ITO, Ahmednagar V. Noble Medical Foundation & ResearchCentre, Ahmednagar

ITA 1683/PUN/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93638 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Charitable institution; Benefit of exemption
• Section: 143(3); 80G; 12A; 12AA; 148; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.1683/PN/2012 ASSESSMENT YEAR: 2008-09 THE INCOME TAX OFFICER, WARD 3, AHMEDNAGAR . APPELLANT VS. NOBLE MEDICAL FOUNDATION AND RESEARCH CENTRE, DHANAJI NAGAR, HOTEL PREMDAN CHOWK, AHMEDNAGAR . RESPONDENT PAN: AAATN6572C ITA NO.130/PN/2013 ASSESSMENT YEAR: 2009-10 THE INCOME TAX OFFICER, WARD 3, AHMEDNAGAR . APPELLANT VS. NOBLE MEDICAL FOUNDATION AND RESEARCH CENTRE, DHANAJI NAGAR, HOTEL PREMDAN CHOWK, AHMEDNAGAR . RESPONDENT PAN: AAATN6572C ITA NO.2123/PN/2013 ASSESSMENT YEAR: 2010-11 THE INCOME TAX OFFICER, WARD 3, AHMEDNAGAR . APPELLANT VS. NOBLE MEDICAL FOUNDATION AND RESEARCH CENTRE, DHANAJI NAGAR, HOTEL PREMDAN CHOWK, AHMEDNAGAR . RESPONDENT PAN: AAATN6572C APPELLANT BY : SHRI ACHAL SHARMA RESPONDENT BY : SHRI SUNIL GANOO DATE OF HEARING : 09-02-2015 DATE OF PRONOUNCEMENT : 08-04-2015 ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 2 ORDER PER SUSHMA CHOWLA, J.M: TWO APPEALS FILED BY THE REVENUE ARE AGAINST THE RE SPECTIVE ORDERS OF CIT(A)-I, PUNE DATED 17.02.2012, 16.08.2012 AND ANO THER APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A)-IT/TP, PUNE RELATING TO ASSESSMENT YEARS 2008-09, 2009-10 AND 2010-11 PASSED UNDER SECTIONS 143(3) R.W.S. 147 AND 143(3) OF THE INCOME TAX ACT, 1961. 2. ALL THE APPEALS RELATING TO THE SAME ASSESSEES W ERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FO R THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING TO THE FACTS AND ISSUES IN ITA NO.1683/PN/2012 TO ADJUDICATE THE ISSUES. 3. SIMILAR GROUNDS OF APPEAL WERE RAISED IN ALL THE YEARS, WHICH READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)-I, PUNE HAS GROSSLY ERRED IN NOT CONSIDERING THE FACT THAT THE TRUST HAD DIRECTLY APPLIED ITS IMMOVABLE PROPERTY AND THE INCOME BOTH FOR THE BENEFIT OF THE MANAGING TRUSTEE, IN CL EAR VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT(A)-I, PUNE HAS GROSSLY ERRED IN NOT APP RECIATING THE FACT THAT THE MANAGING TRUSTEE HAD DIVERTED THE INCOME BY USI NG THE TRUST'S INFRASTRUCTURE FOR HIS PRIVATE GAINS IN CLEAR VIOLA TION OF THE PROVISIONS OF SECTION 13(1)(C) READ WITH SECTIONS 13(2)(B) AND 13 (2)(G) OF THE INCOME-TAX ACT. 1961. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A)-I, PUNE HAS GROSSLY ERRED IN NOT APP RECIATING THE FACT THAT THE TRUST HAS ONLY GIVEN CONCESSION IN THE NATURE O F DISCOUNTS OR MAKING REMISSIONS IN THE PATIENTS' BILLS IS COMMON PRACTIC E IN THE MEDICAL FIELD, AND MERE CONDUCTING FREE TESTS DURING CAMPS ORGANIZ ED BY OTHER TRUSTS / INSTITUTIONS, BOTH BEING BASICALLY AIMED AT PROMOTI NG THE HOSPITAL / MEDICAL INSTITUTION DO NOT CONSTITUTE MEDICAL RELIEF. 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LD COMMISSIONER OF INCOME TAX (APPEALS) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER BE RESTORED ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 3 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL DURING THE COURSE OF APPELL ATE PROCEEDINGS BEFORE THE HONBLE TRIBUNAL. 4. THE ISSUE RAISED IN THE PRESENT APPEAL IS WITH R EGARD TO THE APPLICABILITY OF THE PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(2)(B) AND 13(2)(G) OF THE ACT. 5. THE BRIEF FACTS OF THE CASE ARE THAT, THE ASSESS EE WAS A CHARITABLE TRUST REGISTERED UNDER SECTION 12AA OF THE ACT. FOR THE YEAR UNDER CONSIDERATION, IT HAD FURNISHED RETURN OF INCOME DECLARING NIL INCOME , AFTER CLAIMING EXEMPTION UNDER SECTION 11 OF THE ACT IN RESPECT OF ENTIRE IN COME OF RS.3,89,67,621/-. SURVEY UNDER SECTION 133A(1) OF THE ACT WAS CONDUCT ED AT THE PREMISES OF HOSPITAL ON 9 TH / 10 TH OCTOBER, 2009. THEREAFTER, THE ASSESSING OFFICER RECORDED REASONS FOR REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT ON 14.01.2010. THE REASONS FOR REOPENING THE ASSESSME NT WAS THAT INCOME OF DR. B.E. KANDEKAR, CARDIOLOGIST, THE MANAGING TRUSTEE O F THE ASSESSEE TRUST HAD INCREASED MANIFOLD AND SECONDLY, THE HOSPITAL WAS R UNNING ON COMMERCIAL LINES WITHOUT THERE BEING CHARITABLE ACTIVITIES. THE ASS ESSING OFFICER NOTED THAT THE PRIMA FACIE INFERENCE THAT FLOWED FROM THE OBSERVAT ION WAS THAT THERE WAS VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT. THE ASSESSEE, IN RESPONSE TO NOTICE UNDER SECTION 148 OF THE ACT FURNISHED TH E RETURN OF INCOME AND ALSO SOUGHT REASONS FOR REOPENING THE ASSESSMENT. AFTER RECEIPT OF REASONS, THE ASSESSEE OBJECTED TO THE SAID REASONS, WHICH WERE R EBUTTED BY PASSING AN ORDER UNDER SECTION 147 R.W.S. 148 OF THE ACT ON 15.04.20 10. 6. THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESS ING OFFICER WAS THAT THE TRUST HOSPITAL HAS THE MOST MODERN DIAGNOSTIC, MEDI CAL AND RESEARCH EQUIPMENT IN DIFFERENT FIELDS OF MEDICAL SPECIALTIES, FOR WHI CH IT HAD ENGAGED THE SERVICES OF VARIETY OF MEDICAL SPECIALISTS BELONGING TO ALL BRA NCHES OF MEDICAL SCIENCES. THE ASSESSEE CLAIMED THAT IT HAD A TEAM OF ABOUT 60 MED ICAL CONSULTANTS AND ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 4 SURGEONS, INCLUDING ALL THE FOUR TRUSTEES, WHO IN T URN WERE ENTITLED TO CONSULTANCY CHARGES ONLY RECEIVED FROM THE PATIENTS. ENTIRE BA LANCE CHARGES RECOVERED FROM THE PATIENTS I.E. FOR STAY, NURSING, PATHOLOGICAL T ESTS, ETC. WERE RETAINED BY THE TRUST. THE ASSESSEE INCURRED THE ADMINISTRATIVE AN D OTHER INCIDENTAL EXPENDITURE FROM OUT OF BALANCE AMOUNT REMAINING AFTER PAYMENT OF CONSULTANCY CHARGES. THE INCOME FROM THE HOSPITAL, AS PER THE ASSESSEE W AS WHOLLY APPLIED TO THE TRUST OBJECT I.E. TO PROVIDE MEDICAL RELIEF. THE A SSESSEE FURTHER CONTENDED THAT IN ACCORDANCE WITH THE PROVISIONS OF BOMBAY PUBLIC TRU ST ACT, 1950, 10% OF ITS OPERATIONAL FUNDS FOR TREATING WEAKER SECTION PATIE NTS WERE RESERVED IN THE TRUST HOSPITAL. FURTHER, IN ACCORDANCE WITH THE PROVISIO NS OF THE SAME ACT, THE TRUST WAS TRANSFERRING 2% OF THE TOTAL PATIENTS BILLING I N EACH MONTH TO AN ACCOUNT CALLED INDIGENT PATIENTS FUND TO PROVIDE TREATMEN T TO THE MAXIMUM NUMBER OF INDIGENT AND WEAKER SECTION PATIENTS. 7. THE NEXT PLEA OF THE ASSESSEE BEFORE THE ASSESSI NG OFFICER WAS THAT IT WAS ENTITLED TO THE EXEMPTION AS IT WAS PROVIDING M EDICAL RELIEF WHICH WAS ONE OF THE CHARITABLE OBJECTS DEFINED UNDER SECTION 2(15) OF THE ACT AND AS THERE WAS NO INTENTION TO EARN PROFIT, THE TRUST / INSTITUTION W OULD BE A CHARITABLE INSTITUTION. THE ASSESSEE FURTHER STATED THAT THE TRUST WAS REGISTER ED UNDER SECTION 12AA OF THE ACT AND DURING THE YEAR, IT HAD SPENT MORE THAN 85% OF ITS INCOME ON THE OBJECTS OF THE TRUST AND HENCE, IT WAS ENTITLED TO THE EXEM PTION. THE ASSESSING OFFICER NOTED THAT THE TRUST HAD COME INTO EXISTENCE ON 16. 