Income Tax Appellate Tribunal - Mumbai
Saifee Hospital Trust, Mumbai vs Department Of Income Tax on 8 January, 2013
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E", MUMBAI
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER
AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER
ITA No.: 5686/Mum/2011
Assessment Year: 2008-09
ADIT (E)I(2), Saifee Hospital Trust.
R.No. 504, Piramal Chambers, 15/12, Maharshi Karve Marg,
5th Floor, Parel, Opp. Charni Road
Mumbai - 400 012 Railway Station,
Vs.
Mumbai - 400 004
PAN.: AABTS 7800 D
(Appellant) (Respondent)
Appellant by : Ms. Girija Dayal
Respondent by : Shri D.V. Lakhani
Date of hearing : 08.01.2013
Date of Pronouncement : 06.03.2013
ORDER
Per Dr. S.T.M. Pavalan, JM :
This Appeal filed by the Revenue is directed against the order of the Ld.CIT(A)-1, Mumbai dated 05.04.2011 for the assessment year 2008-09.
2. The issues raised in grounds No 1 & 3 relate to the eligibility for claiming the benefit u/s section 11 of the Income Tax Act ('Act) which the AO disallowed as against the claim of the assessee but allowed by the Ld.CIT(A).
2.1 The assessee, a charitable trust registered with Charity Commissioner, Maharashtra in the year 1974 was managing and operating 'Saifee Hospital' providing medical services to the public. The assessee had been granted registration 2 ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09 by the Director of Income Tax (Exemption) w.e.f. 01.04.2000. During the year under consideration, in the assessment framed u/s 143(3), the AO had rejected the exemption claimed by the assessee u/s 11 on the ground that the assessee made amendment in the trust deed.
2.2 On appeal, the Ld.CIT(A) held that the trust is eligible to claim the benefit u/s 11 on the reasoning that the object clauses in the original trust deed and the amended trust deed are identical. Aggrieved by the decision, the revenue is in appeal before us.
2.3 Before us, the Ld. DR has relied on the order of the AO in support of the revenue's case on this issue. On the other hand, the Ld.AR has stated that the assessee has made certain amendments to the trust deed in the year 2005 in relation to the administrative provisions. However, the said amendments do not make any changes in the main object of the trust. The amended trust deed has been produced before the Income Tax Department by the assessee at the time of filing the application for obtaining certificate u/s 80G. When the assessee has become aware of the fact that the amendments needs to be informed, they have informed the Commissioner of Income Tax and also has requested for the condonation of the delay.
2.4 We have heard both the sides on this issue and perused the material on record. It is observed that the assessee trust has been duly registered with Charity Commissioner and has obtained registration u/s 12A of the Act. It has also obtained approval from the Chief Commissioner of Income Tax, Mumbai vide letter dated 12th March 2008 u/s 10(23C)(iv)(a) of the Act. The registration given by the Director of Income Tax (Exemption) is valid and subsisting during the year under consideration. Hence, we find merits in the findings of the Ld.CIT(A) that the assessee trust enjoys the valid registration granted by the prescribed authority u/s 12A of the Act and till 3 ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09 such time the registration u/s 12A is operative, the AO cannot deny registration u/s 11 of the Act. Also the Ld.CIT(A) has correctly observed that while filing form No.10A, it is required that the CIT should be informed regarding the change of the object of the trust, but, there is no time limit laid down in the Act or Rule for such compliance. It is needless to state that the assessee has complied with the requirement as per the Act though the same is in a latter point of time.
2.4.1 As regards, the reasoning of the AO that the assessee's registration u/s 12A is not valid or ceases to be in existence since the date of changes made in the trust deed relying on the decision of Allahabad High Court in the case of Allahabad Agricultural Institute Vs Union of India (291 ITR 116) for disallowing the claim, it is pertinent mention that the perusal of the original and amended trust deed reveals that there is no change in the object clause. In view of this fact, we hold that the decision of the Allahabad High Court in the said case is not applicable to the facts of the present case for the reason that the decision in the former case is concerned only with adding of more objects which are entirely different from the objects on the basis of which registration is granted u/s 12A of the Act.
