M/s. Vijaya Medical & Educational Trust, CHENNAI V. Assistant Director of Income Tax, CHENNAI

ITA 1965/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73760 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 27-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Charitable institution
• Section: 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 1965/MDS/2013 ( / ASSESSMENT YEAR : 2009-10) M/S. VIJAYA MEDICAL & EDUCATIONAL TRUST, 180, VIJAYA HOSPITAL BUILDINGS, NSK SALAI, VADAPALANI, CHENNAI-600 026. VS. THE ASSISTANT DIRECTOR OF INCOME TAX(EXEMPTIONS)-III, CHENNAI-600034. PAN:AAATV0197R ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : MR. SHAJI P.JACOB, ADDL. CIT / DATE OF HEARING : 27 TH FEBRUARY, 2014 ! /DATE OF PRONOUNCEMENT : 14 TH MARCH, 2014 % / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VII, CH ENNAI DATED 05.09.2013 FOR THE ASSESSMENT YEAR 2009-10. T HE ONLY ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISS IONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN INVOKING SECTION 11(4A) OF THE ACT FOR THE ITA NO.1965/MDS/2013 2 PHARMACY DIVISION ALONE AND BRINGING INTO TAX THE S URPLUS FROM SALE OF MEDICINES. 2. BRIEF FACTS ARE THAT ASSESSING OFFICER WHILE COM PLETING THE ASSESSMENT TREATED INCOME ARISING FROM SALE OF MEDICINES AS INCOME FROM BUSINESS NOT ELIGIBLE FOR EXEMPTION UNDER SECTION 11(4A) OF THE ACT. ON APPEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ACTION OF THE AS SESSING OFFICER IN TREATING INCOME FROM MEDICINES AS NOT CH ARITABLE ACTIVITY BUT IT IS INCOME FROM BUSINESS ACTIVITY OF THE ASSESSEE. 3. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE RUNS THREE HOSPITAL UNITS NAMELY VIJAYA HOSPITAL, VIJAYA HEART FOUNDATION AND VIJAYA HEALTH CENTRE. HE SUBMITS THA T ASSESSEE IS A PUBLIC CHARITABLE TRUST ENGAGED IN RU NNING HOSPITAL, PROVIDING MEDICAL RELIEF, NURSING, FOOD A ND MEDICINES AND APPLIANCES OF MEDICAL, SURGICAL, PHARMACEUTICAL DIETETIC AND SANITARY CHARACTER ETC. AS PART OF ITS OBJECTS, PROVIDING MEDICINE IS ALSO ONE OF ITS OBJECTS. THE ASSESSEE HAS BEEN GRANTED EXEMPTION UNDER SECTION 11 SINCE 1974. THE COUNSEL ITA NO.1965/MDS/2013 3 SUBMITS THAT FOR THE ASSESSMENT YEAR 2009-10, THE A SSESSING OFFICER WHILE COMPLETING THE ASSESSMENT TREATED THE INCOME OF PHARMACY AS A BUSINESS INCOME. IT IS SUBMITTED T HAT ASSESSING OFFICER HAS ACCEPTED THE FACT THAT TRUST IS A CHARITABLE ONE AND HAS GRANTED EXEMPTION IN RESPECT OF ITS OTHER RECEIPTS. HOWEVER, AS FAR AS PHARMACY IS CON CERNED, IT IS TREATED AS BUSINESS INCOME AND ASSESSED TO TAX O N THE GROUND THAT NO TAX AUDIT REPORT WAS FIELD UNDER SEC TION 44AB AND NO SEPARATE PROFIT AND LOSS ACCOUNT WAS MADE OU T FOR PHARMACY. THE COUNSEL SUBMITS THAT