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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI ASHWANI TANEJA
This appeal has been filed by the revenue against the order of the Commissioner of Income Tax (Appeals)-1 (in short „CIT(A)‟), Mumbai dt. 26.2.2010 passed against the assessment order by the Assessing Officer (in short „AO‟) u/s. 143(3) dt. 26.12.2008 for A.Y 2006-07 on the following grounds :
“1. On the facts and in the circumstances of the case, and in law, the learned CIT(A), Mumbai has erred in allowing claim of the assessee for exemption u/s.11 ignoring the fact that income earned by the trust has been considered as profit from business by the A.O.
2 M/s. Jaslok Hospital & Research Centre
2. On the facts and in the circumstances of the case and in law, the learned CIT(A), Mumbai erred in allowing the claim of the assessee for exemption u/s.11 ignoring the fact that the A.O. in his order has pointed out specific defect in treating the income earned by levying surcharge at a specific rate for the bills raised to patient and doctors and treated them as corpus donation instead of income earned from the activities of the trust.
3. On the facts and in the circumstances of the case and in law, the learned CIT(A), Mumbai erred in ignoring the fact that petition of the assessee u/s.10(23C)(via) has been rejected by the CCIT, Mumbai stating that the trust is engaged in making profit from its activities.
4. The appellant prays that the order of the Commissioner of Income Tax (Appeals)-1, Mumbai be set aside and that of the Assessing Officer be restored.”
During the course of hearing the revenue has filed one more ground, i.e., additional ground which is reproduced as under:
1. On the facts and in the circumstances of the case and in Law, the Ld. CIT(A), erred in allowing the claim of the assessee for exemption u/s. 10(21) of the Income Tax Act without appreciating the fact that the assessee has claimed the exemption under section 11 and not under section 10(21) of the Income Tax Act and also did not appreciate the fact that the activities of assessee cannot be termed as being for the purpose of scientific research.
During the course of hearing, arguments were made by Shri Neil Philip, learned Departmental representative on behalf of the revenue (in short „DR‟) and Shri Nitesh Joshi, learned counsel on behalf of the assessee.
With regard to the main ground of the revenue it has been stated, at the outset, during the course of the hearing by the ld. Counsel of the assessee that the issues involved in the revenue‟s appeal has been covered by the judgment of Hon'ble Bombay High Court as well as the 3 M/s. Jaslok Hospital & Research Centre Tribunal in assessee‟s own cases of earlier years. He filed copies of these orders in support of his statement. On the other hand, the ld. DR has relied upon the orders of the AO.
We have gone through the orders of the lower authorities and submissions made before us. The brief facts of the case are that the assessee trust was running a hospital and research centre during the year under consideration. The stated objects of the assessee-company are to grant medical, surgical relief in cash or kind to all the persons irrespective of caste, creed, colour and community, to donate funds to medical institutions and to undertake, promote and foster medical research and establish research centre etc. During the course of assessment, it was found by the AO that the hospital levied a surcharge of 20% on the bills given to the indoor patients on the amount of bills and the assessee recovered 25% of the fees paid to the honorary doctors. It was further noted by him that both of these amounts were taken as Corpus Donation by the assessee in its books of accounts. On these two grounds he denied the benefit of exemption and brought to tax the income of the hospital. Being aggrieved, the assessee filed an appeal before the CIT(A), wherein it was submitted that this issue is coming from earlier years and the same has been decided by the Tribunal in favour of the assessee. After considering the submissions of the assessee, Ld. CIT(A) decided this issue in favour of the assessee and recorded the following findings:
“4.4 I have considered the appellant submission as well as the order of the A.O. I have also taken note of the order of ITAT, Mumbai Bench in the appellant‟s own case for A.Y – 2001-02, wherein the Hon‟ble ITAT, Mumbai has dismissed the appeal of the revenue. I have also perused the order No. CIT(A)-XXX/IT-10/DIT(E)-II/07-08
4 M/s. Jaslok Hospital & Research Centre for A.Y. – 05-06 of my predecessor, wherein my predecessor has also accepted the contention of the appellant that the activities of the appellant is charitable in nature and the appellant is clearly engaged in the activities of „general public utility‟ as defined in section 2(15) of the IT Act, 1961, I consider it proper and appropriate to extract the relevant portion of the order of my predecessor for A.Y-05-06, which is as under :-
“I find that the claim of the appellant has been consistently accepted at the first appellate stage as well as by the Hon'ble Tribunal, Mumbai. As there is no deviation on facts and issues involved, I find no reason not to accept the claim of the appellant. The finding of the ITO that the hospital in running for profit as a „business concern‟ does not appear to be correct on facts. The persons of lower category of income are attended free or at concessional rate. The appellant is clearly engaged in the activities of „general public utility‟ and covered in definition of „general public utility‟ as the provision of section 2(15), hence, the income of the assessee trust is entitled for exemption u/s 11 and u/s 10(21) and 10(23C) of the IT Act.”
4.5 Respectfully following the order of Hon'ble ITAT, Mumbai and also the order of my predecessor I am of the considered view that the appellant activities are covered in definition of „general public utility‟, hence the income of the appellant is entitled for exemption u/s 11 of the IT Act, 1961. Accordingly I consider it proper and appropriate to hold that the A.O. was not justified in rejecting the claim of the appellant. The appellant claim of exemption u/s 11 and section 10(21) of the IT Act is allowed. The A.O. is directed to allow the exemption to the appellant trust accordingly. The appellant request raised through these grounds of appeal is allowed.”