2.4.2 As regards the stand of the AO that the assessee is in the business of hospitals and not charity of hospitals and hence the assessee is neither eligible to claim exemption u/s 10(23C)(vi) nor u/s 11 of the Act, it is observed that the trust has applied more than 85% of its income for charitable purpose and therefore the stand of the AO on this count is not sustainable on facts and law.
2.4.3 In view of that matter, we do not find any infirmity in the decision of the Ld.CIT(A) that the trust is eligible to claim the benefit of section 11 of the Act and the same is herby upheld. Accordingly, ground no 1&3 are dismissed.
4ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09
3. The issue raised in Ground No 2 relates to the issue of requirement of maintaining separate Books of account as an eligibility condition for claiming the benefit u/s 10(23C)(via). The relevant facts are that during the assessment proceeding, the AO found that the assessee had been running Cafeteria, Gymnasium and Pharmacy in the hospital premises and did not maintain separate books of account in this regard. Therefore, the AO treated that these activities as business activities of the assessee on the basis that the conditions of section 10(23C)(via) were violated.
3.1 On appeal, the Ld.CIT(A) held that the assessee trust is engaged in the activity of running & maintaining of the charitable hospital and not carrying any other business activities as all the three departments viz. Pharmacy, Gymnasium and Cafeteria could not be said to be three different independent business activity of the assessee trust. Aggrieved by the decision, the revenue has raised this ground before us.
3.2 Before us, the Ld.DR has relied on the order of the AO in support of the Revenue's case. On the other hand, the Ld.AR has stated that all the three departments are inextricably linked with the main activity of the trust and intended to provide service to the in house patients and other relatives of the patients, OPD patients. These departments are not carrying out any activity for profit. The Ld.AR has also placed his reliance on the decision of the Jurisdictional High Court in the case of Baun Foundation Trust Vs CIT in support of the claim of the assessee.
3.3 We have heard both the parties on this issue and perused the material on record. It is observed that the activities of all the three departments viz. Pharmacy, Gymnasium and Cafeteria are directly related to the main object of the trust and these facilities are needed to carry out for fulfilment of the same. On facts, we concur with the views of the Ld.CIT(A) that the reasoning of the AO that the 5 ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09 assessee trust is making up sale value over its cost and is realising cost no way restrict the assessee trust in running its charitable activities.
3.4 On law, it is relevant to extract the relevant ratio of the jurisdictional High court in the case of Baun Foundation Trust Vs CIT which reads as follows:
"In Aditanar Education Institute Etc. v. Additional Commissioner of Income Tax, the Supreme Court has observed, while construing the provisions of Section 10(22) that the decisive or acid test is whether on an overall view of the matter the object is to make a profit. If after meeting the expenditure any surplus results incidentally from the activity lawfully carried on by the institution, it will not cease to be one existing solely for the statutorily stipulated purpose so long as the object is not to make a profit. Again, it is a well settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital. Even if the figures which are taken into account by the Chief Commissioner are to be had regard to, it is evident that the activity of a chemist shop is an activity which is incidental or ancillary to the dominant object and purpose which is to run a hospital. The Chief Commissioner has accepted that the surplus which is earned from the operation of a chemist shop is utilized for the purposes of the hospital. A hospital must of necessity have a section or department where medicines can be dispensed and it is not uncommon for a medical hospital which exists even for philanthropic purposes to have a chemist shop where pharmaceutical products are sold. This is a facility which is intended to be used predominantly by patients and their relatives. Though the members of the general public are not prohibited from using the facility, the crucial question to ask or the test to answer is whether the establishment of a chemist shop is incidental or ancillary to the dominant object and purpose which is to set up and conduct a hospital for philanthropic purposes. As a matter of fact, Section 10(23C) permits the accumulation of income upto a certain stipulated amount over a stipulated period. In our view, the Chief Commissioner of Income Tax has clearly 6 ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09 misapplied himself in law by having regard to a clearly ancillary or incidental activity and elevating it to the status of the dominant purpose for which the hospital has been established. Running the chemist shop in the present case is not the dominant object or purpose of the trust. Nor would the figures as disclosed indicate that the nature of the activity has assumed such a dominating or overwhelming importance so as to cast doubt on the true nature and character of the hospital which is conducted by the Petitioner. The Chief Commissioner has acted contrary to the judgments of the Supreme Court which hold the field consequent upon which the impugned order would have to be set aside."