HOSPITAL CANNOT RUN WITHOUT PHARMACY PROVIDING MEDICINES TO THE PATIENT S. PHARMACY IS SET UP WITHIN THE HOSPITAL PREMISES AND RUNNING PHARMACY IS INCIDENTAL TO ITS OBJECTS. THE ASSESSEE IS SELLING MEDICINES ON THE MRP AND THE SURPLUS IS EARNED ON SALE OF MEDICINE AS INCIDENTAL TO ITS OBJECTS AND IT IS NOT WITH AN INTENTION TO CARRY ON BUSINESS AND THE ASSESSEE IS MAINTAINING CHEMIST WITHIN ITS HOSPITALS. HE SUBMIT S THAT SURPLUS ARISING OUT OF PHARMACY IN THE HOSPITALS R UN BY THE ASSESSEE ARE NOT BUSINESS INCOME AND IT IS ONLY RUN NING CHEMIST IN THE HOSPITALS AS INCIDENTAL TO CHARITABL E OBJECTS AND ITA NO.1965/MDS/2013 4 THEREFORE EXEMPTION UNDER SECTION 11 CANNOT BE DENI ED. HE PLACES RELIANCE ON THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF BAUN FOUNDATION TRUST VS. CHIEF CIT (2012- TIOL-327) AND THE DECISION OF DELHI BENCH OF THIS T RIBUNAL IN THE CASE OF ST.STEPHENS HOSPITAL SOCIETY VS. DIREC TOR OF INCOME TAX (EXEMPTIONS) (2012 TIOL 505) IN SUPPORT OF HIS SUBMISSION THAT SALE OF MEDICINES IN PHARMACY IS NO T BUSINESS ACTIVITY OF THE ASSESSEE BUT IT IS ONLY IN CIDENTAL TO CARRY ON OBJECTS OF THE ASSESSEE. 4. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT ASSESSE E IS CARRYING ON THE PHARMACY DIVISION IN THE HOSPITALS AND SUCH ACTIVITY IS BUSINESS ACTIVITY AS THERE IS SURPLUS F ROM SALE OF MEDICINES. DEPARTMENTAL REPRESENTATIVE SUBMITS THAT ASSESSEE IS ENGAGED IN COMMERCIAL ACTIVITIES AND TH E INCOME ARISING OUT OF COMMERCIAL ACTIVITIES ARE NOT EXEMPT UNDER SECTION 11 OR 10(23C) OF THE ACT. THIS IS PARTICULA RLY AFTER THE AMENDMENT TO SECTION 2(15) OF THE ACT WHERE CHARITA BLE PURPOSE WAS DEFINED. ITA NO.1965/MDS/2013 5 5. IN REPLY, COUNSEL FOR THE ASSESSEE SUBMITS THAT CBDT ISSUED CIRCULAR NO.11 OF 2008 DATED 19.12.2008 EX PLAINING THE DEFINITION OF CHARITABLE PURPOSES UNDER SECTION 2(15) OF THE ACT. REFERRING TO CLAUSE 2.1 OF THE SAID CIRCULAR, COUNSEL SUBMITS THAT PROVISO TO SECTION 2(15) WHICH RESTRIC TS THE CHARITABLE INSTITUTIONS IN CARRYING ON THE BUSINESS ACTIVITIES I.E. CARRYING ON ACTIVITY IN THE NATURE OF TRADE, COMMER CE OR BUSINESS ETC. WILL NOT APPLY IN RESPECT OF FIRST TH REE LIMBS OF SECTION 2(15) I.E. RELIEF OF THE POOR, EDUCATION O R MEDICAL RELIEF. THEREFORE, HE SUBMITS THAT WHERE THE PURPO SE OF TRUST / INSTITUTION IS RELIEF OF THE POOR, EDUCATION OR MED ICAL RELIEF, IT WILL CONSTITUTE CHARITABLE PURPOSES EVEN IF IT INC IDENTALLY INVOLVES IN CARRYING ON OF COMMERCIAL ACTIVITIES. T HE COUNSEL THEREFORE SUBMITS THAT SINCE CBDT CLARIFIED THAT IF BUSINESS ACTIVITY IS INCIDENTAL TO THE OBJECT OF THE TRUST W HICH PROVIDES RELIEF TO THE POOR, EDUCATION OR MEDICAL RELIEF, T HE INCOME FROM SUCH ACTIVITY STILL ENJOYS DEDUCTION UNDER SECTION 11 OF THE ACT. 6. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND CASE LAWS RELIED ON. THE ASSESSING OFFICER WHIL E ITA NO.1965/MDS/2013 6 COMPLETING THE ASSESSMENT DENIED EXEMPTION UNDER SE CTION 11 OF THE ACT TO THE SURPLUS MADE BY THE ASSESSEE I N RESPECT OF PHARMACY DIVISION I.E. SALE OF MEDICINES BY THE ASSESSEE IN THE HOSPITALS RUN BY THEM. THE ASSESSING OFFICER TR EATED THE SURPLUS ON SALE OF MEDICINES AS BUSINESS INCOME FOR THE REASON THAT ASSESSEE HAS REPORTED SALES OF MEDICINE S AND ACCORDING TO THE ASSESSING OFFICER SALE OF MEDICINE IS A BUSINESS ACTIVITY AND SINCE THE TURNOVER EXCEEDED ` 40,00,000/- ASSESSEE SHOULD HAVE FILED AUDIT REPORT UNDER SECTION 44AB OF THE ACT AND THE ASSESSEE SHOULD HAV E MAINTAINED SEPARATE BOOKS OF ACCOUNTS. THE COMMISS IONER OF INCOME TAX (APPEALS) SUSTAINED THE ACTION OF THE ASSESSING OFFICER IN ASSESSING SURPLUS FROM SALE OF MEDICINES AS BUSINESS INCOME ON THE GROUND THAT PHARMACY SALE S WORKS OUT TO 30% OF TOTAL RECEIPTS. HE WAS ALSO OF THE OP INION THAT THERE WAS NO EVIDENCE TO SHOW THAT MEDICINES WERE S OLD ONLY TO PATIENTS. HE CAME TO THE CONCLUSION THAT RUNNING OF PHARMACY IS NOT INCIDENTAL. HE WAS ALSO OF THE VIEW THAT SEPARATE BOOKS OF ACCOUNTS ARE NOT MAINTAINED FOR P HARMACY DIVISION. ITA NO.1965/MDS/2013 7 7. ONE OF THE MAIN OBJECTS OF THE ASSESSEE TRUST AS PER TRUST DEED ARE AS UNDER: A) TO PROVIDE FACILITIES FOR PROPER MEDICAL ATTENDA NCE, NURSING, FOOD AND MEDICINE AND ALL THINGS AND APPLIANCES OF A MEDICAL, SURGICAL, PHARMACEUTICALS, DIABETIC AND SANITARY CHARACTER. B) TO EMPLOY MEDICAL, SURGICAL AND PHARMACEUTICAL OFFICERS, NURSES AND ATTENDANTS FOR THE PURPOSE OF THE AFORESAID. ON READING OF THE ABOVE CLAUSES OF THE TRUST DEED O F THE ASSESSEE, IT IS CLEAR THAT PROVIDING PHARMACEUTICAL FACILITY IS ALSO ONE OF THE OBJECTS OF THE ASSESSEE TRUST WHIC H HAS BEEN ESTABLISHED FOR PROVIDING MEDICAL FACILITIES TO THE POOR. WE ARE NOT ABLE TO SEE AS TO HOW PROVIDING PHARMACEUTICAL FACILITY IN THE CHEMIST SHOP RUN BY THE ASSESSEE IN ITS HOSPITA L PREMISES FOR THE PATIENTS IS NOT INCIDENTAL TO THE OBJECTS O F THE ASSESSEE. RUNNING CHEMIST SHOP IS CERTAINLY INCIDE NTAL TO THE HOSPITAL RUN BY CHARITABLE INSTITUTION. IT IS ALSO NOT THE CASE OF ITA NO.1965/MDS/2013 8 THE REVENUE THAT SURPLUS ARISING OUT OF THE SALE OF MEDICINES IS NOT UTILIZED FOR THE OBJECTS OF THE ASSESSEE. TH E CBDT ALSO CLARIFIED THAT NEWLY INSERTED PROVISO TO SECTION 2( 15) OF THE ACT WHICH RESTRICTS INSTITUTIONS IN CARRYING ON BUSINES S WILL NOT APPLY IN RESPECT OF FIRST THREE LIMBS OF SECTION 2( 15) OF THE ACT I.E. RELIEF OF THE POOR, EDUCATION OR MEDICAL RELIE F. A SIMILAR SITUATION CAME UP BEFORE THE DELHI BENCH OF THIS TR IBUNAL IN THE