08.2004 AND WAS REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 W.E.F. 16.1 0.2004. THE SETTLOR OF THE TRUST WAS DR. B.E. KANDEKAR, M.D., D.M. (CARD.), WH O IN TURN WAS THE MANAGING TRUSTEE OF THE ASSESSEE TRUST. OTHER TRUSTEES INCL UDED DR. (MRS.) SANGEETA B. KANDEKAR, M.B. (INTENSIVIST) WIFE OF SETTLOR, DR. P .M. DAULE, M.D. (ORTHO), DR. N.R. AKOLKAR, M.D. (PAED.), AND DR. P.S. BANDISHTI, M.D. , D.M. (NEURO.), D.N.B. THE OBJECTS OF THE TRUST ARE REPRODUCED UNDER PARA 7.2 AT PAGES 5 AND 6 OF THE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 5 ASSESSMENT ORDER, OF WHICH, THE FIRST OBJECT WAS TO ACQUIRE, ESTABLISH AND RUN AND MAINTAIN, CARRY ON THE WORK AS AN ADVANCED HOSPITAL AND TO CARRY OUT THE DIAGNOSTIC, THERAPEUTIC PROCEDURES AND PROVIDE SUPE R SPECIALTY FACILITIES IN ALL BRANCHES OF MEDICAL, SURGICAL FIELDS, ETC. OTHER I MPORTANT CLAUSES IN THE TRUST DEED NOTED BY THE ASSESSING OFFICER WERE THAT THE M ANAGING TRUSTEE OF THE TRUST SHALL BE DR. BAPUSAHEB EKNATH KANDEKAR FOR LIFE. F URTHER, THE SAID MANAGING TRUSTEE HAD THE UNFETTERED RIGHT TO APPOINT HIS/HER SUCCESSOR. FURTHER, THE MANAGING TRUSTEE AND FIRST TRUSTEE SHALL BE PAID RE MUNERATION OR HONORARIUM AND OTHER BENEFITS AS MAY BE AGREED UPON BETWEEN THE MA NAGING TRUSTEE AND OTHER TRUSTEES ON THE BOARD OF TRUSTEES. FURTHER, THOUGH THE MANAGING TRUSTEE WAS TO WORK ALONG WITH OTHERS, BUT HIS DECISION SHALL BE F INAL AND BINDING ON ALL THE MATTERS RELATING TO THE RUNNING AND OPERATIONS OF T RUST IN ALL ITS AFFAIRS. NEXT RELEVANT CLAUSE WAS THE TRUSTEES SHALL BE TRUSTEES FOR LIFE. FURTHER, THERE WAS CLAUSE FOR PAYMENT OF PROFESSIONAL FEES OR PROPER C HARGES TO THE TRUSTEES. DURING THE YEAR UNDER CONSIDERATION AS REFLECTED IN THE IN COME AND EXPENDITURE ACCOUNT, THE TOTAL RECEIPTS WERE RS.3.89 CRORES, AGAINST WHI CH THE ASSESSEE HAD INCURRED EXPENDITURE OF CONSULTANCY FEES OF RS.81,13,117/-, PROFESSIONAL FEES OF RS.37,42,162/- AND OTHER EXPENSES INCLUDING THE DEP RECIATION TOTALLING RS.3,36,43,059/-, LEAVING SURPLUS OF RS.53,24,562/- . THE ASSESSING OFFICER FURTHER NOTED CERTAIN RELEVANT ASPECTS FROM THE EXA MINATION OF THE BOOKS OF ACCOUNT AND DOCUMENTS PRODUCED WHICH ARE AS UNDER:- A) THE HOSPITAL BUILDING WAS OWNED BY DR. KANDEKAR AND DR. (MRS.) KANDEKAR JOINTLY, WHICH THEY HAD LEASED OUT TO THE TRUST ON A MONTHLY RENT OF RS.6 LAKHS; CONSTRUCTED AREA OF HOS PITAL BUILDING WAS ABOUT 45,000 SQ. FT. AND LEASE DEED WAS EXECUTE D ON 21.02.2007; B) THE TRUST HAD LEASED OUT CERTAIN PORTIONS OF HOS PITAL BUILDING I.E. MEDICAL SHOP ADMEASURING 200 SQ. FT. ALONG WITH FUR NITURE & FIXTURE TO SHRI VIJAY MANIKRAO NIKAM, WHO WAS THE CO-BROTHE R OF MANAGING TRUSTEE; C) PART OF BUILDING ADMEASURING 475 SQ. FT. WAS LEA SED TO AHMEDNAGAR CATHLAB (I) PVT. LTD. ON A MONTHLY RENTAL OF RS.9,5 00/- AND THE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 6 DIRECTORS OF THE SAID COMPANY WERE DR. B.E. KANDEKA R AND HIS WIFE DR. (MRS.) SANGEETA B. KANDEKAR. AS PER MOU EXECUT ED ON 19.04.2007, THE SAID COMPANY WAS TO PROVIDE THEIR S ERVICES AT CONCESSIONAL RATES TO ALL PATIENTS OF THE TRUST HOS PITAL; D) DR. KANDEKAR WAS INITIALLY CARRYING OUT HIS PRIV ATE PRACTICE IN RENTED PREMISES AND HAD SHIFTED THE PLACE OF PRACTICE TO T HE TRUST HOSPITAL IN JULY, 2007. THE RETURN OF INCOME FILED BY DR. K ANDEKAR WAS VERIFIED AND HAD REVEALED THAT HE HAD CLAIMED DEDUC TION FOR THE SALARIES PAID TO HIS ASSOCIATE DOCTORS IN THE EARLI ER YEARS AND ALSO IN THE RETURN OF INCOME RELATING TO ASSESSMENT YEAR 20 08-09. THE ASSESSING OFFICER WAS OF THE VIEW THAT DR. KANDEKAR HAD SHIFTED HIS PLACE OF PRIVATE PRACTICE TO THE HOSPITAL; E) PART OF BUILDING ADMEASURING 250 SQ. FT. WAS REN TED TO M/S. SAMARTH DIAGNOSTICS PVT. LTD. ON A MONTHLY RENT OF RS.5,000 /- AND THE DIRECTORS OF THE SAID COMPANY WERE UNRELATED. AS P ER MOU, ONE OF THE CONDITIONS WAS THAT THE COMPANY SHALL KEEP THEI R RATES 10% LESS THAN THE MARKET RATE TO ALL PATIENTS OF THE TR UST; F) THE TRUST HAD INVESTED OVER RS.4.15 CRORES IN PL ANT & MACHINERY, WHICH WAS MADE PARTLY BY RAISING LOAN OF RS.2 CRORE S AND PARTLY BY RAISING INTEREST BEARING LOANS FROM MEDICAL PRACTIT IONERS CONCERNED AND RELATIVES OF THE TRUSTEES TOTALLING RS.37.64 LA KHS AND PARTLY BY DR. KANDEKAR AND DR. (MRS) KANDEKAR AT RS.71.36 LAK HS; G) THE ASSESSEE TRUST HAD PAID CONSULTANCY FEES OF RS.81,31,117/- TO VARIOUS CONSULTANTS, WHICH INCLUDED RS.53,44,934/- PAID TO FOUR TRUSTEES OUT OF WHICH RS.47,08,412/- WAS PAID TO DR . KANDEKAR, MANAGING TRUSTEE. THE ASSESSING OFFICER NOTED THAT OUT OF THE TOTAL AMOUNT PAID TO FOUR TRUSTEES, THE CONSULTANCY FEES PAID TO DR. KANDEKAR ALONE CONSTITUTES 88% AND THE AMOUNT OF CO RRESPONDING GROSS IPD / OPD RECEIPTS ATTRIBUTABLE TO HIS CONSUL TANCY ALONE IN THE HANDS OF THE TRUST, WERE OF RS.2,32,29,690/-, W HICH CONSTITUTES MORE THAN 72% OF THE TOTAL HOSPITAL RECEIPTS OF THE TRUST, WHICH WERE DECLARED AT RS.3,22,02,828/-. THE ASSESSING OFFICE R WAS OF THE VIEW THAT THE HOSPITAL THOUGH WAS CLAIMED TO BE OFF ERING SERVICES OF ALL BRANCHES OF MEDICAL AND SURGICAL FIELD, BUT WAS IN-FACT A CARDIAC HOSPITAL. 8. THE ASSESSEE WAS ASKED TO SUBSTANTIATE HIS CLAIM OF TREATING INDIGENT / POOR PATIENTS ON CONCESSIONAL BASIS, IN REPLY TO WH ICH, THE ASSESSEE CONTENDED THAT THIS BEING A FIRST YEAR OF OPERATION, IT COULD NOT PROVIDE FREE MEDICAL RELIEF TO A LARGE NUMBER OF INDIGENT / POOR PATIENTS. HOWEVER, CONCESSIONAL MEDICAL TREATMENT WAS PROVIDED TO SOME OF IPD / OPD PATIENT S. THE ASSESSEE FURNISHED LIST OF CONCESSIONS ALLOWED TO IPD / OPD PATIENTS, WHICH REFLECTS THAT NUMBER OF PATIENTS TO WHOM CHARITY WAS GIVEN WERE 808 AND THE TOTAL BILL AMOUNT OF CHARITY ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 7 WAS RS.14,49,969/- AS AGAINST THE TOTAL RECEIPT OF RS.3.36 CRORES. THE EXAMINATION OF IPD CHARITY DETAILS REVEALED THAT AM OUNT OF CONCESSION WAS MORE IN THE NATURE OF DISCOUNT FOR SERVICES AND ALSO FRE E HEALTH CHECK-UP CAMPS WERE CONDUCTED ON DIFFERENT DATES. THE ASSESSING OFFICE R IN VIEW THEREOF WAS OF THE VIEW THAT DR. KANDEKAR WAS USING WIDE POWERS AT HIS COMMAND AND HAD NOT ONLY CONDUCTED HIS OWN PRACTICE IN THE TRUST HOSPITAL BU T THE BUSINESS OF THE CATHLAB (I) PVT. LTD. WAS SHIFTED TO THE HOSPITAL. AS PER THE ASSESSING OFFICER, THE DOMINANT INTENTION OF DR. KANDEKAR TO CONSTITUTE TH E TRUST WAS FOR A PROFIT GAIN AND FURTHER COMPARISON OF INCOME DISCLOSED IN THE RETUR N OF INCOME FOR THE PRECEDING TWO YEARS WITH THE CURRENT YEARS INCOME REFLECTED THE PROFIT GAIN. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE TRUST HAD DIRECTLY APPLIED ITS PROPERTY AND INCOME BOTH, FOR THE BENEFIT OF D. KANDEKAR, IN CLEAR VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT, CONSEQUENTLY, THE EXCL USION PROVISIONS CONTAINED IN SECTIONS 11 AND 12 OF THE ACT HAD TO BE APPLIED. T HE REPLY OF THE ASSESSEE WAS THAT, IN FACT THE TRUST HAD BENEFITED BY SERVICES O F DR. KANDEKAR AS HE HAD TREATED MORE PATIENTS IN THE HOSPITAL. FURTHER, THE COMPAR ATIVE POSITION OF NUMBER OF PATIENTS AND THE AMOUNT OF IPD / OPD RECEIPTS IN TH E PRECEDING TWO YEARS WITH SIMILAR TYPE OF RECEIPTS IN THE FINANCIAL YEAR 2007 -08 WERE FILED BEFORE THE ASSESSING OFFICER. IT WAS FURTHER POINTED OUT BY T HE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT AS AGAINST FAI R MARKET RATE OF RS.40/50 PER SQ. FT., THE PROPERTY WAS GIVEN ON RENT TO THE TRUS T ONLY AT RS.13.33 PER SQ. FT. THE TRUST WAS PAYING HIM A MONTHLY RENTAL OF RS.6 LAKHS AS AGAINST WHICH, THE TRUST HAD SUB-LET 250 SQ. FT. OF A MEDICAL SHOP ON MONTHL Y RENT OF RS.8/10 LAKHS. THE MEDICAL STORE WAS NOT RUN BY HIM AND THE ASSESSEE T RUST WAS EARNING HUGE INCOME FROM RENT FROM THE SAID STORE. FURTHER, DR. KANDEKAR HAD MORTGAGED HIS INDIVIDUAL PROPERTY AS A SECURITY FOR TAKING LOAN, WHICH HE HAD ADVANCED TO THE TRUST AND HE HAD NOT TAKEN ANY GUARANTEE COMMISSION FROM THE TRUST AND HE WAS ALSO PAYING INTEREST ON THE BANK LOAN AND NO INTERE ST WAS CHARGED TO THE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 8 ASSESSEE TRUST. FURTHER, DR. KANDEKAR WAS DEVOTING MAXIMUM POSSIBLE TIME FOR THE DEVELOPMENT AND BETTERMENT OF THE TRUST AND WAS NOT RECEIVING ANY REMUNERATION FROM THE TRUST. IT WAS ALSO POINTED O UT BY THE ASSESSEE IN REPLY THAT, DURING THE YEAR UNDER CONSIDERATION, THE ASSE SSEE TRUST HAD ACTUALLY NOT PAID THE RENT FOR THE BUILDING. ANOTHER EXPLANATIO N GIVEN BY THE ASSESSEE TRUST WAS THAT SINCE MAXIMUM NUMBER OF PATIENTS BELONGS T O DR. KANDEKAR, HE HAD DOUBLED HIS OWN STAFF, ASSOCIATE DOCTORS TO TAKE CA RE OF HIS PATIENTS AND HAD NOT UTILIZED THE SERVICES OF THE TRUST STAFF OR THEIR S ERVICES. ACCORDING TO THE ASSESSEE, THERE WAS NO VIOLATION OF PROVISIONS OF S ECTION 13(1)(C) OF THE ACT. THE ASSESSEE FURTHER EXPLAINED THAT PROVIDING MEDICAL R ELIEF ITSELF WAS A CHARITY AND IF ANY TRUST WAS ENGAGED IN MEDICAL RELIEF WORK AND TH E PROFIT WAS NOT TAKEN BY THE TRUSTEE, THEN IT COULD BE SAID THAT THE TRUST WAS F OR CHARITABLE PURPOSES. ANOTHER PLEA RAISED BY ASSESSEE WAS THAT SINCE THE INCOME-T AX ACT DOES NOT PRESCRIBE ANY STRUCTURE FOR CHARITY FEES FOR TREATING PATIENT S BY A CHARITABLE HOSPITAL, HENCE, ON THIS GROUND, NUMBER OF FREE PATIENTS IS LESS WOU LD NOT AFFECT THE CASE FOR GRANTING EXEMPTION UNDER SECTION 11 OF THE ACT. 9. THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE THAT PROVIDING MEDICAL RELIEF ITSELF WAS A CHARITABLE AC TIVITY. THE OBSERVATION OF THE ASSESSING OFFICER IN THIS REGARD WAS THAT THOUGH IN COME-TAX ACT DOES NOT PRESCRIBE ANY STRUCTURE OF FEES FOR TREATING PATIEN TS OR STIPULATES THAT FIXED NUMBER OF PATIENTS BE TREATED ON FREE / CONCESSIONAL BASIS , BUT THE ASSESSEES CLAIM THAT THE EXEMPTION COULD NOT BE REJECTED AS IT TREATED O NLY SMALL NUMBER OF FREE / CONCESSIONAL BASIS, WAS NOT ACCEPTED BY THE ASSESSI NG OFFICER. THE ASSESSING OFFICER WAS OF THE VIEW THAT IN THE CONTEXT OF TERM MEDICAL RELIEF OCCURRING IN SECTION 2(15) OF THE ACT, WHERE THE PRE-DOMINANT IN TENTION WAS TO PROVIDE MEDICAL RELIEF AND NOT TO EARN PROFITS, THE TRUST WOULD BE A CHARITABLE INSTITUTION. HOWEVER, IN THE CASE OF TRUST IF IT WAS FOUND THAT THE MAIN OBJECT WAS TO EARN PROFIT, BUT NOT ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 9 TO GRANT MEDICAL RELIEF ON CHARITABLE BASIS, THEN S UCH TRUST COULD NOT BE CALLED A CHARITABLE TRUST. THE ASSESSING OFFICER FURTHER OB SERVED THAT THE FINANCIAL ASPECT OF THE CHARITABLE ACTIVITY OF A TRUST COULD BE JUDG ED AND MEASURED BY THE ACCOUNTS. FROM THE STATE OF AFFAIRS OF THE ASSESSE E TRUST, THE ASSESSING OFFICER NOTED THAT THE HOSPITAL HAD NOT ONLY RECOUPED ITS E XPENSES BY RECOVERING HIGH CHARGES FROM THE PATIENTS UNDERGOING TREATMENT IN T HE UPPER CLASS, BUT HAD ALSO MADE HUGE OPERATIVE SURPLUS IN CASH IN THE ACTIVITY OF RUNNING THE HOSPITAL. AS PER THE ASSESSING OFFICER, THE HOSPITAL WAS BEING R UN ON COMMERCIAL LINES AND WHICH INDICATED THAT THE HOSPITAL WAS RUNNING FOR T HE PURPOSE OF PROFIT. THE ASSESSING OFFICER THUS HELD THAT SINCE THE PROFIT M OTIVE WAS CONTRARY TO THE CONCEPT OF CHARITY AND WHERE THE ASSESSEE HAD TREAT ED TOTAL OF 388 ON CONCESSIONAL BASIS AS AGAINST THE TOTAL NUMBER OF 2 647 IPD PATIENTS, WHERE THE FULL COST OF TREATMENT OF IPD PATIENTS WAS RS.2.75 CRORES AS AGAINST THE TOTAL BILL AMOUNT OF CHARITY GIVEN TO PATIENTS BEING RS.13,42, 709/-, THE PERCENTAGE WORKS OUT AT 14.65% AND IN TERMS OF REVENUE, SUCH PERCENT AGE WORKED OUT TO 4.88%. THE ASSESSING OFFICER THUS, HELD THAT GOING BY THE AMOUNT RECEIVED BY TREATMENT TO INDIGENT POOR PATIENTS, IT WAS AMPLY CLEAR THAT THE EARNING OF PROFIT WAS THE PREDOMINANT ACTIVITY OF THE TRUST ACTIVITY AND CARR YING OUT THE CHARITABLE WAS ONLY INCIDENTAL. THE ASSESSING OFFICER FURTHER HELD THA T THERE WAS NO CHARITY IN RUNNING THE HOSPITAL SINCE THERE WAS PROFIT GAIN BY DR. KANDEKAR IN SETTING UP THE INSTITUTION, THOUGH HE HAD GIVEN LARGE AMOUNT TO TH E TRUST AND HAD ALSO LET OUT THE PRIVATE PROPERTY TO THE TRUST, BUT WHEN THE HOSPITA L WAS COMMISSIONED, HE NOT ONLY SHIFTED HIS BASE TO THE TRUST HOSPITAL BUT ALS O SHIFTED THE CATHLAB (I) PVT. LTD. TO THE TRUST HOSPITAL, EXERCISING VITAL POWERS WHIC H HE HAS RESERVED FOR HIMSELF. THE SHIFTING, AS PER THE ASSESSING OFFICER, WAS DON E TO THE SCOPE OF PROFIT / GAIN BY SETTING UP OF THE TRUST. FURTHER, THE AMOUNTS O F CONSULTANCY FEES RECEIVED BY HIM WERE STAGGERING ENOUGH TO GIVE TO THE CONCLUSIO N THAT THERE WAS NO INTENTION OF CHARITY. WHERE IN THE RUNNING OF INSTITUTIONS, PROFIT GOES TO ANY PRIVATE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 10 INDIVIDUAL OR WHERE THE INSTITUTION IS INTENDED FOR ANY PROFIT / GAIN, THEN AS PER THE ASSESSING OFFICER, THE RUNNING OF SUCH INSTITUTION COULD NOT BE CONSIDERED AS BEING RUN FOR CHARITABLE OBJECT. IN VIEW THEREOF, THE ASSESSING OFFICER WAS OF THE VIEW THAT FROM THE AMOUNTS OF CONSULTANCY RECEIPTS PAID TO THE MANAGING TRUSTEE AND THE CORRESPONDING IPD / OPD RECEIPTS IN THE HAN DS OF THE TRUST, IT WAS CLEAR THAT DR. KANDEKAR, THE MANAGING TRUSTEE HIMSELF ALO NE HAD DIVERTED THE INCOME BY USING THE TRUST INFRASTRUCTURE FOR HIS PROFIT / GAINS, IN CLEAR VIOLATION OF PROVISIONS OF SECTION 13(1)(C) R.W.S. 13(2)(B) AND 13(2)(G) OF THE ACT. CONSEQUENTLY, THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT WAS REJECTED BY THE ASSESSING OFFICER. 