Respectfully following the said decision which is applicable to the facts in the instant case of the assessee, we do not find any infirmity in the decision of the Ld.CIT(A) directing the AO to allow deduction u/s 10(23C)(via) of the Act. Accordingly, Ground No 2 is hereby dismissed.
4. Ground No 4 relates to the issue of allowability of the claim of depreciation of Rs. 17,30,47,286/- on the fixed assets/ capital assets purchased out of the donation received in the earlier years.
4.2 The relevant facts are that during the year under consideration, the assessee had claimed a depreciation of Rs 17,30,47,286/-. The AO found that the assessee had purchased the assets out of the income received from donation in earlier year. Since the donation received in the earlier year was exempt income in those years and the assessee had already received the benefit of tax exemption, the AO disallowed the claim on depreciation on the reasoning that double deduction was not allowable unless expressly provided by the Act.
4.3 On appeal, the Ld.CIT(A) while placing reliance on various judicial pronouncements directed the AO to allow the claim of depreciation to the assessee in 7 ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09 accordance to the respective provisions of the Act and Rules on the basis that the assessee had incurred cost for acquisition of assets and the conditions for grant of depreciation were satisfied. Aggrieved by the impugned decision, the Revenue has raised this issue before us.
4.4 Before us, the Ld DR has relied on the order of the AO and stated that double deduction cannot be presumed in the light of the decision of the Hon'ble Supreme Court in the case of Escorts Ltd Vs Union of India. On the other hand, the Ld.AR has submitted that the claim of depreciation is permissible on the cost of the assets. The source of the cost for acquiring the asset is not relevant for such claims. The depreciation is claimed by the assessee on the opening of WDV as well as in respect of addition to the assets. There has been no claim of double deduction, as in earlier years, the donations have been charged to the corpus of the trust. The Ld.AR has relied on various judicial decisions in support of the claim of the assessee.
4.5 We have heard both the parties and perused the material on record. As regards the alleged issue of double deduction, it is pertinent to mention that the donations received by the assessee trust have been exempt from the tax as the provisions of section 11 to 13 of the Act are applicable in those respective years. The claim of depreciation on the assets acquired through such donation on the opening of WDV in the subsequent years, in our view, does not amount to the claim of double deduction and also the ratio in the case of Escorts Ltd Vs Union of India is not attracted as claimed by the Revenue considering the facts of the present case. The complete working of the depreciation filed by the assessee reveals that the claim is in respect of the addition to the assets and the same is claimed on the opening of WDV. The assessee trust has used the assets for the object of the trust and thus eligible to claim depreciation amount. Various judicial decisions including the decision of the Jurisdictional High Court in the case of Institute of Bombay Personnel Selection(IBPS) reported in 264 ITR 110 support the view that the trust is entitled to 8 ITA No.: 5686/Mum/2011 Saifee Hospital Trust.
Assessment Year: 2008-09 claim deduction of depreciation even when the income of the trust is exempt and such claim of depreciation will not tantamount to double deduction. In view of that matter, we do not find any infirmity in the decision of the Ld.CIT(A) directing the AO to allow the claim of depreciation to the assessee. Accordingly, Ground No 4 is herby dismissed.
5. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on this 6th day of March, 2013.
Sd/- Sd/-
(P.M. JAGTAP) (Dr. S.T.M. PAVALAN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, Dt : 06.03.2013
Rasika*
Copy forwarded to :
1. The Appellant,
2. The Respondent,
3. The C.I.T., concerned Mumbai
4. CIT (A) concerned Mumbai
5. The DR, " " - Bench, ITAT, Mumbai
//True Copy//
BY ORDER
ASSISTANT REGISTRAR
ITAT, Mumbai Benches, Mumbai