Being aggrieved, the revenue filed an appeal before the Tribunal. With the assistance of the parties it is noted by us that similar issues, on identical facts, wherein both of the impugned issues were raised, reached upto the stage of the Tribunal in various years and the Tribunal has consistently decided these appeals and issues in favour of the assessee.
5 M/s. Jaslok Hospital & Research Centre It is further noted by us that the Hon'ble Bombay High Court in vide its order dt. 20.4.2015 has dismissed the appeal filed by the revenue against the order of the Tribunal and decided this issue in favour of the assessee for A.Ys 2005-06 and 2008-09. The relevant paras of the order of the Hon'ble Bombay High Court are reproduced below:
“10. Insofar as exemption under section 11 is concerned, in paragraph 5 of its order, the Tribunal has found that for the assessment year 2005-06, the only reason for not applying the Tribunal's order for earlier assessment years and as recorded by the assessing officer is that the revenue or the department has not accepted the said order. However, in the light of the fair concession of Mr.Malhotra that the tribunal's orders, on same facts as rendered for the earlier assessment years, have not been challenged by the revenue, then, we cannot fault the Tribunal or Commissioner for applying them. It is clear from the Tribunal's order that there was no issue before the Commissioner in respect of any exemption under section 10(21) and 10(23C). The assessing officer had disallowed the claim of exemption under section 11 of the I.T. Act. The Tribunal's earlier orders are in relation to this exemption. The Tribunal concurred with its earlier order dated 10th January 2005. The Tribunal, therefore, found that when the facts are identical to the Assessment order under consideration, then, there is no difficulty in applying and following its views for the earlier assessment years. It is in these circumstances that we are of the view that the Tribunal's order does not raise any substantial question of law. In these circumstances the conclusion reached in paragraph 5 and 5.1 cannot be termed as perverse or vitiated by any error of law apparent on the face of record.
The argument of Mr. Malhotra that the levy of surcharge on patients and doctors ought not to have been treated as income earned from the activities of the trust but a corpus donation, need not detain us. Mr. Malhotra himself had pointed to us that certain directions were issued to the Assessee by the Charity Commissioner of the State in exercise of his powers under section 34 of the Bombay Public Trust Act, 1950. They have been referred to in the order of the assessing officer as well. The argument that the revenue can examine this aspect despite such directions of the Charity Commissioner is also without
6 M/s. Jaslok Hospital & Research Centre merit. The order of the Charity Commissioner and particularly in relation to these matters is an aspect directly covered by the Bombay Public Trust Act. In that regard perusal of the said Act and particularly the provisions of Chapter V, V-A and section 40 and 41-A would indicate that the Charity Commissioner can from time to time issue directions to any trustees of the Public Trust or any person connected therewith to ensure that the trust is properly administered and the income thereof is properly accounted for or duly appropriated and applied to the objects and for the purposes of the trust. The Charity Commissioner has been conferred with the powers to give directions to the trustees, in the event, he finds that the trust property is in danger of being wasted, damaged, alienated or wrongfully sold, removed or disposed of. It is the duty of every trustee or persons connected with the trust to comply with these directions. In the circumstances and when section 41-AA was inserted in the Bombay Public Trust Act by the Maharashtra Act of 1985 with a avowed and specific purpose, that we do not think that despite the directions of the Charity Commissioner, the revenue can insist that the amounts charged or surcharges levied should not be treated as income from the activities of the trust. The authorities under the Income Tax Act are suppose to scrutinise the papers and related documents of the trust or the assessee so as to bring the income to tax and in accordance with the I.T. Act. In such circumstances the concurrent findings did not in any manner indicate that the directions issued by the Charity Commissioner are incapable of being complied or liable to be ignored as is held. The directions issued did not change the character of the receipts. In the circumstances even this argument would not enable us to entertain this appeal. The appeal, therefore, does not raise any substantial question of law and is accordingly dismissed. No costs.”
Thus, respectfully following the order of the Hon'ble Bombay High Court, we direct the AO to grant the benefit of exemption to the assessee u/s 11 only. Therefore, the grounds raised by the revenue in the appeal memo are treated as dismissed in terms of directions given in the aforesaid order.
7 M/s. Jaslok Hospital & Research Centre
With regard to the additional ground raised by the revenue, the ld. Counsel of the assessee has submitted before us copy of the notification dt. 27.6.2008 issued by the Central Board of Direct Taxes, Govt. of India wherein the assessee-company has been granted approval u/s 35(1)(ii) to carry on activities of research centre. It was requested that this issue may be sent back to the file of the AO to re-examine the facts and applicable deduction allowable to the assessee. The ld. DR also expressed no objection with regard to the request of the assessee. Therefore, we send this issue back to the file of the AO and direct him to re-examine the issue afresh in view of the copy of notification granting approval to the assessee for carrying on activities of research centre at Mumbai. Needless to say, that the AO shall grant adequate opportunity of hearing to the assessee. Thus, with these directions this ground may be treated as allowed for statistical purposes.
As a result, the appeal of the revenue stands partly allowed.
Order pronounced in the open court on 2nd March, 2016.