10. BEFORE THE CIT(A), THE ASSESSEE FURNISHED WRITT EN SUBMISSIONS WHICH ARE REPRODUCED UNDER PARA 3.2 AT PAGES 23 TO 32 OF THE APPELLATE ORDER. THE FIRST OBSERVATION MADE BY THE CIT(A) WAS THAT WHERE THE T RUST IS ALREADY REGISTERED UNDER THE BOMBAY PUBLIC TRUST ACT, 1950 AND ALSO RE GISTERED UNDER SECTIONS 12AA AND 80G OF THE ACT, THEN EVEN IF THE ASSESSING OFFICER HAD ANY RESERVATIONS IN RESPECT OF THE CLAUSES OF THE TRUST DEED, THEN THE MATTER COULD BE REFERRED TO HIGHER AUTHORITY, BUT HE COULD NOT GIVE A FINDING THAT THE CLAUSES OF THE TRUST DEED WERE IN VIOLATION OF PURPOSES DEFINED IN SECTION 2(15) OF THE ACT. THE ONLY PROVISION WHICH WAS AVAILABLE TO THE ASSESSING OFFICER WAS TO DECIDE WHETHER THE ACTIVITIES OF THE TRUST BEING CARRIED O UT FROM YEAR TO YEAR AND MORE PARTICULARLY IN THE YEAR UNDER CONSIDERATION WERE I N ACCORDANCE WITH THE DEFINITION GIVEN IN SECTION 2(15) OF THE ACT AND RESTRICTION P LACED IN SECTIONS 11 TO 13 OF THE ACT. THE CIT(A) REFERRED TO THE JUDGMENT OF THE HO NBLE SUPREME COURT IN CIT (ADDL) VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOC IATION (1980) 121 ITR 1 (SC), WHICH HAD CONSIDERED IN DETAIL THE CONCEPT OF CHARI TY, WHICH WAS AVAILABLE IN THE INCOME-TAX LAW VIS--VIS ENGLISH LAW, WHEREIN IT H AS BEEN HELD THAT THE DEFINITION OF CHARITABLE PURPOSES UNDER INDIAN LAW GOES MUCH F URTHER BECAUSE IT SPECIFICALLY ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 11 INCLUDES MEDICAL RELIEF AND EMBRACES OBJECTS OF GEN ERAL PUBLIC UTILITY. THE HONBLE SUPREME COURT FURTHER HELD THAT EVERY OBJEC T OF GENERAL PUBLIC UTILITY WOULD THEREFORE BE CHARITABLE UNDER THE INDIAN LAW SUBJECT TO THE CONDITIONS IMPOSED BY RESTRICTIVE WORDS I.E. NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. THE CIT(A) NOTED THAT THE RESTRICTIVE WORD S REFERRED TO IN THE JUDGMENT OF THE HONBLE SUPREME COURT WERE OMITTED BY THE FINAN CE ACT, 1983 W.E.F. 01.04.1984 AND REMAINED SO UP TO ASSESSMENT YEAR 20 08-09. A NEW SUB- SECTION 2(15) WAS SUBSTITUTED BY THE FINANCE ACT, 2 008 W.E.F. 01.04.2009 WHICH HAD A PROVISO ATTACHED. THE CIT(A) WAS OF THE VIEW THAT IN THE ABSENCE OF ANY RESTRICTIVE CLAUSE IN THE YEAR UNDER CONSIDERATION TO THE DEFINITION OF WORD CHARITABLE PURPOSE IN SECTION 2(15) OF THE ACT, M ANY OF THE OBJECTIONS RAISED BY THE ASSESSING OFFICER HAD VERY LITTLE OR NO RELEVAN CE SO FAR AS THE ASSESSMENT YEAR WAS CONCERNED. THE CIT(A) WAS OF THE VIEW THA T THE ASSESSING OFFICER HAD FAILED TO BRING ON RECORD ADEQUATE MATERIALS WHICH COULD SUPPORT THE FINDING OF DENIAL OF BENEFIT OF EXEMPTION UNDER SECTION 11 OF THE ACT TO THE ASSESSEE, SINCE THE ASSESSING OFFICER HAD NOT APPRECIATED THE POSIT ION OF LAW CORRECTLY AND THE FACTS FOR ARRIVING AT CONCLUSION. AFTER CONSIDERIN G THE VARIOUS OBSERVATIONS OF THE ASSESSING OFFICER, WHICH WE HAVE ALREADY MADE REFER ENCE TO IN THE PARAS HEREINABOVE, THE CIT(A) HELD THAT FROM THE PERUSAL OF SUBMISSIONS MADE BY THE ASSESSEE, IT COULD BE SEEN EASILY THAT ALMOST ALL T HE OBJECTIONS OF THE ASSESSING OFFICER HAD BEEN MET PROPERLY. THE CIT(A) FURTHER OBSERVED THAT IT WAS A WELL SETTLED POSITION OF LAW THAT MEDICAL RELIEF DOES NO T MEAN FREE MEDICAL SERVICES AND CHARGING OF FEES WAS PERMISSIBLE. THE ONLY THI NG WHICH HAS TO BE SEEN WHETHER THE SERVICES WERE FOR PATIENTS OF ALL CATEG ORIES OR NOT, AND IF YES, WHETHER POOR OR DIS-ADVANTAGED CLASS WAS TAKEN CARE OR NOT. THE CIT(A) OBSERVED THAT THE ASSESSING OFFICER HAS FAILED TO BRING ANY MATER IAL TO THIS EFFECT ON RECORD. ON THE OTHER HAND, ASSESSEE HAD CLEARLY DEMONSTRATED T HAT THE RATES AT WHICH THE MEDICAL SERVICES HAS BEEN PROVIDED TO THE PATIENTS ARE MUCH LESS THAN THE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 12 NORMAL RATES AND WAS FALLING WITHIN THE CONCEPT OF MEDICAL RELIEF UNDER THE DEFINITION OF CHARITABLE PURPOSES GIVEN UNDER SECTI ON 2(15) OF THE ACT. THE CIT(A) FURTHER HELD THAT THE ASSESSING OFFICER HAD FAILED TO CONSIDER THAT THE HIGHER INCOME OF DR. KANDEKAR WAS EXPLAINED DUE TO THE LAR GER CAPACITY OF THE HOSPITAL VIS--VIS HIS EARLIER PLACE AND SO FAR AS THE HIGHE R CONSULTANCY CHARGES RECEIVED BY DR. KANDEKAR WAS CONCERNED, THE CIT(A) NOTED THA T THE ASSESSING OFFICER HIMSELF ACCEPTED THAT THE MAXIMUM RECEIPTS OF THE H OSPITAL WERE FROM THE SERVICES RENDERED BY HIM AND HENCE, IT WAS TO BE AC CEPTED THAT THE LARGEST CONTRIBUTION TO THE ACTIVITY OF TRUST AS WELL AS GE NERATION OF SURPLUS WAS BY DR. KANDEKAR. FURTHER, IT WAS OBSERVED BY THE CIT(A) T HAT RENT PAID TO DR. KANDEKAR WAS DEFINITELY MUCH LESS THAN THE RENT EARNED BY TH E TRUST FROM LETTING OUT ONLY PART OF THE PREMISES ITSELF AND ON THIS ACCOUNT ALS O, THE BENEFIT HAD ACTUALLY FLOWN TO THE TRUST AND NOT TO DR. KANDEKAR AS CLAIMED BY THE ASSESSEE. FURTHER, THE CLAIM OF THE ASSESSING OFFICER IN NOT FOLLOWING THE PROCEDURE OF ALLOTMENT OF MEDICAL SHOP THROUGH OPEN TENDER, AS PER THE CIT(A) , IT COULD NOT BE THE BASIS FOR RENDERING THE TRUST IN-ELIGIBLE FOR THE BENEFIT OF SECTION 11 OF THE ACT. IN VIEW THEREOF, THE CIT(A) WAS OF THE VIEW THAT THERE WAS NO MERIT IN DENYING THE BENEFIT UNDER SECTION 11 OF THE ACT TO THE ASSESSEE AND ASS ESSING THE INCOME UNDER THE HEAD FROM BUSINESS OR PROFESSION. THE FINDINGS OF ASSESSING OFFICER, IN THIS REGARD, WERE THUS, REVERSED. 11. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF C IT(A). 12. THE CONTENTION OF THE LEARNED DEPARTMENTAL REPR ESENTATIVE FOR THE REVENUE WAS THAT THERE WAS VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT AND ALSO THE DEDUCTION UNDER SECTION 11 OF THE ACT COULD NOT BE ALLOWED TO THE ASSESSEE TRUST AS THE DOMINANT OBJECT OF THE ASSESS EE TRUST WAS PROFIT MAKING. FURTHER, THE CONCESSIONAL MEDICAL RELIEF PROVIDED B Y THE TRUST WAS INSIGNIFICANT. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REV ENUE POINTED OUT THAT THE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 13 CIT(A) WAS SILENT ON THE VIOLATION OF PROVISIONS OF SECTION 13(1)(C), WHEREAS THE ASSESSING OFFICER HAD DELIBERATED UPON THE SAID ASP ECT IN DETAIL. THE SECOND OBJECTION OF THE LEARNED DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE WAS THAT THE BUILDING WAS OWNED BY THE TRUSTEES IN THEIR IND IVIDUAL NAMES AND 45,000 SQ. FT. WAS RENTED TO THE TRUST AT RS.6 LAKHS PER MONTH AS AGAINST WHICH, THE PART OF BUILDING WAS RENTED TO CATH LAB INDIA PVT. LTD., WH ICH WAS OWNED BY TWO TRUSTEES I.E. AREA MEASURING 475 SQ. FT. ON MONTHLY RENTAL O F RS.9,500/- ONLY. THE OBJECTION OF THE LEARNED DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE WAS THAT THE PROPERTY OF THE TRUST WAS BEING USED BY THE PER SON MENTIONED IN SECTION 13(2) OF THE ACT. IN RESPECT OF THE MEDICAL RELIEF BEING GIVEN TO THE POOR AND DIS- ADVANTAGED PERSONS, OUR ATTENTION WAS DRAWN TO THE OBSERVATION OF ASSESSING OFFICER IN PARA 9 AT PAGE 10 OF THE ASSESSMENT ORDE R, WHEREIN IT WAS POINTED OUT THAT OUT OF TOTAL RECEIPTS OF RS.3.22 CRORES, THE R ECEIPTS OF RS.14,49,969/- ONLY WERE IN THE NATURE OF DISCOUNTS. THE LEARNED DEPAR TMENTAL REPRESENTATIVE FOR THE REVENUE REFERRED TO THE PARA 12 OF THE ASSESSME NT ORDER AND POINTED OUT THAT THE CIT(A) HAS NOT DECIDED THE VIOLATION OF SE CTION 13(1)(C) OF THE ACT. 13. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE A SSESSEE POINTED OUT THAT AFTER THE AMENDMENT OF SECTION 2(15) OF THE ACT, BO ARD ISSUED A CIRCULAR, COPY OF WHICH HAS BEEN FILED ON RECORD AND IT HAS BEEN LAID DOWN THAT FIRST THREE LIMBS OF SECTION 2(15) OF THE ACT ARE TO BE CONSIDERED AS CH ARITABLE ACTIVITY EVEN IF IT ALLOWS CARRYING ON SOME COMMERCIAL ACTIVITY. REFER ENCE IN THIS REGARD, WAS MADE TO THE RATIO LAID DOWN BY PUNE BENCH OF THE TR IBUNAL IN PARKAR MEDICAL FOUNDATION VS. DCIT, IN ITA NOS.861 & 1423/PN/2012, VIDE ORDER DATED 31.07.2014. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER PLACED RELIANCE ON THE RATIO LAID DOWN BY THE HONB LE SUPREME COURT IN ACIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (198 0) 121 ITR 1 (SC). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER REFERRED TO THE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 14 CLAUSES OF TRUST DEED AND POINTED OUT THAT THE ACT DOES NOT PROHIBIT PAYMENT OF CHARGES TO THE TRUSTEES BUT ONLY PROHIBITS THAT THE CHARGES SHOULD NOT BE MORE THAN THE MARKET RATES. IT WAS FURTHER CLARIFIED BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE HONBLE BO MBAY HIGH COURT IN SANJIV GAJANAN PUNALEKAR VS. THE STATE OF MAHARASHTRA & OR S. IN WRIT PETITION (PIL) NO.3132 OF 2004, VIDE ORDER DATED 17.08.2006 HAD LA ID DOWN THE CONDITIONS FOR RUNNING OF HOSPITALS WHICH WERE REGISTERED UNDER MA HARASHTRA PUBLIC TRUST ACT. ANOTHER OBJECTION OF THE LEARNED AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE WAS AGAINST THE OBSERVATION OF ASSESSING OFFICER THAT T HE HOSPITAL WAS BEING USED FOR SELF-USE AND IT WAS POINTED OUT THAT ON THE OTHER H AND, THE TRUSTEE WAS RUNNING THE CATHLAB (I) PVT. LTD. AGAINST WHICH, IT WAS PAY ING RENT AND WAS ALSO PROVIDING CONCESSIONAL SERVICES TO THE PATIENTS OF THE TRUST HOSPITAL. IN VIEW THEREOF, THE ACTIVITIES WERE NOT IN VIOLATION OF SECTION 13(1)(C ) OF THE ACT. RELIANCE IN THIS REGARD WAS PLACED ON THE FOLLOWING DECISIONS:- I) CIT VS. PULIKKAL MEDICAL FOUNDATION (P) LTD. (1 994) 210 ITR 299 (KER) II) ITO VS. DHARAMSHILA CANCER FOUNDATION & RESEARC H CENTRE (2010) 134 TTJ (DEL) 573 III) ADDL. DIRECTOR OF INCOME TAX (EXEMPTION) VS. M ANAV BHARATI CHILD INSTITUTE & CHILD PSYCHOLOGY, (2008) 20 SOT 517 (DE L) 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE TRUST WAS ESTABLISHED UNDER THE BOMBAY PUB LIC TRUST ACT, 1950 AND HAD CONSTRUCTED 111 BEDDED MULTI-SPECIALTY HOSPITAL BY THE NAME NOBLE HOSPITAL AT AHMEDNAGAR. THE HOSPITAL HAVING MODERN DIAGNOST IC, MEDICAL AND SURGICAL EQUIPMENT WAS PROVIDING FACILITIES IN ALL BRANCHES OF MEDICINE BY ENGAGING SERVICES OF SEVERAL MEDICAL SPECIALISTS. THE TRUST DEED WAS EXECUTED ON 16.08.2004 AND WAS REGISTERED UNDER THE BOMBAY PUBL IC TRUST ACT W.E.F. 16.10.2004. THE SETTLOR OF THE TRUST WAS DR. B.E. KANDEKAR, WHO WAS M.D., D.M. IN CARDIOLOGY AND WAS THE MANAGING TRUSTEE OF THE T RUST ALONG WITH HIS WIFE AND THREE OTHER TRUSTEES. THE OBJECTS OF THE TRUST ARE REPRODUCED UNDER PARA 7.2 AT ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 15 PAGES 4 AND 5 OF THE ASSESSMENT ORDER, WHICH REFLEC T THE MAIN OBJECT TO ACQUIRE, ESTABLISH, RUN AND MAINTAIN AND ADVANCE HOSPITAL AN D TO PROVIDE SUPER SPECIALTY FACILITIES IN ALL BRANCHES OF MEDICAL AND SURGICAL FIELDS. THE ASSESSEE TRUST THUS, BY WAY OF RUNNING THE MULTI-SPECIALTY HOSPITAL, WAS PROVIDING MEDICAL RELIEF AND IN VIEW OF THE PROVISIONS OF SECTION 2(15) OF THE ACT WAS A CHARITABLE INSTITUTION. FURTHER, THE ASSESSEE TRUST WAS RECOGNIZED AND GRAN TED REGISTRATION BOTH UNDER SECTIONS 12AA AND 80G(5) OF THE ACT, WHICH ADMITTED LY, HAS NOT BEEN WITHDRAWN TILL DATE. THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION HAD SHOWN RECEIPTS OF RS.3.22 CRORES AND INCOME FROM OTHER SOURCES I.E . THE RENT RECEIVED FROM VARIOUS PORTIONS RENTED OUT BY THE ASSESSEE AND BAN K INTEREST AT RS.48,53,003/- AND HAD DECLARED GROSS RECEIPTS OF RS.3,89,67,621/- . THE EXPENDITURE TOTALING RS.3,36,43,059/- INCLUDED THE CONSULTANCY FEES OF R S.81,13,117/-, PROFESSIONAL FEES OF RS.37,42,162/- AND CONSUMABLES OF RS.30,57, 651/- AND DEPRECIATION OF RS.77,69,511/- AND OTHER EXPENDITURE. THE SURPLUS DECLARED BY THE ASSESSEE AT RS.53,24,562/- WAS CLAIMED AS EXEMPT UNDER SECTION 11 OF THE ACT. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE HOSP ITAL RUN BY THE ASSESSEE WAS WITH A PROFIT MOTIVE AND FURTHER, THERE WAS VIOLATI ON OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT VIS--VIS THE CONCESSION GIVEN TO DR.KANDEKAR, MANAGING TRUSTEE AND HIS FAMILY MEMBERS AND IN VIEW THEREOF, THE ASSESSEE TRUST WAS NOT ENTITLED TO THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT. 15. UNDER THE PROVISIONS OF SECTION 11 AND 12 OF TH E ACT, IT IS PROVIDED THAT THE INCOME ARISING FROM A PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PERSON, SUBJ ECT TO THE FULFILLMENT OF CONDITIONS PROVIDED UNDER THE SAID SECTION. IN ORDE R TO AVAIL THE BENEFIT OF SECTION 11 AND 12 OF THE ACT, IT IS MANDATORY THAT THE TRUS T OR THE INSTITUTION HAS TO BE REGISTERED AS A CHARITABLE/RELIGIOUS TRUST UNDER SE CTION 12A OF THE ACT. THE PROCEDURE FOR REGISTRATION OF A TRUST OR AN INSTITU TION IS PROVIDED UNDER SECTION ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 16 12AA OF THE ACT. SECTION 13 CARVES OUT EXCEPTION T O THE GENERAL EXEMPTION GRANTED UNDER SECTION 11 AND 12 OF THE ACT TO THE I NCOME DERIVED BY THE TRUST OR CHARITABLE INSTITUTION. THE EXEMPTION OF INCOME HE LD FOR CHARITABLE PURPOSES UNDER SECTION 11 OF THE ACT CANNOT BE AVAILED WHERE THE ACTIVITIES OF THE CHARITABLE INSTITUTION FALL WITHIN THE PURVIEW OF S ECTION 13 OF THE ACT. SECTION 13(1) OF THE ACT STARTS WITH A NON-OBSTITUTE CLAUSE I.E. NOTHING CONTAINED IN SECTION 11 OR 12 OF THE ACT, ETC. THE SECTION THUS, PROVIDES TH AT EVEN IF INCOME IS EXEMPT BY VIRTUE OF SECTION 11 AND/OR SECTION 12 OF THE ACT, NO SUCH EXEMPTION WOULD BE ALLOWED TO THE TRUST OR CHARITABLE INSTITUTION, IF ANY OF THE PROVISIONS OF SECTION 13 OF THE ACT ARE CONTRAVENED. THE PROVISIONS OF SECT ION 13 OF THE ACT ARE ATTRACTED IN A CASE WHERE THE INCOME OR PROPERTY OF THE TRUST IS USED OR APPLIED OR ENURES FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SECTIO N 13(3) OF THE ACT. THE SUB- SECTION (1) TO SECTION 13 OF THE ACT IS APPLICABLE WHERE INCOME