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Income Tax Appellate Tribunal, MUMBAI BENCHES “A” MUMBAI
Before: SHRI G.S.PANNU (AM) & SHRI. RAM LAL NEGI (JM)
This appeal has been filed by the revenue against order dated 14/10/2015 passed by CIT (Appeals)-1 for the Asst. Year 2012-13, whereby the Ld. CIT(A) allowed the appeal preferred by the assessee against assessment order dated 27/02/2015 passed u/s 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).
Brief facts of the case are that the assessee a registered society, running a hospital, and also registered u/s 12A of the Act, filed its return of income for the A.Y. 2012-12 as ‘NIL’ claiming exemption u/s 11 of the Act. One of the objects of the assessee trust is to provide medical relief to the public at large. The A.O. while completing the assessment order brought Rs. 1, 93,14,650/- to tax as income from pharmacy store/pharmacy shop situated at the premises of the hospital on the ground that the assessee has been paying VAT to the Sales Tax department. In the first appeal the Ld. CIT(A) set aside the impugned assessment order by following the order of his predecessor passed in assessee’s own case for A.Y. 2010-11. The revenue is in appeal against the said order passed by the Ld. CIT(A).
The revenue has raised the following effective grounds of appeal:-
1) “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), Mumbai erred in allowing the pharmacy shop’s income u/s 11(4A)of the Income Tax Act, and held that activity of running a pharmacy shop is incidental to the attainment of the objects of the trust as well as running shop is not a planned activity, though assessee is paying VAT on sales, with an intention of earning income side by side”.
2) “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), Mumbai is justified in allowing claim of the assessee for exemption for exemption u/s11 by ignoring the fact that the Assessing Officer in his order has pointed out that assessee runs a pharmacy store in its hospital for profit motive and without approaching facts that the assessee’s profit from the Pharmacy store is Rs. 1,45,09,795/- and gross receipts of assessee society are Rs. 2,38,34,439/- including of pharmacy surplus.”
Before us the Ld. Departmental Representative (DR) relying on the finding of the assessing officer submitted that since each and every case has to be decided on its own merits. The Ld. CIT(A) has wrongly followed the orders of his predecessor. Since, the assessee has been running the pharmacy store in its hospital for earning profit, the assessee is not entitled for exemption u/s 11 of the Act. Hence, the impugned order is liable to be set aside.
On the other hand the Authorised Representative (AR) for the assessee submitted that this issue has been decided in favour of the assessee by the Tribunal in assessee’s own case for the A.Y. 2010-11 & 2011-12 in & ITA No. 4307/Mum/2015 and the assessee’s case is squarely covered by the said decision.
We have head the rival submissions and also gone through material place before us including the decision of the co-ordinate Bench in assessee’s own case referred above. The sole grievance of the revenue is that the Ld. CIT(A) has wrongly treated the income of the assessee from the activity of pharmacy store/shop exempt u/s 11(4A)of the Act, because according to the Assessing Officer such an activity is not incidental to its main activity. We notice that the co-ordinate Bench has decided the identical issue in favour of the assessee holding as under:- “If the aforesaid provisions is analyzed, sub-section (4A) says that sub-section (1) or sub-section (2) or sub-section (3) or Sub-section (3A) shall not apply in relation of any income of a trust or any institution, being profit & gains of business, unless the business is incidental to the attainment of the objective of the trust or, as the case may be, institution, and separate books of accounts are maintained by such trust or institution in respect of such business. Section 11(4A) was inserted by the Finance Act, 1983 w.e.f. 01/04/1984, in relation to any income being profit & gains of any business, unless (a) the business is carried on by the trust wholly for public religious purposes/charitable purposes and is carried out.
