News Update

I-T - Mere alteration in their MoA which did not alter basic purpose of providing medical relief, is no ground to deny exemption to hospitals: ITAT

By TIOL News Service

NEW DELHI, JAN 02, 2018: THE ISSUE BEFORE THE TRIBUNAL IS - Whether receipt of fee or charges for services rendered by a hospital, can be a ground to conclude that such hospital is engaged in trade & commerce with a profit earning motive. NO IS THE VERDICT.

Facts of the case:

The assessee, a charitable society registered u/s 12AA(1), is running a hospital in Old Delhi, which provides medical treatment, pathological tests & conducts surgeries, at very subsidised costs for the benefit of the poor, destitute and economically weaker sections of society. The assessee did not receive any donations and the major source of its income was fees collected from patients. During relevant A.Y, scrutiny assessments were conducted on completion of which, exemption u/s 11(1) was denied to the assessee by invoking provisions of Section 2(15), on grounds that the assessee was running the hospital with intent of earning profit. Subsequently, the registration u/s 12AA(1) was also cancelled by the DIT(Exemption). Such cancellation of registration was overturned by the Tribunal, and the Departmental appeal against such order was dismissed by the High Court.

The assessee also sought exemption u/s 10(23C) which was denied by the Revenue but later allowed by the High Court. For the succeeding AY, the AO also denied exemption u/s 11(1) on grounds that the assessee was not performing any charitable activities. Later, the CIT(A) allowed the assessee's appeal against such order.

Tribunal held that,

++ it is is submitted that in earlier A.Ys, the Exemption was granted by the Department which was taken into cognizance by the CIT(A) in his order. There is no need to interfere with the order of the CIT(A). As per the decision in assessee's own case passed by the ITAT which was confirmed by the High Court, the issue is squarely covered in favour of the assessee. In the said decision, on the question of alteration in Memorandum of Association and communication to the Revenue authorities, the Tribunal has examined the changes/amendments and held that these were minor in nature and did not detract or alter the main/basic purpose which was to provide medical relief. Thus, there was no change in the object and purpose of the assessee. The CIT(A) has rightly held that mere receipt of fee or charge cannot be said that the assessee is involved in any trade, commerce or business.

(See 2018-TIOL-11-ITAT-DEL)