them to patients at a profit and ploughed back the surplus from the sales to the institution itself. (vi) 90% of the income of the institution came from the hospital. Even if the purpose of establishment, and the object of the institution at that time, had been to serve the poor, it was not necessary that the said object continued. Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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(vii) Free service, on charitable lines, was no longer available to all patients, as was admitted by the CMC itself.”

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its workers for the year 1997-98. 17. The learned Single Judge in the impugned judgment has relied upon the judgment delivered in Batra Hospital Employees Union which was also rendered by the learned Single Judge. The learned Single Judge in para no.46 of the judgment delivered in Batra Hospital Employees Union culled out the legal proposition as emerged from various judicial pronouncements on the issue of liability of an establishment to pay the bonus which are reproduced as under:- “25. Having noticed the above decisions, I had, in para 46 of the judgement of Batra Hospital Employees Union (supra), culled out the following propositions which emerged therefrom, as useful guidelines to determine the issue of applicability, in any given case, of Section 32(v)(c) of the Act. “(i) The question of whether an institution is, or is not, established "not for the purpose of profit" cannot be decided merely by referring to the original intent and purpose for which the institution may have been set up, as reflected in its Memorandum of Association, Bye-Laws, or any other similar instrument. Else, it would be easily possible for any institution to avoid the bonus under the Act, merely by incorporating a clause in, or wording, its Memorandum of Association or Bye- Laws, to the effect that it is established for charitable purposes, and not for the purposes of profit. Such subterfuge would obviously be impermissible in law.

(ii) If any institution is making profits, given the object of the Act, it would not be possible to treat it as an institution "established not for the purpose of profit". The making of profit has an indelible nexus with the payability Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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of bonus, during the Full Bench Formula regime as well as thereafter. As Tirumala Tirupati Devasthanam (supra) succinctly put it, the moot question would be - "Was the institution „not one for purposes of profit‟, motives apart?" The Act cannot be interpreted in such a manner as would enable organizations, which are profiting from their activities, to escape the liability to pay bonus to their employees or workmen. Such an approach would entirely defeat the socialist structure of our nation, and violate the preambular declaration in the Constitution of India which would always remain the grundnorm.

(iii) Equally, if any institution is set up with the purpose of making profits, the fact that they may not be actually making profits, would not exclude it from the applicability of the Act.

(iv) One of the definitive tests, which would assist in determining the issue, would be the dominant purpose for which the enterprise is set up.

(v) "Ploughing back" of the profits made, into the institution itself, for its maintenance or otherwise, would, equally, not be a justification to avoid liability under the Act. What is material is the earning of profits, and not the manner in which the profits earned are distributed.

(vi) An organization which is run on commercial lines, ex facie, cannot be regarded as "established not for the purpose of profit".

(vii) Among other things, the following features of an organization would indicate that it cannot be regarded as having been "established not for the purpose of profit": (a) having its own assets and liabilities, (b) having a method of recovery of cost incurred in its operations and making of investments, (c) having a profit and loss account, and depositing Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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of profits into specified accounts, resulting in a capital structure of profit with attendant liabilities, (d) having its own labour force, (e) actual earning of profits while discharging its activities, i.e. having surplus of income over expenses, (f) substantial funding, of the institution and its activities, from the earnings made therefrom, as Contra distinguished from earnings from donations etc, and (g) charging of customers, or a majority thereof, on commercial, rather than charitable, basis.”

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established “not for the purposes of profit” under Section 32(v)(c) of the Act. As in the present case, Batra Hospital, too, had been granted the benefit of Section 80-G under sub-section (5) of the said Section. My observations/findings on the issue, as contained in paras 49 to 52 of the said decision, apply, mutatis mutandis, to the present case and, are therefore, reproduced, in extenso, as under:

“49. A perusal of the certificates, issued to the respondentHospital under Section 80-G of the Income Tax Act, reveal that they have been issued under sub-section (5) thereof. Without reproducing the entire provision, it may be noted that exemption, under sub- section (5) of Section 80-G of the Income Tax Act, is available "to donations to any institute or fund referred to in sub-clause (iv) of clause (a) of sub- section (2), only if it is established in India for a charitable purpose..." Mr Sharma would submit that there is no real difference between the expressions "established not for the purpose of profit" and "established for a charitable purpose" and that, therefore, the certificates issued to his client under Section 80- G of the Income Tax Act effectively conclude the factual position that the respondent- Hospital was established not for the purpose of profit.