CASE OF ST. STEPHENS HOSPITAL SOCIETY (SUPRA) AND THE TRIBUNAL HELD THAT SALE OF MEDICINES IN PHARMACY IS CERTAINLY A CHARITABLE ACTIVITY OBSERVING AS UNDER:- AS R EG A RD S THE ALLEGAT I ON OF SALE OF MEDICINES I N THE PHARMACY, ASSE S SEE HAS SUBM I TTED T H AT THE A CTI V I T Y OF P H ARMACY IS A N I NTEG R AL PART O F TH E HOSPITAL RU N N I NG AC TI V I TY W H I CH I S NOT A C OMME R C IAL ACT I VI T Y. I T HAS BEE N SUBM I TTED THAT ASSE S SEE D I SPENSES MED I C I N E S ONLY TO PAT IE N T S WHO A RE TRE ATED BY HOSPITAL DOC T ORS AND WHO ARE HAV I NG PRESCRIPT I ON OF T H E HOSP I TA L AND DO NOT S EL L TO OUTSI DER S . I T HAS F UR T H E R BEEN SUBM I TTED TH AT PHA R MACY SALE O F M ED ICI NES I S N O T TH E P R ED O MIN A NT O BJ ECT I VE OF T HE ASSESSEE , I T I S ON L Y INC I DE N TA L . THE I NCOME IS PLOUGHED BAC K FOR H O S P IT A L A CT I V ITY . I T HAS B E E N FURT H ER BEEN SUBMITTED THAT 50 % MARG I N IS W ITHOUT CONSIDERI N G S ALA RIES O F PH ARMAC Y DEPAR T MEN T , DOCTOR ' S SA L ARY , CO N T R ACT EMP L OYE ES PAY M ENT , AD MINI ST R AT IV E O VER HEA D S LIKE ELECTRIC I TY , MAINTENANCE , OTHE R UT I L I T I ES , DEPREC I AT I ON E T C . IT HA S BEEN C L A I M E D THAT ONL Y INC OME COME TO9 . 15 % AS G I VEN TO DIT ( E ) VIDE L ETTER DATED 16 NOV. 2011 . EVEN T H I S AMOU N T I S P L OUGHED BAC K FOR THE CHARITAB L E ACT I V I T I ES OF THE SOC I ETY . THU S , ITA NO.1965/MDS/2013 9 W E F I ND THAT SA L E O F M E D I CINE I N THE PHARMACY I S CERTAINLY A CHARITABLE ACT I VITY. 8. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF BAU N FOUNDATION TRUST (SUPRA) WHILE DECIDING AS TO WHET HER ASSESSEE IS ELIGIBLE FOR EXEMPTION UNDER SECTION 10 (23C) CONSIDERED WHETHER INCOME FROM CHEMIST SHOP RUN IN THE HOSPITAL IS FOR PHILANTHROPIC PURPOSE OR IT IS A C OMMERCIAL OR AKIN TO TRADING ACTIVITY, THE HONBLE COURT HELD A S UNDER:- 2. THE SO L E GROUND ON WHICH THE CHIEF COMM I SS I ONER OF INCOME TA X HAS DENIED H I S APPROVA L IS T H A T TH E PETITIONER CONDUCTS A CHEMIST SHOP IN THE PREMISES OF THE HOSPITAL. THE CH I EF C OMM I S SIO NE R HAS COMPUTED THE NET SURPLUS FROM THE CHEM I ST SHOP AS A PERCENTAGE O F T H E INC OM E AND CAME TO THE CONCLUSION THAT IT VARIED BETWEEN 15 % FOR 2007-08 TO 1 8 % F OR 2 008- 0 9. MO R EOVER, IT HAS BEEN OBSERVED THAT 73 % OF THE TOTAL TURNOVER IS FROM I NPAT I ENTS , W H I L E 2 7 % I S FROM THE GENERA L PUBL I C WHICH WOULD I NCLUDE PURCHASES MADE BY THE PA T IENTS C OM I NG TO THE OUT PATIENTS' DEPARTMENT ( OPD). THE PERCENTAGE OF SURPLUS FROM TH E CHEM I ST S HOP T O THE TOTAL TURNOVER IS STATED TO RANGE BETWEEN 3 . 72 % TO 5 . 19 % BETWEEN 2 006-07 AND 2 00 8 -09 . HAV I NG SO OBSERVED, THE CHIEF COMM I SSIONER IN H I S I MPUGNED ORDER HA S ACCEPTED TH E PO SIT I O N THAT THE SURPLUS WHICH I S EARNED FROM THE CHEMIST SHOP IS UTILIZED FOR THE PURPOSES OF T HE H OSPITA L . DESPITE THIS, THE CHIEF COMMISSIONER HAS HELD THAT THE NATURE OF A CHEM I ST SHOP IS NOT EX C L USIVE TO THE PAT I ENTS COMING TO THE HOSPITAL AND IS COMMERCIAL OR AKIN TO TRAD I NG A C T IV I TY . HEN C E , I T HAS BEEN CONC L UDED THAT THE TRUST DOES NOT E X IST SOLELY FOR THE PURP O SE S OF PHIL ANT H ROPY. AS A RESULT , THE APPLICATION HAS BEEN REJECTED. ITA NO.1965/MDS/2013 10 3 . C O U N S EL APPEARING ON BEHALF OF THE PETITIONER SUBMITS THAT THE FUNDAMENTAL TEST WH I CH IS R E QUIRE D TO BE ADOPTED IS WHETHER THE OBJECT OF THE TRUST I S TO MAKE A P ROFIT OR CONTRARI W I S E W HE T H E R TH E T RUST EXISTS SOLELY FOR PHILANTHROPIC PURPOSES. LEARNED COUNSEL SUBMITTED THAT IT IS TH E DO MI NANT NATURE OF THE PURPOSE FOR WHICH THE TRUST EXISTS TH AT HAS TO BE BORNE I N MIND A N D IF THAT IS F OUND TO BE PHILANTHROPIC , ANY OTHER OBJECT MERELY ANCIL L ARY OR INCIDENTA L TO TH E P RI MARY O R DOMINANT PURPOSE WOULD NOT DETRACT FROM THE T R UE NAT U RE OR CHARACTER OF THE TR U ST. CO NSEQUENTLY, IT WAS URGED THAT THE CHIEF COMMISSIONER HAS MISAPPLIED HIMSELF I N LAW . ON THE OTH ER HAND COUNSEL APPEAR I NG ON BEHALF OF THE REVENUE HAS SUPPORTED THE ORDER PASSED BY THE CHI EF C O M MISSIONER. 4 . I N A D I T ANA R EDUCATION INSTITUTE ETC . V. ADDITIONAL COMM I SS I ONER O F INCOME TA X ( 199 7) 224 ITR 310 ( S C), THE SUPREME COURT HAS OBSERVED, WHILE CONSTRUING THE PROV I SIONS O F SECTION 1 0(22) THAT THE DECISIVE OR ACID TEST I S WHETHER ON AN OVERALL VIEW OF THE MATTER THE OBJECT IS TO MA KE A PROFIT . I F AFTER MEET I NG THE E X PENDITURE ANY SURPLUS RESULTS INCIDENTA L LY FROM THE AC T I V I T Y L AW FU L LY CARRIED ON BY THE I NSTI T UTION , IT WILL NOT CEASE TO BE ONE E X ISTING SOLELY FOR T HE STATU T OR I L Y S T IPU LA T ED PU RP OSE S O L ONG A S THE O BJECT I S N OT T O M A K E A P R OF I T . AGA IN, I T IS A W E L L SETTL ED PO S I T I ON I N LA W THAT THE DOMINANT NATU R E OF THE PURPOSE FOR WH I CH T HE TRUST E XI STS H AS TO BE CO N SIDERED. THE CHIEF COMMISSIONER HAS NOT DOUBTED THE GENU I NE N ESS OF THE TRU S T OR THE FACT THAT IT IS CONDUCTING A HOSPITAL . EVEN I F THE FIGURES WHICH ARE TAKEN INTO ACCOUNT BY T H E CH I EF COMMISSIONER ARE TO BE HAD REGARD TO, I T IS EVIDENT THAT THE ACTIVITY OF A CHEMIST SHOP IS AN ACT I V I TY W HICH IS INCIDENTA L OR ANCILLARY TO THE DOMINANT OBJECT AND PURPOSE WHICH IS TO RUN A HOS P I TA L . THE CHIEF COMM I SSIONER HAS ACCEPTED T H AT THE SURPLUS WHICH I S EARNED F ROM T H E O PER A T I ON OF A CHEMIST SHOP I S UTI LI ZED FOR T H E PURPOSES OF THE HOSP I TAL . A H OSP I TA L MUS T O F NEC ES SITY HA V E A SECT I ON OR DEPARTMENT WHERE MEDICINES CAN BE DISPENSED AND IT I S NOT UN CO MM O N FO R A MED I CA L HOSPITA L WHICH E XI STS EVEN F OR PHILANTHROP I C PURPOSES TO H AVE A CH EM IST S H OP W HERE PH A RM A C E UTI CA L PR OD U CTS ARE SOLD. THIS IS A FACIL I TY WH I CH I S INTENDED TO BE U SED PREDOMINANTLY BY PATIENTS AND THEIR RELATIVES. THOUGH THE MEMBERS OF THE GENERAL ITA NO.1965/MDS/2013 11 PUBL I C A R E NO T PROHIBITED FROM USING THE FACILITY, THE CRUC I AL QUEST I ON TO ASK OR THE TEST TO ANSWER I S W HETHER THE ESTABLISHMENT OF A CHEMIST SHOP IS INCIDENTAL OR ANCILLARY TO THE DOMINANT OBJECT AN D PURPOSE WHICH IS TO SET UP AND CONDUCT A HOSPITAL FOR PH I LANTHROPIC PURPOSES . AS A MATTER O F F ACT , SE C T I ON 10 ( 23C) PERMITS THE ACCUMULATION OF INCOME UP TO A CERTAIN STIPULATED AMOUNT OV E R A STIPULATED PERIOD . IN OUR VIEW , THE CH I EF COMMISSIONE R OF INCOME TA X HA S C L EAR L Y MI SAPP LI ED H I MSELF IN LAW BY HAVING REGARD TO A CLEARLY ANCI L LARY OR I NCIDENTAL ACT I VITY AND EL E V AT I NG IT T O THE STATUS OF THE DOMINANT PURPOSE FOR WH I CH THE HOSPITAL HAS BEEN ESTABL IS HED. R UN NIN G THE C H EMIST SHOP I N THE PRESENT CASE I S NOT THE DOM I NANT OBJECT OR PURPOSE OF T H E T RUST . NOR WOULD THE F I GURES AS DISCLOSED IND I CATE THAT THE NATURE OF THE ACT I VITY HAS ASSUMED S UCH A DOMINATING OR OVERWHELMING IMPORTANCE SO AS TO CAST DOUBT ON THE TRUE NATURE AND C H ARACTER O F 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 WH I CH THE IMPUGNED ORDER WOULD HAVE TO BE SET ASIDE . 9. IN THE CASE ON HAND, THE PRE-DOMINANT OBJECTS OF THE ASSESSEE IS TO PROVIDE MEDICAL RELIEF TO THE POOR B Y ESTABLISHING HOSPITALS, PHARMACEUTICALS, DISPENSARI ES ETC. RUNNING OF A CHEMIST SHOP IN THE HOSPITALS IS CERTA INLY AN ACTIVITY WHICH IS INCIDENTAL TO CARRYING ON OF ITS OBJECTS AND THE ASSESSEE IS NOT CARRYING ON ANY BUSINESS IN RUNNING THE CHEMIST SHOP IN ITS HOSPITALS. IN THE CIRCUMSTANCES , WE REVERSE THE ORDERS OF THE LOWER AUTHORITIES AND DIR ECT THE ASSESSING OFFICER TO TREAT THE SURPLUS FROM SALE OF MEDICINES ITA NO.1965/MDS/2013 12 AS INCOME INCIDENTAL TO THE OBJECTS OF THE ASSESSEE AND IS ELIGIBLE FOR EXEMPTION UNDER SECTION 11 OF THE ACT. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 1 4 TH DAY OF MARCH, 2014 AT CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) (CHALLA NAGEN DRA PRASAD) ACCOUNTANT MEMBER JUDI CIAL MEMBER CHENNAI, DATED THE 14 TH MARCH, 2014. SOMU COPY TO: (1) APPELLANT M/S.SUBBARAYA AIYAR PADMANABHAN & RAMAMANI, ADVOCATES 75A, DR.RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI-600 004. (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G .F