OF THE PRIVATE RELIGIOUS TRUST IS NOT ENURING FOR THE BENEFIT OF P UBLIC. THE PROVISIONS OF SECTION 13(1)(B) OF THE ACT ARE ATTRACTED WHERE THE CHARITA BLE TRUSTS ARE CREATED OR ESTABLISHED FOR THE BENEFIT OF A PARTICULAR RELIGIO US COMMUNITY OR CASTE. IN THE CASE OF A CHARITABLE OR RELIGIOUS TRUST, ACTIVITIES OF WHICH ARE ENURING TO THE BENEFIT OF CREATOR OR FOUNDER OR HIS RELATION, PROVISIONS O F SECTION 13(1)(C) OF THE ACT ARE APPLICABLE, WHICH READ AS UNDER:- 13. (1) NOTHING CONTAINED IN SECTION 11 OR SECTION 12 SHALL OPERATE SO AS TO EXCLUDE FROM THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT THEREOF- (A) .. (B) .. (C) IN THE CASE OF A TRUST FOR CHARITABLE OR RELIGI OUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, ANY INCOME THE REOF- (I) IF SUCH TRUST OR INSTITUTION HAS BEEN CREATED O R ESTABLISHED AFTER THE COMMENCEMENT OF THIS ACT AND UNDER THE TE RMS OF THE TRUST OR THE RULES GOVERNING THE INSTITUTION, A NY PART OF SUCH INCOME ENURES, OR (II) IF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR THE INSTITUTION (WHENEVER CREATED OR ESTABLISHED) I S DURING THE PREVIOUS YEAR USED OR APPLIED, ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 17 DIRECTLY OR INDIRECTLY FOR THE BENEFIT OF ANY PERSO N REFERRED TO IN SUB-SECTION (3): PROVIDED THAT IN THE CASE OF A TRUST OR INSTITUTION CREATED OR ESTABLISHED BEFORE THE COMMENCEMENT OF THIS ACT, THE PROVISIONS OF SUB-CLAUSE (II) SHALL NOT APPLY TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDI- RECTLY, OF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE TRUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB-SECTION (3), IF SUCH USE OR APPLICATION IS BY WAY OF COMPLIANCE WIT H A MANDATORY TERM OF THE TRUST OR A MANDATORY RULE GOVERNING THE INST ITUTION : PROVIDED FURTHER THAT IN THE CASE OF A TRUST FOR RE LIGIOUS PURPOSES OR A RELIGIOUS INSTITUTION (WHENEVER CREATED OR ESTABL ISHED) OR A TRUST FOR CHARITABLE PURPOSES OR A CHARITABLE INSTITUTION CRE ATED OR ESTABLISHED BEFORE THE COMMENCEMENT OF THIS ACT, THE PROVISIONS OF SUB-CLAUSE (II) SHALL NOT APPLY TO ANY USE OR APPLICATION, WHETHER DIRECTLY OR INDIRECTLY, OF ANY PART OF SUCH INCOME OR ANY PROPERTY OF THE T RUST OR INSTITUTION FOR THE BENEFIT OF ANY PERSON REFERRED TO IN SUB-SE CTION (3) IN SO FAR AS SUCH USE OR APPLICATION RELATES TO ANY PERIOD BEFOR E THE 1 ST DAY OF JUNE, 1970 16. UNDER CLAUSE (C) TO SECTION 13(1) OF THE ACT, IT IS PROVIDED THAT A TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES OR A CHARITABLE OR RELIGIOUS INSTITUTION, CREATED OR ESTABLISHED ON OR AFTER 01.04.1962, SHALL FORFEIT T HE EXEMPTION UNDER SECTION 11 OF THE ACT, IF ANY PART OF ITS INCOME ENURES TO THE BE NEFIT OF ANY INTERESTED PERSON REFERRED TO IN SUB-SECTION (3) OR ANY PART OF SUCH INCOME OR PROPERTY OF THE TRUST OR INSTITUTION IS, DURING THE PREVIOUS YEAR, USED OR A PPLIED FOR THE BENEFIT OF ANY SUCH PERSON DURING ANY PART OF THE PREVIOUS YEAR. UNDER SUB-SECTION (2) TO SECTION 13 OF THE ACT, IT IS PROVIDED THE CONDITIONS, UNDER WH ICH IT WOULD BE DEEMED TO HAVE BEEN USED OR APPLIED FOR THE BENEFIT OF A PERSON RE FERRED TO IN SUB-SECTION (3). IT COVERS THE CASES WHERE THE PART OF THE INCOME OR PR OPERTY OF THE TRUST OR INSTITUTION IS OR CONTINUES TO BE LENT TO SUCH INTE RESTED PERSON, OR WHERE ANY AMOUNT OR BUILDING OR OTHER PROPERTY OF THE INSTITU TION IS OR CONTINUES TO BE MADE AVAILABLE FOR THE USE OF THE INTERESTED PARTY AND W HERE ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE OR OTHERWISE DURING THE PREVIO US YEAR TO ANY PERSON REFERRED TO IN SUB-SECTION (3) AND THE AMOUNTS SO PAID IS IN EXCESS WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES AND ALSO WHERE TH E SERVICES OF THE TRUST OR INSTITUTION ARE MADE AVAILABLE TO ANY INTERESTED PE RSON WITHOUT ADEQUATE REMUNERATION OR OTHER COMPENSATION. THERE ARE OTHE R CONDITIONS ALSO LAID DOWN ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 18 IN SUB-SECTION (2) OF SECTION 13(1) WHICH ARE ENUME RATED TO (I) TO H OF THE SAID SUB-SECTION. FURTHER, UNDER SUB-SECTION (3) TO SEC TION 13(1), THE INTERESTED PERSONS ARE TO INCLUDE THE AUTHOR OF THE TRUST OR F OUNDER OF THE TRUST, ANY PERSON WHO HAS MADE SUBSTANTIAL CONTRIBUTION TO THE TRUST OR INSTITUTION AND WHERE SUCH AUTHOR, FOUNDER OR PERSON IS AN HINDU UNDIVIDED FAM ILY, A MEMBER OF THE FAMILY. FURTHER, ANY TRUSTEE OF THE TRUST OR MANAGER OF THE INSTITUTION AND ALSO THE RELATIVE OF ANY SUCH AUTHOR, FOUNDER OR PERSON, MEMBER, ETC. ARE THE INTERESTED PARTIES, IN ADDITION TO ANY CONCERN, IN WHICH ANY OF THE PERSON REFERRED TO IN CLAUSES (A) TO (D) HAS A SUBSTANTIAL INTEREST, ARE ALSO THE INTERE STED PARTIES. AS REFERRED TO BY US IN THE PARAS HEREIN-IN-ABOVE, THE DEDUCTION UNDER S ECTION 11 OF THE ACT HAS BEEN DENIED TO THE ASSESSEE ON TWO ACCOUNTS I.E. FIRST F OR THE NON-FULFILLMENT OF CONDITIONS PRESCRIBED IN SECTION 2 (15) OF THE ACT AND ALSO FOR VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT R.W.S. 13 (2) AND 13(3) OF THE ACT. 17. THE FIRST ASPECT OF THE ISSUE RAISED BEFORE US IS WHETHER THERE IS NON- FULFILLMENT OF CONDITIONS PRESCRIBED IN SECTION 2(1 5) OF THE ACT. AS PER THE DEFINITION OF CHARITABLE PURPOSES IN SECTION 2(15) OF THE ACT, THE RECOGNITION HAS BEEN GIVEN TO THE ACTIVITIES OF PROVIDING RELIEF TO THE POOR, EDUCATION, MEDICAL RELIEF AND ADVANCEMENT OF ANY OTHER OBJECT OF GENER AL PUBLIC UTILITY TO BE A ACTIVITY FOR CHARITABLE PURPOSE. PROVISO HAS BEEN INSERTED BY THE FINANCE ACT, 2008 UNDER SECTION 2(15) OF THE ACT W.E.F. 01.04.2009, U NDER WHICH, IT HAS BEEN PROVIDED THAT IN CASE OF ADVANCEMENT OF ANY OTHER S UBJECT OF GENERAL PUBLIC UTILITY SHALL NOT BE CHARITABLE, IF IT INVOLVES CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF REND ERING ANY SERVICE IN RELATION TO SUCH TRADE, COMMERCE OR BUSINESS FOR A CESS, FEES, OR ANY OTHER CONSIDERATION. THE RESTRICTION CLAUSE BY WAY OF PROVISO TO SECTION 2(15) IS WITH REGARD TO ADVANCEMENT OF ANY OTHER SUBJECT OF GENERAL PUBLIC UTILITY I.E. THE FOURTH CLAUSE OF SECTION 2(15) OF THE ACT IN RESPECT OF THE ACTIVITY OF PROVIDING RELIEF TO THE POOR, ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 19 EDUCATION AND MEDICAL RELIEF. THERE IS NO RESTRICT IVE COVENANT IN THE SAID PROVISO UNDER SECTION 2(15) OF THE ACT IN RESPECT OF PROVID ING RELIEF TO POOR, EDUCATION AND MEDICAL RELIEF. IN OTHER WORDS, WHERE THE ASSESSEE TRUST IS ENGAGED IN ACTIVITIES WITHIN THE FRAMEWORK OF LAW TO PURSUE ITS OBJECTIVE S AND IN TURN RECEIVES CHARGES FOR RENDERING THE SERVICES IN FURTHERANCE OF ITS AC TIVITIES, IT CANNOT BE SAID THAT THE TRUST IS NOT CHARITABLE. IT HAS BEEN LAID DOWN BY VARIOUS LEGAL PROPOSITIONS THAT WHERE THE PREDOMINANT OBJECT OF THE TRUST OR INSTIT UTION IS TO