“(15) „charitable purpose‟ includes the poor, education, medical relief, and preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility:

Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves carrying on of any activity in the nature of trade, commerce or Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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business, or any activity of rendering any service in relation to any trade, commerce or business, pharmacists or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:

Provided further that the 1st proviso shall not apply if the aggregate value of the receipts from the activities referred to the rain 25 lakh rupees or less in the previous year;”

Reading the above definition of "charitable purpose", as contained in the Income Tax Act, carefully, it is seen that providing medical relief, ipso facto, is treated as a "charitable purpose" thereunder. Even more significant is the proviso to the said clause, which excepts, from the scope of the clause, i.e., from the scope of the definition of "charitable purpose", carrying on of activity in the nature of trade, commerce or business, whether or not the income from such activity is retained by the assessee concerned, or not. This exception, however, is expressly made applicable only to the last category of "purposes" referred to in the definition, i.e., to the "advancement of any other object of general public utility". In other words, the limitation imported into the definition by the proviso thereto, is not apply to providing of medical relief. An institution which provides medical relief is, therefore, per definition, treated as discharging a "charitable purpose", irrespective of whether its activities partake of the character of trade, commerce or business, or not. Such legislative latitude is not provided, by any provision of the Payment of Bonus Act. In view of the somewhat peculiar definition of "charitable purpose", contained in clause (15) of Section 2 of the Income Tax Act, therefore, it is not possible to regard grant of a certificate, under Section 80-G (5) of the Income Tax Act, as automatically excepting the holder of such certificate from the applicability of the Payment of Bonus Act.

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Act. There is substance, in the contention advanced by Mr. Sanjay Ghose, learned counsel for the petitioner, that the word "charitable purpose", as used in Section 80-G (5) of the Income Tax Act, may not readily be equated with the words "not for the purpose of profit", as used in Section 32(v)(c) of the Payment of Bonus Act. It is well-settled principle, of interpretation of statutes, that different words used in one statutory instrument, have to be accorded different meanings, on the presumption that the legislature, in using such different words, must have intended it to be so. The Income Tax Act uses the expression "not for purposes of profit" in various sub-clauses of Section 10(23C) which, it is well settled, is a provision closely interlinked to Section 80-G. Where the two expressions "charitable purpose" and "not for purposes of profit" are used in the same statute, in cognate provisions, even if situated at some distance from each other, they cannot be accorded the same meaning, without due justification. In the present case, the situation would be worse, as Mr. Manish Sharma would exhort this court to equate the words "for charitable purpose", as used in Section 80-G of the Income Tax Act, with the words "not for purposes of profit" used in Section 32(v)(c) of the Payment of Bonus Act. This, in my opinion, would be entirely impermissible in law.

Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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by the appellant Hospital might not be distributed amongst the Trustees and might be ploughed back into the corpus of the Hospital to better its facilities and augment its quality of services would not allow the appellant Hospital to be exempted from the applicability of the provisions of the Act. The learned Single Judge has rightly laid emphasis on various documents as referred in para no. 35 of the impugned judgment to establish the liability of the appellant Hospital to pay bonus to its workers. The dominant purpose of the Trust which is running the appellant Hospital is established to be to earn profit. 21. We have carefully perused the Award and impugned judgment which are well reasoned and passed on relevant factual and legal propositions. The Award and the impugned judgment are not perverse, illogical or contrary to the factual and legal propositions. It is based on sound factual and legal reasoning. The learned Single Judge while upholding Award passed by the Tribunal has rightly concluded that the provisions of the Act are applicable to the appellant Hospital and the appellant Hospital cannot be exempted from the liability to pay bonus to its workmen for the year 1997-98. The arguments advanced by the learned counsel for the appellant and the Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified

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respondents are considered in right perspective. There is no merit in appeal, hence dismissed. 22. The present appeal, along with pending applications, if any, stands disposed-off.

(SUDHIR KUMAR JAIN) JUDGE

(NAJMI WAZIRI) JUDGE

MAY 26, 2023 N/SD Digitally Signed By:HARVINDER KAUR BHATIA Signing Date:06.06.2023 17:58:26 Signature Not Verified