It has been further elaborated in the departmental Circular NO.372 dated 08/12/1983 and further discussed in CIT vs Thanthi Trust (2001) 247 ITR 785, 795 (SC) holding that section 11(4A), as is stood from A.Y. 1984-85 to 1991-92, restricted the benefit so that it was not available for income derived from business unless the conditions contemplated in clauses (a) & (b) are satisfied. It is pertinent to note that by section 11(4A), the benefit due to an assessee in case of an income from a business held interest is extended to an income from a business carried on by it on its satisfying the conditions laid down the under clauses (A) & (b) of the section (CIT vs Dharmodayam COMPANY (1997) 225 ITR 686, 692 (Kerala), wherein, the assessee was held to be entitle to claim exemption u/s 11(1) of the Act. In respect of the income from Kury business, which itself was held in trust by the assessee. This decision was set-aside by Hon’ble Apex Court in (2001) 248 ITR 816 (SC). In DIT vs Bombay Billion Association Dharma NO Kanto Trust (2002) 254 ITR 708 (Bom.), wherein, the general public was beneficiary, therefore, the Hon’ble jurisdictional High Court held that since there was substantial compliance of section 11(4A)(b), therefore, the trust was entitled to exemption. Identical ratio was laid down in DIT (E) vs Shilpam (1998) 230 ITR 126 (Cal.). As a result of substitution by the Finance No.(2) Act, 1991 w.e.f 01/04/1992, the provisions of section 11(1) or 11(2) or 11(3) or 11(3A) shall not apply for and from A.Y. 1992-93 in relation to any income of the trust or any institution, being profit & gains of business unless
(a) the business is incidental to attainment of objective of the trust or the institution as the case may be and (b) separate books of accounts are maintained by such trust or institution in respect of such business.
In ACIT vs Thanthi Trust (2001) 247 ITR 785 (SC), affirming Thanti Trust vs ACIT (1999) 238 ITR 635 (Mad.) it was held that the scope of section 11(4A) operative for and from A.Y. 1992-93, is more beneficial to a trust of institution then was the scope of section 11(4A), as it was operative for A.Y. 1984-85 to 1991-92. Section 11(4A), as it stand for and from A.Y. 1992-93, all that is required for the business income of a trust or a institution to be exempt from a tax is that the business should be incidental to the attainment of the objectives of the trust or institution. In view of the matter, the trust was held to be entitled to exemption as the business of the trust was incidental to the attainment of the object of the trust. If the language used in the section is kept in juxtaposition with various decisions, it can be said that the dominant nature of the purpose for which the trust exist has to be considered. The ratio laid down in Aditanar Educational Institution etc. vs Addl. CIT 224 ITR 310 (SC) wherein, the Hon’ble Apex Court, while construing the provisions of section 10(22) observed the decisive or acid test is whether on an overall view of the matter, the object has to be considered. Identically, Hon’ble jurisdictional High Court in Baun Foundation Trust vs Chief Commissioner (2012) 251 CTR (Bom) 237, wherein, identically, the activity of chemist of was held to be incidental or ancillary to the dominant object and purpose to run a hospital. The Hon’ble Court held that running a chemist shop is not the dominant object for the purpose trust, therefore, the assessee’s application was allowed u/s 10(23C) (via) of the Act, by holding that application of approval cannot be rejected on the ground that running of a shop in the hospital is incidental for the purposes of the hospital. In the present appeal also, the chemist shop is part and partial of the hospital being incidental/ancillary to achieve the objects of the hospital, therefore, following the aforesaid decisions and also the case of Franciscan Sisters of St. Joseph’s Society (ITA No.1897/MDS/2013) order dated 06/01/2014, wherein, running of pharmacy by the assessee society as integral part of running a hospital, ratio laid down in DIT (E) vs Agri-horticulture Society (2005) 273 ITR 198, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals), more specifically when the pharmacy shop is integral part and partial of the hospital. We affirm the same.”
Since, the identical issue has already been decided by the co-ordinate Bench in assessee’s own case, we have no reason to deviate from the view taken by the co-ordinate Bench. Hence, respectfully following the decision of the co-ordinate Bench in assessee’s own case aforesaid, we decide the sole issue urged by the assessee in his favour. Accordingly, the order passed by the Ld. CIT(A) is upheld and the grounds of appeal of the revenue are dismissed.