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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF MARCH, 2020
PRESENT
THE HON'BLE MR. JUSTICE ALOK ARADHE
AND
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
INCOME TAX APPEAL NO.453 OF 2010
BETWEEN:
THE DIRECTOR OF INCOME – TAX EXEMPTIONS C.R.BUILDING, QUEENS ROAD, BENGALURU. ... APPELLANT (BY SRI K.V.ARAVIND, ADV.)
AND:
C.B.C.I. SOCIETY FOR MEDICAL EDUCATION, ST. JOHNS MEDICAL COLLEGE AND HOSPITAL CAMPUS, JOHN NAGAR, BENGALURU – 560 034.
... RESPONDENT (BY SRI M. LAVA, ADV.)
THIS INCOME TAX APPEAL IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:23.07.2010 PASSED IN ITA NO.1226/BANG/2009, PRAYING TO:
2 (i) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, (ii) ALLOW THEAPPEAL AND SET ASIDE THE ORDERS PASSEED BY THE ITAT, BENGALURU ITA NO.1226/BANGA/2009 DATED 23.07.2010 CONFIRMING THE ORDER PASSED BY THE DIRECTOR OF INCOME TAX, EXEMPTIONS, BENGALURU, IN THE INTEREST OF JUSTICE.
THIS INCOME TAX APPEAL COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., MADE THE FOLLOWING:
JUDGMENT
This appeal is filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), by the Revenue, being aggrieved by the order dated 23.07.2010 passed by the Income Tax Appellate Tribunal, Bengaluru, in ITA.No.1226/Bang/2009.
The appeal was admitted vide order dated 08.11.2011, for considering the following substantial question of law: “1. Whether the order passed by the Income Tax Appellate Tribunal granting renewal of exemption is contrary to Section 80- G(5)(iii) of the Act is therefore unsustainable?”
The facts giving rise to filing of this appeal briefly stated are that, the assessee is a Trust established through a Memorandum of Association and registered with the Registrar of Societies, Mysuru on 07.12.1961. Subsequently, the Registrar of the Societies issued a letter dated 30.12.1964 proposing amendments of some rules and regulations and change of name of the Society as CBCI Society for Medical Education in the Memorandum of Association. The assessee was granted recognition under Section 80G of the Act, ever since the date of the registration till 31.03.2009. The respondent - assessee on 20.03.2009, applied for grant of renewal of recognition under Section 80G of the Act. The Director of Income Tax (Exemption) while processing the renewal application of the assessee inter alia observed that the primary object of the Society was to establish and run medical college and hospital and as per paragraph No.3 of the Memorandum of Association, the primary object of the Trust among others,
4 primarily was for the benefit of Catholics and others may be admitted without any distinction of caste or creed. It was found that the aforesaid Clause 3 of the Memorandum of Association is not in consonance with the requirement of Section 80G(5)(iii) of the Act. Thereafter, the assessee filed a detailed reply to the show cause notice which was issued by the Assessing Officer, in which inter alia it was pointed out that, in actual practice on an average, 2,000 patients were treated daily and approximately 75-80% of such patients were from other communities. The hospital was open to anybody without any distinction of caste or religion. It was also pointed out that admission to medical college was through an open competitive examination done in a transparent manner. It was stated in the reply that from the perusal of the Memorandum of Association, it is evident that there is no restriction that the beneficiary should be from particular caste or religion. The Assessing Officer rejected the application filed by the assessee stating that the clauses in the proposed Memorandum of Association was not in consonance with the provisions of
5 Section 80G(5)(iii) of the Act. Being aggrieved, the Assessee preferred an appeal before the Income Tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’). The Tribunal vide impugned order dated 23.07.2010 allowed the appeal preferred by the assessee. In the aforesaid factual background, the Revenue has filed this appeal.
Learned counsel for Revenue while inviting the attention to Clause 3 of the Memorandum of Association submitted that the object of the Trust was primarily for the benefit of the catholic community. It is further submitted by referring to the order passed by the Director of Income Tax (Exemptions) that from the perusal of the admission list of MBBS students for the academic year 2008-09, it is evident that 80% of the total number of students belong to Catholic Christian. It is also submitted that from perusal of the same, 90% of the non-teaching staff are from catholic community and therefore, it was held by the Tribunal that the assessee – Society exists primarily for the benefit of
6 Catholic community. Therefore, he submits that the Tribunal grossly erred in reversing the order passed by the Director of the Income Tax (Exemptions). In support of the aforesaid submission, learned counsel for the Revenue has placed reliance on the decision of the Hon’ble Supreme Court in the case of UPPER GANGES SUGAR MILLS LIMITED ETC. VS. COMMISSIONER OF INCOME TAX reported in (1997) 227 ITR 578 (SC).
On the other hand, learned senior counsel for respondent submitted that ever since the date of registration, till 2006, the Society enjoyed the exemption under Section 80G(5)(iii) of the Act. However, dealing with the application for renewal for the year 2009, the Director of Income Tax (Exemptions) has taken an erroneous view. He has invited the attention of this Court to paragraph xiv of the representation dated 11.11.2009 and pointed out that the Society was registered during the year 1961 and the medical college started functioning in the year 1963. It is further submitted that thereafter, the
7 exemption under Section 80G of the Act was granted and it continued to be renewed from time to time. It is further argued that the clause “primarily for benefit of Catholics; other may be admitted without distinction of caste or creed” has been thoroughly examined by the department several times earlier. Only after satisfying that the import of Proviso (iii) to subsection (5) of section 80G is not attracted, the approval was given and renewed several times consecutively. He also invited the attention of this Court to paragraph No.7 of the order passed by the Tribunal and submitted that the Tribunal has taken into account the material available on record and has rightly concluded that the respondent - assessee is performing the charitable work without any discrimination on the basis of caste, creed or religion and therefore the respondent herein is entitled for exemption under Section 80G(5)(iii) of the Act.
We have considered the submissions of the learned counsel for the parties and perused the records.
The issue which arises for our consideration in this appeal is whether the respondent is doing charitable work without any discrimination on the basis of caste, creed or religion?
It is pertinent to note that the Society was registered in the year 1961 and the medical college commenced in the year 1963. Admittedly, thereafter, the exemption under Section 80G(5)(iii) of the Act was granted to the Society. Clause 3 of the Memorandum of Association which uses the expression “primarily for the benefit of Catholics”. Others may be admitted without distinction of caste and creed” has been thoroughly examined by the Department several time and only on the satisfaction, the Tribunal granted exemption under Section 80G(5)(iii) of the Act to the Assessee.
No explanation is forthcoming on behalf of the appellants – Revenue as to why the exemption was
9 granted to the respondent - Society for the previous years from 1963 till the year 2009.
From the perusal of paragraph No.7.3 of the order passed by the Tribunal, it is recorded that, even though the object of formation of Trust was primarily for the benefit of Catholics, the Tribunal has taken into account the statistics in the financial year 2008-09 and has found that the assessee – Trust’s Hospital has treated 8,51,127 patients of non-Christian community out of 9,00,406 total patients received treatment which works out to 94.5%. Similarly, in the financial year 2009-10, the total number of patients received various treatments in the hospital is 9,07,641 and out of which, 8,50,146 patients did not belong to the Christian community. Thus, this fact belies the finding recorded by the Director of Income Tax (Exemptions) that the Assessee - Trust had served only Catholic community and only run for the benefit of the Catholics. It has further been held that out of total number of 685 students admitted in the medical college,
10 195 students were from Hindu community, 24 from Muslim and the remaining were from various sects of Christian community. Similarly, the number of staffs employed in its various institutions such as Research Institute, Medical College, Hospital etc., were from other communities also. In paragraph No.7.4 of the order of the Tribunal, it has been held that the assessee – Trust has been serving the people on humanity basis in its noble profession by rendering timely treatment to the needy without discriminating the caste, creed, community etc.
The findings recorded by the Tribunal are based on meticulous appreciation of the evidence on record which does not call for our interference. In view of the preceding analysis, the substantial question of law framed by this Court is answered against the Revenue and in favour of the respondent – Assessee. Accordingly, the respondent – Assessee is held entitled for renewal of exemption under Section 80G(5)(iii) of the Act from the year 2009.
11 12. In the result, we do not find any merit in the appeal. Accordingly, the appeal is dismissed.
Sd/- JUDGE
Sd/- JUDGE
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