INDIAN MEDICAL TRUST, Jaipur V. ITO, Jaipur

ITA 105/JPR/2011

• Counselvise Citation: 10523114 RSA 2011
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2001-2002
• Appeal Filed On: 07-02-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VINOD JOHRI
• Assessee Lawyers: G M MEHTA
• Section: 12A; 12; 11

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH B JAIPUR (BEFORE SHRI R.K.GUPTA AND SHRI N.L.KALRA) ITA NO.105/ JP/2011 ASSESSMENT YEAR: 2001-02 PAN: AAATI 1392 F M/S. INDIAN MEDICAL TRUST VS. THE ITO B-4, GOVIND MARG WARD- 5(3) ADRASH NAGAR, JAIPUR JAIPUR (APPELLANT ) (RESPONDENT) ASSESSEE BY : SHRI G.M. MEHTA DEPARTMENT BY : SHRI VINOD JOHRI ORDER PER N.L. KALRA, AM:- THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORD ER OF THE LD. CIT(A), JODHPUR, CAMP AT JAIPUR DATED 20-12-2010 FOR THE ASSESSMENT YEAR 2001- 02. 2.1 THE FIRST GROUND OF APPEAL RAISED BY THE ASSESS EE IS AS UNDER:- THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEVIATING FROM THE GROUND OF APPEAL BEFORE HIM A ND THEREBY TREATING THE HOSPITAL RECEIPTS OF THE ASSES SEE TRUST AMOUNTING TO RS. 70,31,505/- AS NOT COVERED BY PROVISIONS OF SECTION 10(23C)(IIIAE) OF I.T. ACT FO R THE REASON THAT MEDICAL COLLEGE WAS NOT STARTED IN ABSE NCE OF PERMISSION FROM MCI. HE ALSO THEREFORE, DID NOT CON SIDER THE EXEMPTION U/S 11 OF THE INCOME TAX ACT THOUGH T HE ASSESSEE TRUST IS REGISTERED U/S 12A OF I.T. ACT. 2 2.2 THE ASSESSEE TRUST IS RUNNING A HOSPITAL AND ME DICAL COLLEGE IN THE NAME AND STYLE NATIONAL INSTITUTE OF MEDICAL SCIEN CES (NIMS). DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ACTIVITIES OF THE MEDICAL COLLEGE WERE NOT STARTED. THE TRUST HAS SHOWN THE INCOME FROM DONATION AND FEE CHARGED FROM MEDICAL T REATMENT FROM THE PATIENTS. IT WAS STATED BEFORE THE AO THAT THE FEES WERE CHARGED WITH THE OBJECT TO RUN THE HOSPITAL ON NO PROFIT NO LOSS BAS IS. BEFORE THE AO, THE ASSESSEE CONTENDED THAT THE CASE IS COVERED U/S 10( 23C)(IIIAD) OF THE ACT AS THE GROSS RECEIPTS OF THE ASSESSEE WERE BELOW RS. 1 .00 CRORE. THE AO REJECTED THE CONTENTION OF THE ASSESSEE BECAUSE SEC TION 10(23C)(IIIAD) OF THE ACT IS APPLICABLE IN THE CASE OF AN UNIVERSITY OR E DUCATIONAL INSTITUTIONS. DURING THE YEAR, THE MEDICAL COLLEGE HAS NOT STARTE D. THEREFORE, EXEMPTION U/S 10(23C)(IIIAD) OF THE ACT DOES NOT ARISE. 2.3 BEFORE THE LD. CIT(A), THE ASSESSEE CONTENDED T HAT INCOME OF THE TRUST IS EXEMPT IN VIEW OF PROVISIONS OF SECTION 10(23C)( IIIAD) OF THE ACT AS RECEIPTS ARE LESS THAN RS. 1.00 CRORE. THE DONATION OF RS. 2,90,40,500/- CANNOT BE INCLUDED IN RS. 1.00 CRORE BECAUSE SUCH D ONATIONS WERE RECEIVED TOWARDS CORPUS OF THE TRUST AND WEE CREDITED IN THE BALANCE SHEET. THE LD. CIT(A) HAS REFERRED TO SECTION 10(23C)(IIIAD) OF TH E ACT IN WHICH IT HAS BEEN MENTIONED THAT THE TRUST OR INSTITUTION SHOULD EXIS T SOLELY FOR EDUCATIONAL 3 PURPOSES WHILE IN THE CASE OF THE PRESENT TRUST, IT IS NOTICED THAT THERE ARE EIGHT MAIN OBJECTS. IT WAS THEREFORE, HELD THAT THE TRUST DOES NOT FALL UNDER THE PROVISIONS OF SECTION 10(23C)(IIIAD) OF THE ACT . 2.4 BEFORE US, THE LD. AR HAS FILED THE WRITTEN SUB MISSION. OUR ATTENTION WAS DRAWN TO THE FACTS THAT THE TRUST HAS BEEN APPR OVED BY THE CHIEF COMMISSIONER OF INCOME TAX U/S 10(23C)(VI) & (VIA) OF THE ACT. THE REQUIREMENT U/S 10(23C)(VIA) ARE THE SAME AS GIVE N IN SECTION 10(23C)(IIIAE) OF THE ACT. IT WAS THEREFORE, ARGUED THAT THE TRUST IS ENTITLED FOR EXEMPTION U/S 10(23C)(IIIA3) OF THE ACT. 2.5 ON THE OTHER HAND, THE LD. DR DREW OUR ATTENTIO N TO SECTION 10(23C)(IIIAE) OF THE ACT IN WHICH IT HAS BEEN MENT IONED THAT THE TRUST SHOULD EXCEED SOLELY FOR PHILANTHROPIC PURPOSES. 2.6 WE HAVE HEARD BOTH THE PARTIES. IT IS AN UNDISP UTED FACT THAT SECTION 10(23C)(IIIAE) OF THE ACT IS APPLICABLE IN CASE THE CORRECT ANNUAL RECEIPTS OF SUCH HOSPITAL OR INSTITUTION DID NOT EXCEED RS. 1.0 0 CRORE. THE LIMIT HAS BEEN MENTIONED AND RULE 2 BC WHICH STATES THAT AMOUNT OF ANNUAL RECEIPT SHOULD NOT EXCEED RS. 1.00 CRORE. THE LD. AR HAS CONTENDED THAT THE DONATIONS RECEIVED TOWARDS THE CORPUS OF THE TRUST CANNOT BE CONSIDERED FOR CONSIDERING THE QUANTUM OF THE RECEIPTS FOR THE PURPOSE OF SECT ION 10(23C)(IIIAE) OF THE ACT. THE CONTRIBUTION MADE WITH A SPECIFIC DIRECTIO N TO FORM PART OF THE 4 CORPUS OF THE TRUST OR INSTITUTION ARE NOT TO BE IN CLUDED FOR THE PURPOSE OF SECTION 11 AS MENTIONED IN SECTION 12 OF THE ACT. I T WILL BE USEFUL TO REPRODUCE SECTION 12(1) OF THE ACT. INCOME OF TRUSTS OR INSTITUTIONS FROM CONTRIBUTIONS . 12. [(1)] ANY VOLUNTARY CONTRIBUTIONS RECEIVED BY A TR UST CREATED WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES OR BY AN INSTI TUTION ESTABLISHED WHOLLY FOR SUCH PURPOSES (NOT BEING CONTRIBUTIONS MADE WIT H A SPECIFIC DIRECTION THAT THEY SHALL FORM PART OF THE CORPUS OF THE TRUS T OR INSTITUTION) SHALL FOR THE PURPOSES OF SECTION 11 BE DEEMED TO BE INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES AND THE PROVISIONS OF THAT SECTION AND SECTION 13 SHALL APPLY ACCORDINGLY.] THUS THE RECEIPTS WHICH ARE FORMING PART OF THE COR PUS OF THE TRUST ARE NOT TO BE INCLUDED FOR THE PURPOSE OF SECTION 11 OF THE AC T AND IT IS NOT MENTIONED IN SECTION 12 OF THE ACT THAT SUCH RECEIPTS WILL AL SO BE EXCLUDED FOR THE PURPOSE OF SECTION 10(23C)(IIIAE) OF THE ACT. THE I TAT, BANGALORE BENCH IN THE CASE OF KARNATAKA INSTRADE CORPORATION LTD. VS. ACIT, 133 TTJ 616 HAD AN OCCASION TO CONSIDER THE DEEMING PROVISIONS U/S 41(1) OF THE ACT. THE FICTION CREATED IN SECTION 41(1) IS LIMITED ONLY TO THE ASSESSMENT AND BALANCE WRITTEN BACK IS UNDER THE HEAD BUSINESS. THERE IS NO OTHER FICTION THAT THE ASSESSEE MUST BE DEEMED TO HAVE CONTINUED THE BUSIN ESS. THE FICTION IS CREATED FOR A LIMITED PURPOSE AND IT IS APPLICABLE ONLY FOR THAT PURPOSE. HON'BLE APEX COURT IN THE CASE OF APPOLLO TYRES LTD . VS. CIT, 255 ITR 273 HAD AN OCCASION TO CONSIDER THE DEEMING PROVISIONS IN UTI ACT THAT UTI DEEMED TO BE COMPANY AND INCOME DISTRIBUTED TO UN IT HOLDER IS DIVIDEND 5 FOR THE PURPOSE OF INCOME TAX. THUS THE DEEMING FIC TION CANNOT BE EXTENDED TO HOLD THAT THE UNITS WERE SHARES. HENCE, EXPLANAT ION TO SECTION 73 WAS HELD AS NOT APPLICABLE AS AT THAT RELEVANT TIME AS IT WA S APPLICABLE ONLY TO THE SHARES. HON'BLE APEX COURT IN THE CASE OF CIT VS. A JAX PRODUCTS LTD., 55 ITR 741 HAD AN OCCASION TO CONSIDER THE SCOPE OF AM ENDMENT TO PROVISO TO SECTION 10(2) OF THE INCOME TAX ACT, 1922. THE AMEN DMENT CREATED A FICTION THAT THAT ASSET SHOULD HAVE BEEN USED WHEN THE BUSINESS WAS BEING CARRIED ON. HOWEVER, IT DID NOT INTRODUCE A FURTHER FICTION THAT BUSINESS SHALL BE DEEMED TO HAVE BEEN CONDUCTED BY THE ASSESSEE DU RING THE PREVIOUS YEAR RELEVANT TO SAY THAT DEEMING PROVISIONS MAY BE INTE NDED TO ENLARGE THE MEANING OF A PARTICULAR WORD OR TO INCLUDE MATTERS WHICH OTHERWISE MAY OR NOT MAY NOT FALL WITHIN THE PROVISIONS. HENCE FOR T HE PURPOSE OF SECTION 10(23C)(IIIAE), ONE HAS TO CONSIDER THE ANNUAL RECE IPTS WITHOUT EXCLUDING THE CONTRIBUTION TOWARDS CORPUS OF THE TRUST. IT IS NOT THE CASE OF THE ASSESSEE THAT SUCH RECEIPTS ARE NOT RECEIPTS OF THE HOSPITAL. ONE HAS TO CONSIDER THE CORRECT RECEIPTS. IT IS ALSO A WELL ESTABLISHED LAW THAT EN TRIES IN THE BOOKS ARE NOT CONCLUSIVE AND ONE HAS TO BE SEE THE TRANSACTIONS A S PER PROVISIONS OF THE ACT. WE THEREFORE, HOLD THAT THE ASSESSEE IS NOT EN TITLED TO BE COVERED U/S 10(23C)(IIIAE) OF THE ACT. SINCE THE RECEIPTS WERE MORE THAN RS. 1.00 CRORES 6 THEREFORE, THE ASSESSEE SHOULD HAVE OBTAINED APPROV AL U/S 10(23C)(VIA) OF THE ACT. 2.7 IT IS SUBMITTED THAT THE AO HAS NOT CONSIDERED THE EXEMPTION U/S 11 OF I.T. ACT THOUGH THE TRUST IS REGISTERED U/S 12A OF I.T. ACT. THE LD. AR HAS FILED PHOTOCOPY OF REGISTRATION GRANTED U/S 12A OF THE I.T. ACT. ONCE THE TRUST IS REGISTERED THE INCOME IS TO BE COMPUTED AS PER S ECTION 11 OF I.T. ACT. THE LD. CIT(A) HAS HELD THAT SINCE THE EXEMPTION IS NOT BEING GIVEN IN SECTION 10(23C)(IIIAE) AND HENCE NO BENEFIT CAN BE GIVEN U/S 11 TO 13 OF I.T. ACT. WE HOLD THAT IF THE ASSESSEE IS NOT ENTITLED TO EXE MPTION U/S 10(23C)(IIIAE) THEN IT WILL NOT BE A BAR IN NOT CLAIMING BENEFIT U /S 11 TO 13 OF I.T. ACT. THE AO WILL GIVE BENEFIT TO THE ASSESSEE. 3.1 THE SECOND GROUND OF APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWANCE OF DEPRECIATIO N ON THE MEDICAL COLLEGE BUILDING ON ACCOUNT OF PASSIVE USE WHICH COULD NOT BE STARTED IN ABSENCE OF PERMISSION FROM MEDICAL COUNCIL OF INDIA. 3.2 DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAS NOT GOT THE APPROVA L FOR THE MEDICAL COLLEGE. THE PASSIVE USE CAN BE CONSIDERED IN CASE THE ASSES SEE GOT THE APPROVAL BUT THE MEDICAL COLLEGE WAS NOT STARTED AND THE BUILDIN G WAS READY IN ABSENCE OF APPROVAL. ONCE CANNOT SAY THAT THE MEDICAL COLLEGE BUILDING IS USED FOR THE 7 PURPOSE OF THE BUSINESS OF PROFESSION. THE HOSPITAL IS A SEPARATE UNIT WHILE THE MEDICAL COLLEGE IS A SEPARATE UNIT OF THE TRUST . MEDICAL COLLEGE IS AN INSTITUTION FOR AND IT IS DIFFERENT FORM THE PROFES SION. THE HOSPITAL WAS GETTING RECEIPTS FROM THE PROFESSION. HENCE, IT CAN NOT BE SAID THAT MEDICAL COLLEGE BUILDING CAN BE CONSIDERED FOR THE PASSIVE USE FOR THE HOSPITAL BECAUSE THERE WAS NO APPROVAL IN RESPECT OF THE INS TITUTION OF RUNNING MEDICAL COLLEGE. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 08-07 -2011 SD/- SD/- (R.K. GUPTA) (N.L. KALRA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR DATED; 08 /07/2011 *MISHRA COPY FORWARDED TO :- 1. M/S. INDIAN MEDIAL TRUST, JAIPUR 2. THE ITO, WARD- 5(3), JAIPUR 3. THE LD. CIT (A) JAIPUR 4. THE LD. CIT BY ORDER 5. THE LD.DR 6. THE GUARD FILE (ITA NO.105/JP /11) A.R, ITAT, JAIPUR FIT FOR PUBLICATION JM AM 8 9 10