CARRY OUT THE ACTIVITIES FOR CHARITABLE PURPOSES AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARACTER OF BEING FOR CHARITABLE PURPOSE, MERELY BECAUSE SOME P ROFIT ARISES FROM THE ACTIVITY. THE CBDT IN ITS CIRCLE NO.11, DATED 19.12.2008 HAD CLARIFIED THAT WHERE THE PURPOSE OF TRUST OR INSTITUTION IS RELIEF OF THE PO OR, EDUCATION OR MEDICAL RELIEF, IT WOULD CONSTITUTE CHARITABLE PURPOSE, EVEN IF INCIDE NTALLY INVOLVES CARRYING ON THE COMMERCIAL ACTIVITIES. IN VIEW THEREOF, WHERE THE ASSESSEE WAS ENGAGED IN CARRYING ON THE ACTIVITIES FOR ATTAINING THE OBJECT S OF PROVIDING MEDICAL RELIEF TO PEOPLE AT LARGE AND SURPLUS WAS GENERATED FROM HOSP ITAL ACTIVITIES FOR DOING CHARITABLE WORK IN THE HANDS OF THE ASSESSEE, DOES NOT ESTABLISH THE CASE OF THE ASSESSING OFFICER THAT IT WAS NOT ENGAGED IN CHARIT ABLE ACTIVITIES. FURTHER, THE ASSESSEE TRUST WAS ESTABLISHED FOR THE PURPOSE OF G RANTING MEDICAL RELIEF AND THE ACTIVITIES HAVING BEEN CARRIED OUT AS PER THE TERMS OF SETTLEMENT AND THE SAID ACTIVITIES HAVING BEEN RECOGNIZED AS CHARITABLE UND ER THE PROVISIONS OF THE ACT, EVEN RECOGNITION GIVEN BY THE BOMBAY PUBLIC TRUST A CT AND ALSO BY THE REGISTRATION GRANTED UNDER SECTION 12AA OF THE ACT, WE FIND NO MERIT IN THE ORDER OF ASSESSING OFFICER, IN THIS REGARD. 18. WE FIND THAT SIMILAR RATIO WAS LAID DOWN BY DEL HI BENCH OF THE TRIBUNAL IN ADDL. DIRECTOR OF INCOME TAX (EXEMPTION) VS. MANAV BHARATI CHILD INSTITUTE & CHILD PSYCHOLOGY (SUPRA), THAT MERELY BECAUSE THERE WAS SOME SURPLUS IN THE ACTIVITIES CARRIED ON BY THE SOCIETY, THE SAME WOUL D NOT DIS-ENTITLE TO CLAIM ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 20 EXEMPTION UNDER SECTION 11 AND 12 OF THE ACT. SIMI LAR PROPOSITION HAS BEEN LAID DOWN BY THE DELHI BENCH OF THE TRIBUNAL IN ITO VS. DHARAMSHILA CANCER FOUNDATION & RESEARCH CENTRE (SUPRA), WHEREIN IT HA S BEEN LAID DOWN THAT THE PROFITABILITY IS NOT THE SOLE CRITERIA TO JUDGE THE CHARITABLE NATURE OF A SOCIETY AND WHERE THE ASSESSING OFFICER HAS FAILED TO TAKE INTO CONSIDERATION THAT INCOME WAS ONLY APPLIED FOR THE PURPOSE OF CHARITY, THERE WAS NO JUSTIFICATION IN NON-GRANT OF BENEFIT UNDER SECTION 11 OF THE ACT. THE HONBLE K ERALA HIGH COURT IN CIT VS. PULIKKAL MEDICAL FOUNDATION (P) LTD. (SUPRA) HAD AL SO LAID DOWN SIMILAR PROPOSITION THAT MERELY BECAUSE THE ASSESSEE WAS RU NNING A HOSPITAL ON COMMERCIAL LINES, IT WOULD NOT BE DIS-ENTITLED TO T HE EXEMPTION UNDER SECTION 10(22) OF THE ACT. THE LEARNED AUTHORIZED REPRESEN TATIVE FOR THE ASSESSEE HAD MADE A REFERENCE TO THE RATIO LAID DOWN BY PUNE BEN CH OF THE TRIBUNAL IN IN PARKAR MEDICAL FOUNDATION VS. DCIT (SUPRA). HOWEVE R, ON THE PERUSAL OF ORDER, WE FIND THAT THOUGH REFERENCE WAS MADE TO THE VARIO US SUBMISSIONS MADE BY THE ASSESSEE, EVEN WITH REGARD TO THE ASSESSEE TRUST RU NNING THE HOSPITAL ON COMMERCIAL BASIS AND ITS EFFECT, BUT THE SAID ISSUE S HAVE NOT BEEN ADJUDICATED AS REGISTRATION UNDER SECTION 12A OF THE ACT WAS ALLOW ED TO THE ASSESSEE ON OTHER ISSUES. IT WAS FURTHER HELD THAT THE ASSESSING OFF ICER WHILE ASSESSING THE INCOME IN THE HANDS OF CHARITABLE TRUST, HAS THE POWER TO DENY EXEMPTION TO THE EXTENT IT IS COVERED UNDER SECTION 13(1)(C) OF THE ACT. ACCO RDINGLY, WE FIND NO MERIT IN THE RELIANCE PLACED UPON BY THE LEARNED AUTHORIZED REPR ESENTATIVE FOR THE ASSESSEE. 19. THE HONBLE SUPREME COURT IN CIT (ADDL) VS. SUR AT ART SILK CLOTH MANUFACTURERS ASSOCIATION (SUPRA) HAD ALSO LAID DOW N THE PROPOSITION THAT FOR THE ACCOMPLISHMENT OF OBJECT OR MEANS TO CARRY OUT THE OBJECT, IT IS NOT NECESSARY THAT IT SHOULD NOT INVOLVE ANY ACTIVITY FOR PROFIT, IN CASES, WHERE THE PREDOMINANT OBJECT OF THE TRUST IS TO CARRY OUT THE ACTIVITY FO R CHARITABLE PURPOSES AND NOT TO EARN PROFIT. FURTHER, IT WAS HELD THAT THE TRUST W OULD NOT LOSE ITS CHARACTER OF A ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 21 CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISE S FROM THE ACTIVITIES. REFERENCE WAS MADE TO THE EXCLUSIONARY CLAUSE APPLI CABLE AT THAT TIME AND IT WAS HELD THAT THE SAME DOES NOT REQUIRE THAT THE AC TIVITY MUST BE CARRIED ON IN SUCH A MANNER THAT IT DOES NOT RESULT IN ANY PROFIT . 20. NOW, COMING TO THE SECOND ASPECT OF EXEMPTION U NDER SECTION 11 OF THE ACT TO THE ASSESSEE, IN VIEW OF VIOLATION OF PROVIS IONS OF SECTION 13(1)(C) OF THE ACT. IN THE FACTS ENUMERATED HEREIN-IN-ABOVE AND A LSO WHILE MAKING REFERENCE TO THE OBSERVATIONS OF THE ASSESSING OFFICER, IT HAS B EEN REFERRED TO BY US THAT THE ASSESSEE TRUST WAS SETTLED BY DR. KANDEKAR, MANAGIN G TRUSTEE AND FOUR OTHER AS TRUSTEES. DR. KANDEKAR WAS A CARDIOLOGIST AND HE A LONG WITH HIS WIFE MADE AVAILABLE 45,000 SQ. FT. OF CONSTRUCTED BUILDING TO THE TRUST TO CARRY ON ITS ACTIVITIES OF RUNNING HOSPITAL THEREFROM. THE ASSESSEE TRUST W AS PAYING MONTHLY RENTAL OF RS.6 LAKHS TO DR. KANDEKAR AND HIS WIFE. IN ADDITI ON, CERTAIN PORTION APPROXIMATELY 475 SQ. FT. OF THE HOSPITAL PREMISES WAS GIVEN TO A COMPANY CALLED CATHLAB (I) PVT. LTD. ON A MONTHLY RENTAL OF RS.9,5 00/-, WHICH COMPANY BELONGED TO DR. KANDEKAR AND HIS WIFE. A MOU WAS ENTERED IN TO BETWEEN THE TRUST AND THE COMPANY, AS PER WHICH IT WAS UNDERSTOOD THAT THE CO MPANY WOULD EXCLUSIVELY PROVIDE ITS SERVICES AT CONCESSIONAL RATES TO THE P ATIENTS OF THE HOSPITAL. IT HAS BEEN NOTED BY THE ASSESSING OFFICER THAT DR. KANDEK AR WAS CARRYING OUT A PRIVATE PRACTICE BEFORE JOINING THE HOSPITAL RUN BY THE ASS ESSEE TRUST. THE OBJECTION OF THE ASSESSING OFFICER WAS THAT IN THE RETURN OF INC OME FILED FOR THE EARLIER YEARS, HE HAD CLAIMED DEDUCTION FOR SALARY PAID TO HIS ASS OCIATED DOCTORS AND EVEN IN RETURN FILED FOR ASSESSMENT YEAR 2008-09, SIMILAR D EDUCTION WAS CLAIMED IMPLYING THEREBY THAT DR. KANDEKAR HAD SHIFTED HIS PLACE OF PRIVATE PRACTICE TO THE TRUST HOSPITAL. FURTHER, THE OBJECTION OF THE ASSESSING OFFICER WAS THAT HE WAS CONTROLLING AND RUNNING WHOLE HOSPITAL AND WAS ALSO RECIPIENT OF CONSULTANCY FEES OF RS.47,08,412/- OUT OF TOTAL CONSULTANCY FEES OF RS.53,44,934/- PAID TO FOUR ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 22 TRUSTEES. IN THIS REGARD, THE ASSESSING OFFICER OB SERVED THAT THE CONSULTANCY FESS PAID TO DR. KANDEKAR ALONE CONSTITUTE 88%. HOWEVER , THE ASSESSING OFFICER ALSO ADMITTED THAT THE AMOUNT OF CORRESPONDING GROSS IPD /OPD RECEIPTS ATTRIBUTED TO HIS CONSULTANCY ALONE IN THE HANDS OF THE TRUST WER E OF RS.2.32 CRORES, WHICH WAS ABOUT 72% OF THE TOTAL RECEIPTS OF THE TRUST, WHICH STOOD AT RS.3.22 CRORES. 21. WE FIND NO MERIT IN THE OBSERVATIONS OF THE ASS ESSING OFFICER IN THIS REGARD THAT THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT HAVE BEEN VIOLATED. ADMITTEDLY, DR. KANDEKAR IS THE INTERESTED PARTY AS PER PROVISI ONS OF SECTION 13(3) OF THE ACT ARE CONCERNED. HOWEVER, THE FINANCIAL ASPECTS REFL ECT THAT OUT OF TOTAL RECEIPTS OF THE TRUST OF RS.3.22 CRORES, ADMITTEDLY 72% OF THE SAID RECEIPTS AT RS.2.32 CRORES WERE ATTRIBUTABLE TO SERVICES OF DR. KANDEKAR, AGAI NST WHICH HE WAS PAID CONSULTANCY FEES OF ONLY RS.47,08,412/-. THE BALAN CE RECEIPTS WERE ATTRIBUTABLE TO THE TRUST AS PER THE AGREEMENT BETWEEN CONSULTAN T DOCTORS AND THE TRUST, WHEREIN ONLY CONSULTANCY FEES WAS TRANSFERRED TO TH EIR ACCOUNT AND THE BALANCE CHARGES RECEIVED FROM THE PATIENTS WERE TRANSFERRED TO THE ACCOUNT OF THE ASSESSEE TRUST. WE ALSO FIND NO MERIT IN THE OBJEC TION OF ASSESSING OFFICER THAT DR. KANDEKAR HAD SHIFTED HIS PRIVATE PRACTICE TO TH E TRUST HOSPITAL. LOOKING AT THE REMUNERATION GENERATED BY DR. KANDEKAR FOR THE ASSE SSEE TRUST, IT COULD NOT BE ESTABLISHED THAT HE WAS DOING ANY PRIVATE PRACTICE AT THE PREMISES OF THE TRUST HOSPITAL. ANOTHER OBJECTION OF THE ASSESSING OFFI CER WAS VIS--VIS THE CLAIM OF EXPENDITURE OF ASSOCIATED DOCTORS BY DR. KANDEKAR I N HIS RETURN OF INCOME, AGAINST HIS CONSULTANCY CHARGES, IT WAS EXPLAINED B Y THE ASSESSEE BEFORE ASSESSING OFFICER THAT THE SAID ASSOCIATE DOCTORS W ERE ENGAGED BY DR. KANDEKAR FOR LOOKING AFTER HIS PATIENTS IN THE TRUST HOSPITA L AND HE WAS PAYING FOR THEIR SERVICES AND CLAIMING THE EXPENDITURE WITHOUT UTILI ZING THE SERVICES OF DOCTORS OF THE HOSPITAL TRUST. THE SAID CLAIM OF THE ASSESSEE HAS NOT BEEN REBUTTED BY THE ASSESSING OFFICER AND THE CONTRARY INFERENCE DRAWN IN THIS REGARD, CANNOT BE ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 23 ACCEPTED. WE FIND NO MERIT IN THE OBJECTION OF THE ASSESSING OFFICER, WHERE DR. KANDEKAR ACTING AS MANAGING TRUSTEE OF THE ASSESSEE TRUST HAD SUPERVISE THE ACTIVITIES OF THE TRUST AND HAD DEVOTED TIME FOR NO T ONLY THE MEDICAL CONSULTANCY, BUT ALSO FOR ADMINISTRATIVE WORK. THE ASSESSEE HAD ALSO MADE AVAILABLE THE SERVICES OF THE COMPANY CATHLAB (I) PVT. LTD. FOR T HE PATIENTS OF TRUST HOSPITAL AT CONCESSIONAL RATES AND IN SUCH CIRCUMSTANCES, IT CO ULD NOT BE SAID THAT THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT ARE ATTRA CTED. IN ANY CASE, UNDER SECTION 13(2)(C) OF THE ACT, THE PROVISION IS ATTRACTED WHE RE THE AMOUNT PAID IS IN EXCESS WHAT MAY BE REASONABLY PAID FOR SUCH SERVICES. THE PROVISIONS OF SECTION 13(2)(C) OF THE ACT ARE NOT TO BE APPLIED WHERE ANY AMOUNT IS PAID BY WAY OF SALARY, ALLOWANCE OR OTHER TO ANY INTERESTED PERSON OUT OF RESERVES OF THE TRUST OR INSTITUTION, FOR SERVICES RENDERED BY SUCH PERSON T O TRUST OR INSTITUTION. THE CLAUSES ARE ATTRACTED IN CASE THE AMOUNT SO PAID IS IN EXCESS OF WHAT MAY BE PAID FOR SUCH SERVICES. THE ASSESSING OFFICER HAS NOT ESTABLISHED THE CASE OF NON-REASONABLENESS OF THE AMOUNT PAID TO DR. KANDEK AR, WHO WAS THE INTERESTED PARTY IN THIS CASE AND IN THE ABSENCE OF THE SAME, THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT ARE NOT TO BE APPLIED. 22. ANOTHER OBJECTION RAISED BY THE ASSESSING OFFIC ER FOR INVOKING PROVISIONS OF SECTION 13(1)(C) OF THE ACT WAS THE ALLOTMENT OF MEDICAL SHOP MEASURING 200 SQ. FT. ALONG WITH FURNITURE & FIXTURES TO SHRI VIJ AY MANIKRAO NIKAM, WHO WAS CO- BROTHER OF DR. KANDEKAR. AS PER MOU, IT WAS AGREED FOR THE PERIOD 01.06.2007 TO 31.03.2008, RENT OF RS.47 LAKHS AND FOR THE PERIOD 01.04.2008 TO 31.03.2009, RENT OF RS.1,08,00,000/- HAD TO BE PAID. IF WE LOOK AT THIS TRANSACTION AND COMPARE THE SAME WITH THE MOU SIGNED BY DR. KANDEKAR WITH T HE ASSESSEE TRUST WHILE HANDING OVER HIS BUILDING WITH CONSTRUCTED AREA OF 45,000 SQ. FT. ON MONTHLY RENT OF RS.6 LAKHS, WE FIND NO MERIT IN THE ORDER OF ASS ESSING OFFICER IN HOLDING THAT THE SAID MEDICAL SHOP BEING RENTED OUT TO INTERESTE D PARTY ATTRACTS THE PROVISIONS ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 24 OF SECTION 13(1)(C) OF THE ACT. IN COMPARISON, PAR T OF THE BUILDING MEASURING 250 SQ. FT. WAS ALLOTTED TO M/S. SAMARTH DIAGNOSTICS PV T. LTD. ON A MONTHLY RENT OF RS.5,000/- AND AS PER THE ASSESSING OFFICER, BOTH T HE DIRECTORS WERE WHOLLY UNRELATED EITHER TO THE MANAGING TRUSTEE OR ANY OTH ER TRUSTEE. AS PER MOU, THE SERVICES WERE PROVIDED TO THE PATIENTS OF HOSPITAL AT RATES 10% LESS THAN MARKET RATE. IN CASE, WE COMPARE THE TWO AGREEMENTS FOR L ETTING OUT THE PREMISES OF THE ASSESSEE TRUST, THE PREMISES HANDED OVER TO THE INT ERESTED PARTY IS FETCHING HIGH RENTALS TO THE TRUST AND IT COULD NOT BE SAID THAT THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT, HAVE BEEN VIOLATED. 23. ANOTHER ASPECT OF THE DENIAL OF DEDUCTION UNDER SECTION 11 OF THE ACT TO THE ASSESSEE WAS THAT THE ASSESSEE HAD FAILED TO PR OVIDE CONCESSIONAL TREATMENT TO INDIGENT / POOR PATIENTS. ADMITTEDLY, THIS WAS THE FIRST YEAR OF OPERATION OF THE HOSPITAL AND THE PLEA OF THE ASSESSEE WAS THAT IT C OULD NOT PROVIDE FREE MEDICAL RELIEF TO LARGE NUMBERS OF INDIGENT / POOR PATIENTS . HOWEVER, AS PER THE DATA SUBMITTED BEFORE THE ASSESSING OFFICER, WHICH IS IN CORPORATED UNDER PARA 9 AT PAGE 10 OF THE ASSESSMENT ORDER, SUCH SERVICES TO I NDIGENT / POOR PATIENTS WAS NUMBERING 808 WAS PROVIDED BY THE ASSESSEE TRUST AN D THE TOTAL BILL AMOUNT OF CONCESSION GIVEN TO THE PATIENTS WAS RS.14,49,969/- AS AGAINST THE BILLED AMOUNT RECEIVED FROM OTHER PATIENTS OF RS.3.22 CRORES. UN DER THE INCOME-TAX ACT, THERE IS NO PROVISION FOR PROVIDING A PERCENTAGE OF THE C ONCESSION TO INDIGENT / POOR PATIENTS. BUT CERTAIN LIMITS HAVE BEEN LAID DOWN O THERWISE. HOWEVER, IN THE ABSENCE OF ANY LIMIT BEING PROVIDED IN THE INCOME-T AX ACT, VIOLATION, IF ANY, OF THE SAID LIMIT DOES NOT ENTITLE THE REVENUE AUTHORITIES TO DISALLOW THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT TO THE ASSESS EE TRUST, WHICH OTHERWISE HAD CARRIED OUT THE ACTIVITIES AS PER ITS OBJECTS AND H ENCE, IS ENTITLED TO THE DEDUCTION UNDER SECTION 11 OF THE ACT. ACCORDINGLY, THE ASSE SSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF ASSESSEE IN THIS REGARD. ITA NO.1683/PN/2012 ITA NO.130/PN/2013 ITA NO.2123/PN/2013 NOBLE MEDICAL FOUNDATION & RESEARCH CENTRE 25 24. THE FACTS AND ISSUE IN ITA NOS.130 AND 2123/PN/ 2013 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO.1683/PN/2012 AND OUR DECI SION IN ITA NO.1683/PN/2012 SHALL APPLY MUTATIS MUTANDIS TO ITA NOS.130 AND 2123/PN/2013. 25. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED ON THIS 8 TH DAY OF APRIL, 2015. SD/- SD/- (G.S. PANNU) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 8 TH APRIL, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO: - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE CIT(A)-IT/TP, PUNE; 6) THE CIT-IT/TP, PUNE; 7) THE DR B BENCH, I.T.A.T., PUNE; 8) GUARD FILE. BY ORDER //TRUE COPY// //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE