Appeal Details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 1954 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 5 month(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-04-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
17-02-2016
Assessment Year
2008-2009
Appeal Filed On
22-10-2012
Judgement Text
, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . , ! , # $ BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.2046/PN/2012 #& & / ASSESSMENT YEAR : 2008-09 ITO, WARD-11(2), PUNE . / APPELLANT V/S LATA MANGESHKAR MEDICAL FOUNDATION, SHRI MANGESH, 2153, SADASHIV PETH, VIJAYNAGAR COLONY, PUNE - 30 PAN NO.AAATL1944N . / RESPONDENT . / ITA NO.761/PN/2013 #& & / ASSESSMENT YEAR : 2009-10 ITO, WARD-11(2), PUNE . / APPELLANT V/S M/S. LATA MANGESHKAR MEDICAL FOUNDATION, S.NO.8, 13, ERANDWANE, NEAR MHATRE BRIDGE, PUNE -411 004. PAN NO.AAATL1944N . / RESPONDENT / ASSESSEE BY: SHRI NIKHIL PATHAK / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 17.02.2016 / DATE OF PRONOUNCEMENT:15.04.2016 2 ITA NO.2046/PN/2012 & 761/PN/2013 / ORDER PER R.K. PANDA, AM : THE ABOVE 2 APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST THE SEPARATE ORDERS DATED 30-03-2012 AND 23-01-2013 OF T HE CIT(A) I, PUNE RELATING TO ASSESSMENT YEARS 2008-09 AND 2009-10 RESPECTIVELY. FOR THE SAKE OF CONVENIENCE BOTH THE APPEALS WERE HEA RD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.2046/PN/2012 (A.Y. 2008-09) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A TRUST AND IS RUNNING A HOSPITAL UNDER THE NAME AND STYLE OF DEENANAT H MANGESHKAR HOSPITAL, ERANDWANE, PUNE. IT FILED ITS RETURN O F INCOME ON 30-09-2008 DECLARING TOTAL INCOME OF NIL. THE RETURN WAS ACCOMPANIED WITH STATEMENT OF TOTAL INCOME, AUDITED BALANCE SHEET AND INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED ON 31-03- 2008 AND FORM NO.10B. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO SUBMIT THE INFORMATION ON FOLLOWING POINTS : 1. DETAILS OF PATIENTS TREATED AT CONCESSIONAL RATE/FREE W ITH PROOF. 2. PERCENTAGE OF FREE/CONCESSIONAL PATIENTS OUT OF TOTAL PATIENTS. 3. CRITERIA APPLIED FOR TREATING PATIENTS AT CONCESSIONAL RATE/FREE. 4. COMPARATIVE CHART OF RATES CHARGED FOR VARIOUS PROCED URE IN COMPARISON WITH THE RATES CHARGED BY ANY THREE LEADIN G HOSPITALS IN PUNE. 5. NOTE ON SERVICES RENDERED BY THE TRUSTEES AND JUSTIFICAT ION OF PAYMENTS MADE TO THEM. 6. PATIENT WISE DETAILS OF CHARITY MADE. 7. DETAILS OF INDIGENT PATIENT FUND. 8. NOTE ON INTEREST PAID ON DEPOSITS ALONG WITH REASONS FOR ACCEPTING DEPOSITS, RATE OF INTEREST PAID ETC. 9. A NOTE ON RESEARCH ACTIVITY 10. A COPY OF CONTRACT WITH THE PERSONS RUNNING THE CANTE EN. 11. DETAILS OF VARIOUS EXPENSES CLAIMED AS WELL AS INCOME EAR NED UNDER VARIOUS HEADS. 3 ITA NO.2046/PN/2012 & 761/PN/2013 4. FROM THE RETURN OF INCOME FURNISHED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR AND THE DETAILS FURNISHED FROM T IME TO TIME, THE AO NOTED THAT THE ASSESSEE HAS SHOWN TOTAL R ECEIPTS AT RS.90,31,96,501/-. SOME OF THE MAJOR ITEMS OF INCOME ARE AS UNDER : 1. HOSPITAL FEES - RS.72.31 CRS 2. CANTEEN RECEIPTS - RS.02.28 CRS 3. SALE OF MEDICINES - RS.12.73 CRS 4. OTHER INCOME - RS.01.31.CRS 5. THE AO NOTED THAT SINCE THE TRUST HAS BEEN REGISTE RED U/S.12(A) OF THE I.T. ACT, 1961 IT IS COVERED BY SECTION 2(15) OF THE I.T. ACT. THE TRUST IS NOT RECOGNIZED U/S.10(23C) (VIA). TO VERIFY WHETHER THE TRUST IS PROVIDING CHARITABLE SERVICES OR NOT THE AO ASKED THE AS SESSEE TO FURNISH A COPY OF THE RETURN/STATEMENT FILED WITH THE CHA RITY COMMISSIONER. HE ALSO ADDRESSED A LETTER TO THE CHARITY COMMISSIONER TO FURNISH A COPY OF THE STATEMENT FILED BY TH E TRUST. ON VERIFICATION OF THE COPIES OF THE SAID RETURN/STATEMENT THE AO NOTED THAT THE ASSESSEE HAS SHOWN GROSS RECEIPT AT RS.21.09 CRORES IN THE STATEMENT FILED BEFORE THE CHARITY COMMISSIONER AS AGAINST THE ACTUAL HOSPITAL FEE OF RS.72.31 CRS. HE FURTHER NOTED VARIOUS LAPSE S WHICH INCLUDE UNDERSTATED FIGURES SHOWN TO THE CHARITY COMMISS IONER, HIGH PROFIT FROM THE CANTEEN RUN BY THE TRUST, TAKING DEPOSITS AND PAYING INTEREST ON THE SAME, SHOWING SOME OF THE MEDICAL RECEIPT S AS DONATIONS AND RECEIPTS U/S.80G BEING GIVEN TO THEM AND S O ON. IN VIEW OF THE ABOVE OBSERVATION THE AO PROPOSED TO DENY THE EXEMPTION U/S.11 TO THE TRUST AS THE TRUST IS BEING RUN MORE AS A COMMERCIAL ORGANIZATION THAN A CHARITABLE ONE. HE, THEREFORE, ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE ASKING TO EXPLAIN AS TO WH Y EXEMPTION U/S.11 SHOULD NOT BE DENIED TO THE TRUST. 4 ITA NO.2046/PN/2012 & 761/PN/2013 6. THE VARIOUS REASONS GIVEN BY THE AO IN THE SAID SHOW CAUSE NOTICE INTER ALIA INCLUDED THE FOLLOWING VIOLATIONS WHICH HAS BEE N SUMMARIZED BY THE LD.CIT(A) AT PAGE 8 OF HIS ORDER : 1(A) GROSS RECEIPTS SHOWN TO THE CHARITY COMMISSIONER F ROM HOSPITAL FEES OF RS.21.09 CRORES IS LESSER THAN THE ACTUAL RECEIPT OF RS.72.03 CRORES, WHICH HAS RESULTED INTO UNDERCREDITING OF RS.51.09 LAK HS ONLY IN THE IPF FUND. THE ASSESSING OFFICER FURTHER POINTED OUT THAT TH E ACTUAL PAYMENT OF RS.66.06 LAKHS SHOWN BY YOU FROM THE IPF FUND WAS LESSER THAN THE ACTUAL AMOUNT YOU WERE REQUIRED TO SPEND OF RS.1.44 CRORES B EING 2% OF RS.72.31 CRORES. (B) THE INSPECTION REPORT OF JT. CHARITY COMMISSIONER DATED 23.12.2009 CLEARLY SHOWS THAT 10% OF BEDS FOR INDIGENT PATIENTS AN D ANOTHER 10% FOR WEAKER SECTION HAS NOT BEEN DONE IN YOUR HOSPITAL. TH E ASSESSING OFFICER FURTHER STATED THAT THE NUMBER OF BEDS SHOWN TO CHARIT Y COMMISSIONER WAS 288 ONLY, WHEREAS THE SAME IN THE ACTIVITY REPORT SUBMITTED DURING SCRUTINY WAS SHOWN AT 450. ON THAT BASIS THE ASSESSING OFFIC ER CHARGED THE APPELLANT THAT THE NUMBER OF OPERATIONAL BEDS WAS DEL IBERATELY REDUCED FOR LESSER EARMARKING OF BEDS FOR INDIGENT PATIENTS AN D WEAKER SECTION PATIENTS. (C) THE RATES CHARGED BY THE APPELLANT TRUST IS AT PAR WITH HOSPITALS RUN ON COMMERCIAL LINES, WHICH IS ESTABLISHED FROM THE SURPL US OF 10.04 CRORES AFTER DEPRECIATION AND RS.16.02 CRORES BEFORE DEPRECI ATION ON THE TOTAL RECEIPT OF RS.90 CRORES. (D) ASSESSEE TRUST HAD TAKEN DEPOSITS OF RS.1.73 CRORES FRO M PUBLIC, RS.24.09 LAKHS FROM EMPLOYEES AND RS.19.07 LAKHS FROM CO NSULTANTS, ON WHICH INTEREST OF RS.11.74 LAKHS WERE PAID. 2(A) THE ASSESSING OFFICER THEREAFTER, IN THE SAME SHOW CAUSE NOTICE REFERRED TO ABOVE, QUOTED THE OBJECTS OF THE TRUST, AS TAKEN OUT FROM THE TRUST DEEDS AND THEREAFTER STATED THAT THE ASSESSEE HOSPIT AL IS ALSO RUNNING A CANTEEN WHOSE TOTAL GROSS RECEIPTS IS OF RS.2,28,76,076 AND AFTER MAKING AN EXPENDITURE OF RS.1,49,94,755, THE GROSS PROFIT WA S COMPUTED AT RS.78,81,321 WHICH WAS WORKED OUT AT 34.4% OF THE GRO SS RECEIPTS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE CANTEEN IS RUN WITH A PROFIT MOTIVE WITHOUT ANY SUBSIDY TO PATIENTS ETC., BECAUSE SUC H HIGHER PROFIT MARGIN CANNOT BE EARNED WITHOUT THIS MOTIVE. THE ASSE SSING OFFICER FURTHER POINTED OUT THAT RUNNING OF CANTEEN IS NOT O NE OF THE OBJECTIVES OF THE TRUST AND THEREFORE, IT COULD ONLY BE HELD TO BE INCIDENTAL TO THE MAIN OBJECTIVE IF IT COULD BE SEEN THAT THE SERVICES OF TH E CANTEEN WERE PROVIDED TO THE PATIENTS FREE OF COST. IN THIS CONTEXT, THE ASSESSI NG OFFICER ALSO REFERRED TO THE REPORT OF JT. CHARITY COMMISSIONER WH EREIN IT WAS NOTED THAT THE HOSPITAL DO NOT PROVIDE MEALS EVEN TO INDIGE NT PATIENTS FREE OF COST. 2(B) ASSESSING OFFICER FURTHER POINTED OUT THAT RUNNING OF CANTEEN IS NOT ONE OF THE OBJECTIVES OF THE TRUST AND THEREFORE, IT COULD ONLY BE HELD TO BE INCIDENTAL TO THE MAIN OBJECTIVE IF IT COULD BE SEEN THAT THE SERVICES OF THE CANTEEN WERE PROVIDED TO THE PATIENTS FREE OF COST. IN THIS CONTEXT, THE ASSESSING OFFICER ALSO REFERRED TO THE REPORT OF JT. CHA RITY COMMISSIONER 5 ITA NO.2046/PN/2012 & 761/PN/2013 WHEREIN IT WAS NOTED THAT THE HOSPITAL DO NOT PROVIDE MEALS EVEN TO INDIGENT PATIENTS FREE OF COST. 3. THE ASSESSING OFFICER HAS FURTHER STATED IN THE ABOVE REFERRED SHOW CAUSE THAT THE TRUST HAS RECEIVED DONATIONS OF RS.66,50, 136, OUT OF WHICH RS.37,07,000 WAS TOWARDS CORPUS FUND. THE ASSESSING OFFICER HAS STATED THAT LETTERS WERE ADDRESSED TO SOME OF THE DONORS AFTER OBTAINING DONORS ADDRESSES ETC. FROM THE ASSESSEE AND TWO PERSONS I.E. MRS. SU JATA NAYAKUDE AND MR. AMIT S. WAGALE HAVE REPLIED THAT T HE HUSBAND AND THE MOTHER OF THE RESPECTIVE PERSONS WERE UNDER TREATMENT AT THE HOSPITAL UNDER ESI SCHEME AND THE DIFFERENCE OF THE BILLS RAISE D BY THE HOSPITAL AND THE REIMBURSEMENT FROM THE ESI WERE GIVEN AS DONATION S, FOR WHICH RECEIPTS U/S 80G WERE ISSUED. THE ASSESSING OFFICER FURTHER STATED IN THIS CONTEXT THAT THE MEMBERS OF SHAH FAMILY, NAMELY LATA SHAH, SHARADBHAI SHAH, SHARMILA SHAH, SATYASHIL SHAH AND RAGINI SHAH, HAVE PAID RS.3,000 EACH TO THE FOUNDATION FOR PARTICIPATING IN THE MED ICAL CHECK UP PROJECT CALLED SHWAS WHEREIN HEALTH CHECK UP ALONG WITH Y OGA TEACHING WERE DONE. THE ASSESSING OFFICER THEREFORE, CHARGED THE APPE LLANT TO HAVE CAMOUFLAGED THE HOSPITAL RECEIPTS FOR PROVIDING MEDIC AL SERVICES AS DONATIONS. 4. IN THE AFORESAID SHOW CAUSE NOTICE THE ASSESSING OFFICE R THEREAFTER POINTED OUT THAT PAYMENTS OF RS.90,000 AS HONORARIUM T O MRS. MEENA KELKAR, MOTHER OF ONE OF THE TRUSTEES AND RS.3,60,000, AS SALARY TO MR. SACHIN KSHIRSAGAR, BROTHER OF ANOTHER TRUSTEE, DR. JIT ENDRA KSHIRSAGAR, AND RS.4,20,000 AS HONORARIUM AND RS.1,80,000 AS CONVEYANCE CHARGES TO MRS. BHARATI MANGESHKAR, ONE OF THE TRUSTEES WERE MADE WHO ARE PERSONS COVERED U/S 13(1)I AND THEREFORE, THE APPELLANT WAS ASKED TO JUSTI FY THESE PAYMENTS WITH EVIDENCES. 5. THE ASSESSING OFFICER THEREAFTER, ON THE STRENGTH OF THE OBSERVATIONS DESCRIBED IN THE ABOVE REFERRED SHOW CAUSE NOTICE, WHICH HAS BEEN SUMMARIZED ABOVE, CALLED UPON THE ASSESSEE TRUST TO SHOW CAUSE AS TO WHY THE EXEMPTION U/S 11 SHOULD NOT BE DENIED FOR RUNNING THE HOSPITAL AS A COMMERCIAL ORGANIZATION AND FOR SUSPECTED VIOLATION OF SEC. 13(1)I. 6. THE ASSESSING OFFICER FURTHER POINTED OUT IN THE AFO RESAID SHOW CAUSE NOTICE THAT THE CLAIM OF THE ASSESSEE FOR DEPRECIA TION WHILE COMPUTING THE INCOME U/S 11 IS NOT ALLOWABLE AS PER THE DECISIONS OF THE HONBLE CALCUTTA HIGH COURT GIVEN IN 199 ITR 215, B ASED ON THE DECISION OF HONBLE MADRAS HIGH COURT IN 135 ITR 485. AS PER THESE DECISIONS THE INCOME AND EXPENSES HAS TO BE REAL. OTHER CASE LAWS WERE ALSO RELIED UPON TO SHOW CAUSE WHY DEPRECIATION CLAIMED SHOULD ALSO NOT BE DISALLOWED. 7. THE ASSESSING OFFICER IN THE SAME SHOW CAUSE NOTICE AL SO REFERRED TO RENTAL RECEIPT OF RS.2,88,100 FROM DIFFERENT PART IES INCLUDING RS.1,80,000 FROM BHARTI AIRTEL FOR ITS TOWER AS WELL A S THE ORGANIZING OF MUSICAL NIGHTS AND GAZAL NIGHTS AS PER ACTIVITY REPORT TO CLAIM THAT THE ACTIVITIES OF THE HOSPITAL IS NOT OF THE NATURE OF CHA RITABLE PURPOSES. 7. THE ASSESSEE GAVE PARA WISE REPLY TO THE VARIOUS POINTS RAISED BY THE AO IN THE SAID SHOW CAUSE NOTICE. HOWEVER, THE AO WAS NOT CONVINCED WITH THE SUBMISSIONS GIVEN BY THE ASSESSEE. AS REGARDS THE 6 ITA NO.2046/PN/2012 & 761/PN/2013 CONTENTION OF THE ASSESSEE THAT IT HAS GIVEN FREESHIP TO PATIENTS OF RS.5.34 CRORES THE AO NOTED THAT NO EVIDENCE WAS PROVID ED THAT THESE ARE ALL POOR AND NEEDY PATIENTS. ASSESSEE HAS MERELY GIVEN A LIST OF PATIENTS TREATED FROM THE IPF IN SOFT FORM. THE LISTS INCL UDED ONLY NAME OF PATIENTS AND THE ACCOUNTS SHOWN FROM JUNE 2007 TO MARCH 2008. NO FURTHER DETAILS HAVE BEEN PROVIDED. ACCORDING T O THE AO MERE GIVING DISCOUNTS FOR VARIOUS OTHER REASONS TO THE P ATIENTS DOES NOT AMOUNT TO CHARITY. HE OBSERVED THAT DURING THE RE LEVANT ASSESSMENT YEAR THE HOSPITAL RECEIPTS FROM MEDICAL TREATM ENT ARE TO THE TUNE OF RS.72.31 CRORES. 2% OF THIS WOULD COME TO RS.1 .4 CRORES AND THE ASSESSEE SHOULD HAVE SPENT THIS AMOUNT ON THE INDIGENT AND WEAKER SECTION PATIENTS. AS AGAINST THIS THE ASSESSEE CLAIMED TO HAVE SPENT ONLY RS.66 LAKHS. THUS, THERE IS CLEAR SHORTFALL OF R S.74 LAKHS IN THE AMOUNT TO BE EXPENDED FOR THE IPF & WEAKER SECTIO N PATIENTS AS STIPULATED BY THE CHARITY COMMISSIONER. 8. AS REGARDS THE SUBMISSION OF THE ASSESSEE THAT AS P ER THEIR UNDERSTANDING OF THE IPF SCHEME THE GROSS BILLING OF THE S CHEME DOES NOT INCLUDE OPD FEES, GENERAL WARD FEES AND HOSPITAL DRUGS, DOCTORS FEES ETC., THE AO HELD THAT THERE IS NO AMBIGUITY IN THE M EANING AND ANY LAY PERSON WILL INFER THAT IT IS INCLUSIVE OF MEDICAL RECEIPTS . HE FURTHER NOTED THAT THE WORKING GIVEN BY THE TRUST IS ALS O ABSURD BECAUSE FROM THE AMOUNT AS PER INCOME AND EXPENDITURE ACCOUNT OF RS.72.31 CRORES, THEY HAVE DEDUCTED OPD FEES OF RS.14.72 C RORES, CANTEEN OF RS.0.3 CRORES, PHARMACY RS.3.3 CRORES ETC. T HE TOTAL RECEIPTS FROM THE CANTEEN ARE RS.2.28 CRORES AND FROM TH E PHARMACY RS.12.73 CRORES. THEREFORE, IT IS NOT UNDERSTOOD AS TO WH Y ONLY RS.0.3 CRORES FROM CANTEEN AND RS.3.3 CRORES FROM THE PHARMACY ARE REDUCED FROM RS.72.3 CRORES. 7 ITA NO.2046/PN/2012 & 761/PN/2013 9. AS REGARDS THE SUBMISSION OF THE ASSESSEE THAT THE Y HAVE SUBMITTED ALL THE FINANCIAL STATEMENTS DULY AUDITED TO THE CHARITY COMMISSIONER IS CONCERNED, THE AO HELD THAT THE SAME IS NOT CORRECT SINCE THE COPIES OF THE STATEMENT FILED BY THE ASSESSEE W ITH THE JOINT CHARITY COMMISSIONER SHOWS RECEIPTS OF ONLY RS.21 CRORES. 10. AS REGARDS THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNT SPENT ON BPL PATIENTS OF RS.66.06 LAKHS IS EXCLUSIVE OF FREE SHIP OF RS.5.34 CRORES IS CONCERNED, THE AO HELD THAT THE SAME IS ALSO NOT CORRECT. HE NOTED THAT THE ASSESSEES ACTIVITY REPORT SUBMITTED DURING THE COURSE OF HEARING MENTIONS THE TOTAL NUMBER OF BEDS AT 450. IN THE STATEMENT FILED WITH THE CHARITY COMMISSIONER THEY HAV E SHOWN IT AS 288. 10% OF THESE RESERVED FOR BPL PATIENTS AND FURT HER 10% FOR WEAKER SECTION PATIENTS. THE ASSESSEE HAS STATED THAT ACTUAL BEDS ARE 241. THUS THERE ARE DIFFERENT FIGURES GIVEN AT DIFFERENT POIN TS OF TIME. ACCORDING TO THE AO ONLY ONE OF THEM IS CORRECT AND T HE ASSESSEE HAS GIVEN THE OTHER INCORRECT FIGURE FOR REASONS BEST KNOWN TO THEM. 11. AS REGARDS THE RECEIPTS FROM CANTEEN IS CONCERNED IT WAS SUBMITTED BY THE ASSESSEE THAT THE PROFIT IS NOT RS.78.81 LAKHS BUT ONLY RS.18.95 LAKHS AND SEPARATE BOOKS OF ACCOUNT ARE M AINTAINED FOR THE CANTEEN. HOWEVER, THE AO NOTED THAT IF THE SAME IS CORRECT THE SAME COULD HAVE BEEN REFLECTED IN THE CONSOLIDATED ACCOUN T AS WELL. HOWEVER, IN THE PROFIT AND LOSS ACCOUNT THE CANTEEN RECE IPTS WERE SHOWN AT RS.2.28 CRORES AND CANTEEN EXPENSES AT RS.1.49 CRORES. THE SUBMISSION OF THE ASSESSEE THAT THE RATES ARE MUCH LESS ER THAN OTHER PLACES IS ALSO NOT CORRECT IN VIEW OF THE REPORT OF THE IN SPECTOR WHO HAD GIVEN THE RATES OF FOOD ITEMS CHARGED BY THE CANTEEN OF THE ASSESSEE. HE NOTED THAT THE HOSPITAL DOES NOT PROVIDE FOOD TO THE PATIENTS. THE PATIENTS AND OTHERS HAVE TO BUY FROM THE CANTEEN. THE REFORE, IT IS IN 8 ITA NO.2046/PN/2012 & 761/PN/2013 THE NATURE OF BUSINESS CONDUCTED BY THE ASSESSEE AND THE INCOME FROM SUCH BUSINESS CANNOT BE EXEMPT UNLESS IT IS IN THE COURSE OF THE A CTUAL CARRYING OUT OF THE PRIMARY PURPOSE OF THE TRUST. FOR T HE ABOVE PROPOSITION THE AO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. THANTHI TRUST REPORTED IN 247 ITR 285 AND THAT OF DASA BALINJIKA SEVA SANGAM VS. CIT REPORTED IN 240 ITR 863 . 12. THE AO NOTED THAT THE ASSESSEE ALSO HAS RECEIVED DONATIONS FROM THE PATIENTS IN LIEU OF MEDICAL SERVICES RENDERED. HE REFERR ED TO SOME OF THE DONATIONS RECEIVED FROM THE PATIENTS SUCH AS DILIP N AYAKUDE, RS.5,100/- SMT. KAVITA WAGLE RS.9,000/- AND SHRI RAJESH PHA DKE RS.2,000/- ETC. ACCORDING TO THE AO THESE RECEIPTS ARE IN THE NATURE OF MEDICAL FEES AND NOT VOLUNTARY DONATIONS AS EXPLAINED IN T HE SHOW CAUSE NOTICE. HE, HOWEVER, NOTED THAT THE ASSESSEE HAD ISSUED DONATION RECEIPTS TO THE PATIENTS AND CLAIMED DEDUCTION U/S.80G. 13. AS REGARDS THE DONATIONS RECEIVED FROM SHAH FAMILY IS CONCERNED, IT WAS EXPLAINED BY THE ASSESSEE THAT THESE PAYMENTS WERE RECEIVED AS DONATIONS FOR THE SHWAS PROJECT. HOWEVER, T HE AO NOTED THAT THESE PEOPLE HAD PARTICIPATED IN THE PROJECT/CAMP AND PAID FOR THE SERVICES TAKEN. ACCORDING TO THE AO A VOLUNTARY DO NATION HAS TO BE MADE OUT OF ONES VOLITION AND SHOULD BE UNCONDITIONAL. HOWEVER, FROM THE LIST OF THE DONORS HE NOTED THAT THEY HAVE PAR TICIPATED IN THE CAMPS AND MADE PAYMENT. THEREFORE, IT IS NOTHING BUT F EES IN THE GARB OF DONATION. IN SOME OF THE CASE, THE AO FURTHER NO TED THAT EACH ONE OF THEM HAS PAID RS.3,000/- AS DONATION. HAD IT BEEN VOLUNTARY THE FIGURE WOULD HAVE VARIED. THEREFORE, IT IS HIGHLY IMPROBA BLE THAT INDIVIDUALS FROM DIFFERENT AREA DECIDE TO GIVE RS.3,000/- ONLY FOR THE CAMP. THUS, IT IS EVIDENT THAT THERE IS A PRESCRIBED FEE O F RS.3,000/- PER HEAD TO PARTICIPATE IN THE CAMP. 9 ITA NO.2046/PN/2012 & 761/PN/2013 13.1 SIMILARLY, THE AO NOTED THAT THE TRUST HAS PAID SALAR Y TO MRS. BHARATI MANGESHKAR AND MRS. MEENA KELKAR. MRS. BHARATI MANGESHKAR IS A TRUSTEE OF THE ASSESSEE TRUST WHILE MRS . MEENA KELKAR IS MOTHER OF MR. DHANANJAY KELKAR, WHO IS THE TRUSTEE OF THE ASSESSEE TRUST. ACCORDING TO THE AO THE SALARY PAID TO THESE 2 PERSONS IS IN CLEAR VIOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT , 1961. THE AO FURTHER NOTED THAT IN RESPECT OF THE SALARY PAID TO MRS MEENA KELKAR THE ASSESSEE HAS NOT PROVED THAT ANY SERVICES ARE RENDERED BY HER AND WHETHER SHE HAD THE REQUISITE QUALIFICATION FOR HAN DLING THE JOB. HE FURTHER NOTED THAT THE RETIREMENT AGE OF THE E MPLOYEES WAS 58 WHILE MRS. KELKAR WAS ABOVE THE AGE OF 65. THE ASSESSEE TRUST HAS BYPASSED THE RULES WHILE APPOINTING HER. 13.2 AS REGARDS THE EMPLOYMENT OF MRS. BHARATI MANGESHKA R IS CONCERNED THE AO NOTED THAT SHE IS NOT COMING REGULAR LY TO THE HOSPITAL. FURTHER, MRS. BHARATI MANGESHWAR HAS NOT CARR IED OUT MUCH WORK AND THE ASSESSEE HAS ALSO NOT PRODUCED ANY EVIDE NCE OF THE WORK CARRIED OUT BY HER. THE AO NOTED THAT APART FROM 3 PA PERS WHICH WERE SIGNED BY HER NO OTHER DOCUMENT WAS FURNISHED BY THE ASSESSEE TO JUSTIFY THE ACTUAL WORK CARRIED OUT BY MRS. BHARATI MANG ESHKAR. CONSIDERING THE ABOVE OBJECTIONS THE AO DISALLOWED THE CLA IM OF EXEMPTION U/S.11 BY HOLDING THAT THE PAYMENT MADE TO MR S. BHARATI MANGESHKAR AND MRS. MEENA KELKAR RESULTED IN VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT. FOR THE ABO VE PROPOSITION THE AO RELIED ON THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF AGAPPA CHILD CENTRE VS. CIT REPORTED IN 226 ITR 211 A ND THE DECISION IN THE CASE OF SHRI NARAYAN CHANDRIKA TRUST VS. CIT REPORTED IN 224 ITR 464. 10 ITA NO.2046/PN/2012 & 761/PN/2013 14. THE AO FURTHER NOTED THAT THE ACTIVITY REPORT SUBM ITTED BY THE ASSESSEE SHOWS THAT IT HAS ORGANIZED MUSICAL NIGHTS AND GAZAL NIGHTS WHICH ACCORDING TO HIM IS NOTHING BUT ENTERTAINMENT AND T HE EXPENDITURE INCURRED TOWARDS THESE ACTIVITIES CANNOT BE CONSIDERED TO BE APPLICATION FOR CHARITABLE PURPOSES. THE SUBMISSION OF THE ASSESSE E THAT THIS ACTIVITY SUPPORTS THE INPUTS OF MEDICINES AND ME DICAL SERVICE TO PATIENTS AND THAT THE MUSICAL NIGHTS ARE ORGANIZED ON LY FOR THE BENEFITS OF THE PATIENTS, RELATIVES, STAFF AND CONSULTANTS ETC . WAS REJECTED BY THE AO ON THE GROUND THAT HOSPITAL IS A PLA CE WHERE CALM AND QUIET IS REQUIRED. ACCORDING TO THE AO MUSICAL NIGHTS MAY NOT BE OF ANY HELP. EVEN IF THEY ARE HELPFUL IT IS ONLY THE PRIVATE ROOM PATIENTS WHO WILL HAVE ACCESS TO T.VS AND THE GENERAL WAR D AND OTHER PATIENTS WILL NOT HAVE THE BENEFITS. THE AO FURTHER HELD TH AT EVEN IF MUSIC SUPPORTS THE INPUTS OF MEDICINES AND MEDICAL SERVICE , SELECTED MUSIC CAN BE PLAYED THROUGHOUT THE DAY AND THERE IS NO NEED TO ORGANIZE MUSICAL NIGHTS. THE AO ALSO NOTED THAT THE ASSE SSEE HAS RECEIVED RENT FROM BHARTI AIRTEL FOR ERECTION OF TOWER IN TH E HOSPITAL PREMISES WHICH AMOUNTS TO COMMERCIAL EXPLOITATION OF THE HO SPITAL PROPERTY. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSES SEE AND DISTINGUISHING THE VARIOUS DECISIONS RELIED ON BY THE ASSESS EE THE AO DENIED THE EXEMPTION CLAIMED U/S.11 OF THE I.T. ACT AND D ETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.11,34,45,230/- BY OBSERVING AS UNDER : 13. TO SUM UP, THE ASSESSEE IS RUNNING THE HOSPITAL WITH AN INTENTION OF MAKING PROFIT AS IS EVIDENT FROM THE DISCUSSIONS MADE IN PARAGRAPHS 5 & 10 ABOVE. THE LEGISLATIVE INTENT IN EXEMPTING THE INCOME OF TH E TRUSTS IS THAT THEY SHOULD PROVIDE MEDICAL RELIED TO EVERYBODY ESPECIALLY TO POOR AND NEEDY. THIS IS CLEAR FROM THE CONDITIONS LAID DOWN BY THE CHA RITY COMMISSIONER TO SET APART 2% OF THE GROSS RECEIPTS AS INDIGENT PATIENT F UND. THE ASSESSEE HAS NOT FOLLOWED THIS AS IT HAS GROSSLY UNDERSTATED ITS REC EIPTS IN THE 11 ITA NO.2046/PN/2012 & 761/PN/2013 STATEMENT FURNISHED TO THE CHARITY COMMISSIONER AS DISCUS SED IN PARAGRAPHS 5 AND 11 ABOVE. SOME OF THE PATIENTS HAVE PAID FOR MEDICAL TREATMENT OR OTHER SERVICES BUT RECEIPTS HAVE BEEN GIVEN TO THEM TREATING THE SAME A S DONATIONS. IF THESE PEOPLE HAD CLAIMED DEDUCTION U/S.80G, THEN IT WOULD AMOUNT TO THE TRUST ABETTING TAX EVASION. AS DISCUSSED IN PARAGRAPH 8 ABOVE THERE IS CLEAR VIOLATI ON OF SECTION 13(1)I DUE THE PAYMENTS MADE TO MRS. BHARATI MANGESHKAR AND M RS. MEENA KELKAR. IN VIEW OF THE ABOVE, THE EXEMPTION CLAIMED U/S.11 O F THE INCOME TAX ACT , 1961 IS DENIED TO THE ASSESSEE TRUST AND PENALTY PROCEEDI NGS U/S.271(1)(C) ARE INITIATED SEPARATELY FOR FURNISHING OF INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. SUBJECT TO T HE ABOVE REMARKS THE INCOME OF THE TRUST IS COMPUTED AS UNDER : PARTICULARS AMOUNT (RS.) AMOUNT (RS.) SURPLUS AS PER RETURN 10,45,52,505 ADD : PROVISION OR PAYMENT OF GRATUITY NOT ALLOWABLE U/S.40A(7) OF THE I.T. ACT AS STATED IN COLUMN NO.17(1) OF THE TAX AUDIT REPORT 57,75,273 PROVISION FOR LEAVE ENCASHMENT NOT PAID BEFORE THE SPECIFIED DATE AS PER PROVISIONS OF SECTION 43B AS STATED IN COLUMN 21(B)(B) OF THE TAX AUDIT REPORT 31 ,17,452 88,92,725 TOTAL INCOME 11,34,45,230 15. BEFORE CIT(A) THE ASSESSEE MADE ELABORATE SUBMISSIONS AND RELIED ON VARIOUS CASE DECISIONS. THE CIT(A) CALLED FOR A REM AND REPORT FROM THE AO AND CONFRONTED THE SAME TO THE ASSESSEE. AFTER CONSIDERING THE REMAND REPORT OF THE AO AND BASED ON T HE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) ALLOWED THE CLAIM O F EXEMPTION U/S.11 TO THE ASSESSEE. WHILE DOING SO, HE NOTED THAT TH E AO HAS DENIED THE EXEMPTION BY RAISING VARIOUS OBJECTIONS WHICH CAN BE CONSIDERED TO BE FALLING UNDER THE FOLLOWING 2 CATEGORIES, I.E . (A) THAT THE ACTIVITIES OF THE ASSESSEE TRUST ARE NOT CHARITABLE IN NATURE, (B) THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) BY M AKING PAYMENTS TO MRS. MEENA KELKAR AND MRS. BHARATI MANGESHKAR. 12 ITA NO.2046/PN/2012 & 761/PN/2013 15.1 AS REGARDS THE OBJECTION OF THE AO THAT ACTIVITIES O F THE ASSESSEE TRUST ARE NOT CHARITABLE IN NATURE HE NOTED THAT THE A O HAS BASED HIS OPINION ON THE GROUND THAT THERE IS HIGHER PROFIT MARGIN, V IOLATION OF CONDITIONS PRESCRIBED IN BOMBAY PUBLIC TRUST ACT, DISCREP ANCY IN THE REPORT SUBMITTED TO THE CHARITY COMMISSIONER, NON FULFILLMENT OF CONDITIONS PRESCRIBED BY THE BOMBAY HIGH COURT AND CHAR ITY COMMISSIONER UNDER THE BPT ACT TO ALLOCATE 2% OF THE HOS PITAL COLLECTIONS TO IPF AND 10% OF OPERATIONAL BEDS EACH TO IND IGENT CATEGORY AND WEAKER SECTION CATEGORY. HE FURTHER NOTED THAT CONCESSION OF RS.5.2 CRORES CLAIMED BY THE ASSESSEE TO HA VE BEEN GIVEN TO POOR IN FACT HAS MAINLY BEEN GIVEN TO PERSONS OF MIDDLE CLASS, WHO CAN AFFORD PAYMENT, HIGHER PROFIT FROM RUNNING OF CANTEEN, ACCEPTING DEPOSITS FROM DIFFERENT PERSONS, RENTAL INCOME FROM AIRTEL AND ORGANIZING MUSICAL NIGHTS ETC. FURTHER, ACCORDING TO THE A O MERE RUNNING OF A HOSPITAL CANNOT BE SAID TO BE AN ACTIVITY OF C HARITABLE NATURE BUT FOR QUALIFYING THE SAID ACTIVITY UNDER THE HEA D CHARITABLE PURPOSES, THE MEDICAL RELIEF MUST BE GIVEN TO THE POOR A ND THE UNDER PRIVILEGED EITHER FREE OF COST OR AT CONCESSIONAL RATES. TH E LD.CIT(A) ANALYSED THE PROVISIONS OF SECTION 2(15) WHICH GIVES AN INC LUSIVE DEFINITION TO THE CHARITABLE PURPOSES AND SAYS CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. SINCE THE IMPUGNED ASSESSMENT YEAR INVOLVED IS A.Y. 2008-09 HE NOTE D THAT THE WORDS NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PR OFIT WERE NOT AVAILABLE IN THE DEFINITION OF CHARITABLE PURPOSES UPTO A. Y. 2008-09. W.E.F., 01-04-2009 SUB-SECTION 2 (15) HAS BEEN FURTHER SUBST ITUTED BY THE NEW DEFINITION. 13 ITA NO.2046/PN/2012 & 761/PN/2013 16. RELYING ON VARIOUS DECISIONS THE LD.CIT(A) HELD THAT M ERELY BECAUSE SOME SURPLUS HAS BEEN GENERATED, NO FAULT CAN BE FOUND WITH THE ACTIVITY OF THE ASSESSEE SO LONG THE SURPLUS IS UTILIZED FOR THE OBJECTS OF THE TRUST. THEREFORE, THE OBJECTION OF THE AO ON THE ISSUE OF SURPLUS AS AN EVIDENCE OF HOSPITAL BEING RUN AS A COMMERC IAL ENTITY CANNOT BE ACCEPTED IN THE CONCEPT OF CHARITY AVAILABLE IN THE INCOME TAX ACT FOR THE IMPUGNED ASSESSMENT YEAR. FOR THE AB OVE PROPOSITION HE RELIED UPON VARIOUS DECISIONS INCLUDING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF ADINATH EDUCATIONAL INSTITUT ION REPORTED IN 224 ITR 310 AND THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE VASE OF VANITA VISHRAM TRUST REPORTED IN 327 ITR 121 WH ERE IT HAS BEEN HELD THAT GENERATION OF SURPLUS IS NOT REASON TO DE NY EXEMPTION TO A CHARITABLE TRUST. 17. AS REGARDS THE OBJECTION OF THE AO THAT THE ASSES SEE HAS NOT FURNISHED CORRECT DOCUMENTS TO THE CHARITY COMMISSIONER AND THAT THERE WAS A SHORTFALL IN THE CREATION OF IPF IS CONCERNE D THE LD.CIT(A) NOTED THAT THE ASSESSEE TRUST HAD CLARIFIED ALL THE ISSUE S WHICH WERE TOTALLY IGNORED BY THE AO WHILE COMPLETING THE ASSESSMENT . HE OBSERVED THAT THE ASSESSEE HAS NOT HIDDEN ANY FIGURE FR OM THE CHARITY COMMISSIONER AND ALL THE ANNUAL REPORTS WERE SUBMITTED T O THE CHARITY COMMISSIONER. 18. AS REGARDS THE CREATION OF INDIGENT PATIENT FUND HE N OTED THAT THERE WAS CERTAIN CONFUSION REGARDING THE AMOUNT TO BE PROVIDED FOR THE SAID FUND AND AFTER INSPECTION OF THE CHARITY COMMISSION ER THE ASSESSEE TRUST HAD PROVIDED FOR THE SHORTFALL IN THE SUBS EQUENT YEAR. FURTHER THE SHORTFALL COMPUTED BY THE CHARITY COMMISSION ER WAS MUCH LESS THAN THE SHORTFALL COMPUTED BY THE AO. 14 ITA NO.2046/PN/2012 & 761/PN/2013 19. AS REGARDS THE OBJECTION OF THE AO THAT THE ASSES SEE IS RUNNING A CANTEEN ON A COMMERCIAL BASIS, THE CIT(A) NOTED THAT THE PROFIT ON RUNNING THE CANTEEN WAS INCIDENTAL TO THE MAIN OBJECTS OF THE TRUST. FURTHER, ACCORDING TO THE LD.CIT(A) THE RATES CHARGED ARE QUITE LOW . HE OBSERVED THAT THE ACTUAL SURPLUS FROM THE CANTEEN ACTIV ITY WAS RS.18.95 LAKHS AND NOT RS.78.81 LAKHS AS COMPUTED BY THE AO. HE FURTHER OBSERVED THAT THE ASSESSEE HAS MAINTAINED SEPA RATE BOOKS OF ACCOUNT AND THEREFORE THE CONDITION OF SECTION 11(4A) HAS BEEN FULFILLED. 20. AS REGARDS THE OBJECTION OF THE AO THAT THE ASSES SEE HAS ISSUED DONATION RECEIPTS WHILE ACTUALLY THE ASSESSEE TRUST HAD RENDERED SERVICE TO THE VARIOUS PERSONS TO WHOM DONATION RECEIP TS WERE ISSUED, THE CIT(A) NOTED THAT THERE IS NO JUSTIFICATION FOR ARRIVING AT SUCH A CONCLUSION. HE OBSERVED THAT THE AO HAD RECORDED THE STATEMENTS OF FEW PERSONS WITHOUT GRANTING ANY OPPORTUNITY TO THE ASS ESSEE TO REBUT THE SAME. HE CONSIDERED THE EVIDENCES FURNISHED BY THE ASSESSEE WHEREIN ALL THE PERSONS HAD CLARIFIED THAT THEY HAD GIVEN D ONATIONS TO THE ASSESSEE TRUST. FURTHER, IN THE REMAND PROCEEDINGS ALSO, THE AO COULD NOT CONTROVERT THE VARIOUS SUBMISSIONS GIVEN BY T HE ASSESSEE. HE, THEREFORE, HELD THAT THERE IS NO MERIT IN THE ALLEGATION OF THE AO THAT THE ASSESSEE TRUST HAS ISSUED DONATION RECEIPTS A ND THEREBY HAS EVADED TAX. 21. AS REGARDS THE OBJECTION OF THE AO THAT ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) IN RESPECT OF THE PAYMENT MADE TO MRS. BHARATI MANGESHKAR AND MRS. MEENA KELKAR IS CONCERNED T HE CIT(A) HELD THAT SUCH OBJECTION OF THE AO IS NOT CORRECT. ON T HE BASIS OF THE VARIOUS SUBMISSIONS AND EVIDENCES INCLUDING THE ADDITIONAL EVIDENCES FILED BEFORE HIM THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. 15 ITA NO.2046/PN/2012 & 761/PN/2013 ON THE BASIS OF SUCH REMAND REPORT THE CIT(A) HELD THAT BOTH THESE PERSONS WERE RENDERING SERVICES TO THE ASSESSEE TRUST AND THEREFORE THE PAYMENTS MADE TO THEM COULD NOT BE HELD TO BE RESULTING IN VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C). 22. AS REGARDS THE OBJECTION OF THE AO THAT THE RETIRE MENT AGE OF THE EMPLOYEES OF THE TRUST IS 58 WHEREAS MRS. MEENA KELKAR, 6 5 YEARS OF AGE WAS ACCOMMODATED THE CIT(A) HELD THAT THERE IS NO ACCOMMODATION TO MRS. MEENA KELKAR. THE JOB OF MRS. KELK AR WAS EARLIER CARRIED OUT BY MRS. SARITA SHUKLA WHO WAS BEING PA ID SALARY OF RS.16,000/- PER MONTH WHEREAS MRS. KELKAR WAS BEING GIVEN SALARY OF RS.10,000/- PER MONTH. 23. AS REGARDS THE ALLEGATION OF THE AO THAT DR. DHANAN JAY KELKAR, SON OF MRS. KELKAR HAD ACCEPTED THAT MRS. KELKAR HAD NO PRIOR EXPERIENCE THE CIT(A) ACCEPTED THE FACT THAT SHE WAS E ARLIER WORKING WITH SANJEEVAN HOSPITAL AND SHE HAD PRIOR WORKING EXPERIENCE. 24. AS REGARDS THE PAYMENT MADE TO MRS. BHARATI MANJE SHKAR IS CONCERNED THE CIT(A) NOTED THAT SHE WAS RENDERING HER SERVICES TO THE ASSESSEE TRUST. THE VARIOUS EVIDENCES/ADDITIONAL EVIDENCES FILED BEFORE THE CIT(A) WERE FORWARDED TO THE AO CALLING FOR A REMAND R EPORT WHEREIN THE AO HAS NOT CONTROVERTED SUCH SUBMISSIONS G IVEN BY THE ASSESSEE IN RESPECT OF THE SERVICES RENDERED BY MRS. BH ARATI MANGESHKAR. 25. AS REGARDS THE ALLEGATION OF THE AO THAT THE ASSE SSEE HAS RECEIVED RENT OF RS.2,88,100/- FROM VARIOUS PARTIES WHICH IN CLUDES RENT OF RS.1,80,000/- FROM BHARTI AIRTEL FOR ALLOWING THEM TO E RECT THEIR TOWER IN THE PREMISES OF THE TRUST WHICH IS A COMMERCIAL EXPLOITATION OF ITS PROPERTY THE CIT(A) HELD THAT THE SAME IS FOR SUPPLE MENTING THE 16 ITA NO.2046/PN/2012 & 761/PN/2013 MAIN OBJECT OF THE ASSESSEE TRUST. HE ACCEPTED THE CO NTENTION OF THE ASSESSEE THAT THE SPACE FOR TOWER WAS PROVIDED WHICH HELPED IN AUGMENTING THE SIGNAL FOR TELECOMMUNICATION FOR THE PATIENTS AND THEIR WARDS AND THE RECEIPT OF RENT WAS INCIDENTAL TO THE MAIN ACTIVITY. 26. AS REGARDS THE OBJECTION OF THE AO THAT ASSESSEE HAS ORGANIZED MUSICAL NIGHTS AND GAZAL NIGHTS WHICH IS NOTHING BUT ENTERT AINMENT AND THE EXPENDITURE INCURRED TOWARDS THESE EVENTS CAN NOT BE CONSIDERED TO BE APPLICATION FOR CHARITABLE PURPOSES IS CON CERNED THE LD.CIT(A) HELD THAT BY CONDUCTING THESE EVENTS NO COMMER CIAL BENEFIT WAS RECEIVED BY THE ASSESSEE AND SUCH ACTIVITIES WERE O RGANIZED FOR THE BENEFIT OF THE PATIENTS AND THEIR ATTENDANTS AND ALSO THE STAFF MEMBERS TO RELEASE THE STRESS AND CREATE MORE APPROPRIATE ENV IRONMENT FOR BETTER RECOVERY AND SERVICE. DISTINGUISHING THE VARIOUS DE CISIONS RELIED ON BY THE AO THE LD.CIT(A) HELD THAT THE ASSESSEE TRUST IS ENTITLED TO EXEMPTION U/S.11 OF THE I.T. ACT. 27. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US WITH THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW A ND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD.CIT(A) GROSSLY ERRED IN HOLDING THAT THE ASSE SSEE IS ENTITLED TO EXEMPTION U/S.11 OF THE INCOME TAX ACT, 1961. 3. THE LD.CIT(A) GROSSLY ERRED IN FAILING TO APPRECIA TE THE VOLUMINOUS DATA AND EVIDENCES GATHERED AND USED BY THE ASSESSING OFF ICER WHICH WOULD CLEARLY ESTABLISH THAT THE ASSESSEE WAS RUNNING ITS HOSPITAL, CANTEEN AND OTHER ACTIVITIES ALONG COMMERCIAL LINES, AND, T HEREFORE, COULD NOT BE TREATED AS PURSUING CHARITABLE OBJECTS. 4. THE LD.CIT(A) GROSSLY ERRED IN DILUTING THE CONCEP T OF CHARITY BEYOND RECOGNITION AND IN NOT TAKING ANY NOTE OF TH E SPIRIT UNDERLYING THIS CONCEPT AS USED IN THE INCOME TAX ACT, 1961. 5. THE LD.CIT(A) GROSSLY ERRED IN HOLDING THAT THE ASSE SSEE CANNOT BE CONSIDERED TO HAVE VIOLATED THE PROVISIONS OF SECTION 1 3(1)(C) OF THE ACT. 17 ITA NO.2046/PN/2012 & 761/PN/2013 6. THE LD.CIT(A) GROSSLY ERRED IN ROUTINELY DISMISSING THE INSTANCES OF VIOLATIONS OF SECTION 13(1)(C) BROUGHT OUT IN THE ASSE SSMENT ORDER, PARTICULARLY WITH REGARD TO THE UNJUSTIFIABLE PAYMEN TS MADE BY THE ASSESSEE TO MRS. MEENA KELKAR AND MRS. BHARTI MANGESHKAR. 7. THE LD.CIT(A) GROSSLY ERRED IN DISMISSING THE WELL FO UNDED CONCLUSION DRAWN BY THE ASSESSING OFFICER, ON THE BASIS O F CONCRETE EVIDENCES AND COGENT REASONING, TO THE EFFECT THAT TH E ASSESSEE WAS CAMOUFLAGING MEDICAL RECEIPTS AS DONATIONS AND ALSO ISSUI NG CERTIFICATES U/S.80G THEREBY ABETTING TAXES EVASION. 8. THE LD.CIT(A) GROSSLY ERRED IN ADMITTING THE ADDIT IONAL EVIDENCES IN THE FORM OF AFFIDAVITS ETC. SUBMITTED BY THE ASSESSEE. DURING THE COURSE OF THE APPEAL PROCEEDINGS WITHOUT APPRECIATING THAT THESE WERE IN THE NATURE OF AFTERTHOUGHTS, AND ALSO IN DECIDING THE APP EAL ON THE BASIS OF SUCH EVIDENCES DISREGARD OF THE FACT THAT THE SAME DID NOT CONTAIN ANY EVIDENTIARY VALUE. 9. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD.CIT(A) MAY BE VACATED AND THAT OF THE AO BE RESTORED. 10. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEN D ANY OR ALL THE GROUNDS OF APPEAL. 28. THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT THE ASSESSEE IN THE INSTAN T CASE HAS VIOLATED THE PROVISIONS OF SECTION 11 SINCE THE ACTIVITIES OF THE ASSESSEE TRUST ARE COMMERCIAL IN NATURE. THE OBJECTS OF THE CHAR ITY IN THE INSTANT CASE HAS BEEN DILUTED SINCE THE ASSESSEE HAS GE NERATED HUGE SURPLUS AND HAS NOT PROVIDED SUBSTANTIAL MEDICAL RELIEF TO T HE UNDER- PRIVILEGED CLASS OF THE SOCIETY. FURTHER, THE ASSESSEE TRU ST HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) BY GIVING EXCESSIVE REMUNER ATION TO RELATIVES OF THE TRUSTEES. REFERRING TO THE ORDER OF THE AO HE SUBMITTED THAT THE AO HAS ELABORATELY DISCUSSED THE VARIOUS REASONS FOR WH ICH HE HAS DENIED THE BENEFIT OF EXEMPTION U/S.11. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE CIT(A) BE REVERSED AND THAT OF THE AO BE RESTOR ED. 29. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE TRUST IS PURELY ENGAGED IN THE MEDICAL ACTIVITIES. REFERRING TO PA GE 16 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT 18 ITA NO.2046/PN/2012 & 761/PN/2013 VIDE ORDER DATED 27-12-1988 HAS ALLOWED REGISTRATION U/S .12A(A) TO THE ASSESSEE TRUST. REFERRING TO PAGES 1 TO 15 OF THE PAP ER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE COPY OF THE TRUST D EED WHICH CONTAINS THE OBJECTS OF THE TRUST AT CLAUSE (4) OF THE TRUST DEED . REFERRING TO THE COPY OF THE ASSESSMENT ORDER FOR A.Y. 2007-08, COPY OF WH ICH IS PLACED AT PAGES 585 AND 586 OF THE PAPER BOOK, HE SUBMITTED THAT THE AO IN THE ORDER PASSED U/S.143(3) ON 22-10-2009 HAS ALLOWED T HE CLAIM OF EXEMPTION U/S.11. REFERRING TO THE COPY OF THE ASSESSMEN T ORDER FOR A.Y. 2006-07, COPY OF WHICH IS PLACED AT PAGE 589 OF THE PA PER BOOK HE SUBMITTED THAT THE AO HAS ALLOWED THE CLAIM OF EXEMPTION U /S.11 IN THE ORDER PASSED U/S.143(3) ON 11-12-2008. HE SUBMITTED THAT THE AO IN THE ORDER PASSED U/S.143(3) FOR A.Y. 2005-06 ON 29-11- 2007 HAS ALLOWED THE CLAIM OF EXEMPTION U/S.11 A COPY OF WHICH IS PLACE D AT PAGE 592 AND 593 OF THE PAPER BOOK. SIMILARLY, THE AO HA S ALLOWED THE CLAIM OF EXEMPTION U/S.11 FOR A.Y. 2004-05, 2003-04 AN D 2002-03 IN THE ORDERS PASSED U/S.143(3), COPIES OF WHICH ARE PLACED AT PAGE 596 TO 605 OF THE PAPER BOOK. HOWEVER, FOR THE IMPUGNED ASSESSMENT YEAR, THE AO DENIED THE CLAIM OF EXEMPTION U/S.11 MAINLY ON THE FOLLOWING GROUNDS: (A) THE ASSESSEE TRUST IS RUNNING THE HOSPITAL WITH AN INTENTION OF MAKING PROFIT AND HUGE SURPLUS IS GENERATED. (B) THE ASSESSEE TRUST HAS NOT PROPERLY COMPLIED WITH THE OBJECTIVE OF CHARITY. THERE IS UNDERSTATEMENT OF RECEIPTS IN THE STATEMENTS FURNISHED TO THE CHARITY COMMISSIONER. (C) IT WAS RUNNING A CANTEEN FROM WHICH IT WAS MAKING HUGE PROFIT BY RUNNING IT IN A COMMERCIAL MANNER. (D) FURTHER, THE ASSESSEE TRUST HAS ACCEPTED DONATIONS FRO M PATIENTS AND HAS PAID REMUNERATION TO RELATIVES OF TRUSTE ES IN VIOLATION OF THE PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT. (E) THE ASSESSEE TRUST HAS ORGANIZED MUSICAL NIGHTS AND HA S ALSO RECEIVED RENT FROM BHARTI AIRTEL BY ALLOWING THEM TO ERECT TOWER ON THE PREMISES OF THE HOSPITAL. 19 ITA NO.2046/PN/2012 & 761/PN/2013 30. SO FAR AS THE OBJECTION OF THE AO THAT THERE IS SH ORTFALL IN MAKING PROVISION FOR INDIGENT PATIENT FUND AS PER THE GUIDELINES ISSU ED BY THE CHARITY COMMISSIONER IS CONCERNED, HE SUBMITTED THAT THE CHARITY COMMISSIONER HAD ISSUED GUIDELINES THAT EACH HOSPITAL SHOULD MAKE THE PROVISION OF 2% OF THE HOSPITAL RECEIPTS TOWARDS IPF. THERE HAD BEEN NO CLARIFICATION REGARDING THE INTERPRETATION OF THE CO NCEPT OF 2% OF PATIENT RECEIPTS. HE SUBMITTED THAT THE MECHANISM OF C OMPUTATION OF GROSS RECEIPTS WAS A DEBATABLE ISSUE WITH CHARITY COMM ISSIONER. THE ASSOCIATION OF HOSPITALS IN PUNE HAD TAKEN UP THE MAT TER WITH THE CHARITY COMMISSIONER. HE SUBMITTED THAT THERE ARE VARIOU S PRACTICES AMONG THE HOSPITALS REGARDING BILLING TO PATIENTS. SOME HOS PITALS GIVE DIFFERENT BILLS FOR MEDICINES, VISIT FEES OF DOCTORS AND OTHER SE RVICES. AS SUCH, THE GROSS BILLING OF SUCH CASES CONSIST OF ONLY HOSPIT AL/MEDICAL ATTENDANT SERVICES. IN SOME OTHER CASES LIKE IN THE CA SE OF THE ASSESSEE, THE GROSS BILLING INCLUDES VISIT FEES OF DOCTORS/OPD FEES/HOSPITAL DRUGS/MEDICINES/CATERING CHARGES ETC. THE AS SESSEE TOOK THE GROSS RECEIPTS EXCLUDING THE OPD FEES, MEDICINE CHARGE S AND DOCTORS FEES ON THE GROUND THAT MAJOR PART OF THEM A RE TO BE REFUNDED TO THE DOCTORS OR SUPPLIERS OF THE MEDICINES ETC. AND THE REFORE ACCORDING TO THE ASSESSEE DOCTORS FEES AND SUPPLY OF MEDICINES DO NOT FORM PART OF THE GROSS RECEIPTS. THEREFORE, THE ASSESSEE CONSIDERED ONLY HOSPITAL BILLING FOR THE PURPOSE OF TRANSFERRING 2% OF TH E FUND TO THE IPF. IN THIS YEAR THE TOTAL HOSPITAL BILLING WAS RS.2 1,98,94,306/-. ACCORDINGLY, THE ASSESSEE CREDITED 2% OF THE SAID AMOUNT TO THE IPF WHICH WORKS OUT TO RS.43,97,884/-. FURTHER, THERE WERE C ERTAIN DONATIONS RECEIVED SPECIFICALLY FOR TREATMENT OF INDIGENT PAT IENTS AND HENCE THE AMOUNT OF SUCH DONATIONS RECEIVED WAS ALSO CR EDITED TO THE SAID FUND. DURING THIS YEAR THE ASSESSEE HAS RECEIVED DO NATIONS FOR 20 ITA NO.2046/PN/2012 & 761/PN/2013 SPECIFIC PURPOSES AT RS.7,98,500/-. THUS, THE TOTAL AMOUNT TRANSFERRED TO THE IPF FUND WAS RS.51,96,384/-, I.E. RS.43,97,8 84/- + RS.7,98,500/-. 31. HE SUBMITTED THAT THE CHARITY COMMISSIONER HAS INSPE CTED THE RECORDS AND AFTER INSPECTION THEY HAVE DIRECTED THE ASS ESSEE TO INCLUDE THE OPD RECEIPTS FOR CALCULATING IPF. THE SHORTFALL IN THE P ROVISIONS WAS TRANSFERRED TO THE IPF ACCOUNT. REFERRING TO PAGE 612 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTIO N OF THE BENCH TO THE IPF LEDGER ACCOUNT AND SUBMITTED THAT THE ASSE SSEE ON 31-05- 2010 HAS CREDITED AN AMOUNT OF RS.71,77,267/- TO THE IPF ACCOUNT FOR THE PERIOD FROM OCTOBER 2006 TO NOVEMBER 2009 AS PER THE DIRECTION OF THE CHARITY COMMISSIONER IN HIS VISIT ON 18-05-2010. HE SU BMITTED THAT WHEN THE CHARITY COMMISSIONER HAS NOT CANCELLED THE REGISTRATION FOR SUCH SHORTFALL AND SINCE NO PENALTY HAS BEEN LEVIED BY HIM, THEREFORE, IT IS NOT UNDERSTOOD AS TO HOW THE AO CAN DE NY EXEMPTION U/S.11. HE SUBMITTED THAT DESPITE THE SUBMISSION OF THE A BOVE FACTS BEFORE THE AO HE IGNORED THE CONTENTION OF THE ASSESSEE . FURTHER, EVEN AFTER THE INSPECTION OF THE CHARITY COMMISSIONER THE ASSES SEE TRUST WAS REQUIRED TO INCLUDE ONLY THE OPD RECEIPTS IN THE GR OSS BILLING FOR THE PURPOSE OF CREDITING THE AMOUNT TO THE FUND. OTHER CHARGES LIKE CANTEEN, MEDICINES AND IMPLANTS, DOCTOR FEES, ETC. ARE NOT TO BE INCLUDED IN THE GROSS BILLING. THEREFORE, THE CONTENTION OF THE AO THAT ASSESSEE SHOULD HAVE PROVIDED 2% OF RS.72.31 CRS. IS INCORR ECT BECAUSE EVEN THE CHARITY COMMISSIONER HAS NOT DIRECTED THE ASSESSEE TO MAKE SUCH A PROVISION. HE SUBMITTED THAT IN THIS YEAR, THE OPD RECEIPTS WERE RS.10.20 CRS. IF THE HOSPITAL BILLING AND OPD R ECEIPTS ARE CONSIDERED, THE TOTAL AMOUNT WORKS OUT TO RS.32.19 CRS. AND 2% OF THE ABOVE AMOUNT IS RS.64.38 LAKHS. THEREFORE, THE CONTENTION OF THE AO 21 ITA NO.2046/PN/2012 & 761/PN/2013 THAT THE ASSESSEE SHOULD HAVE MADE THE PROVISION OF 2% OF RS.72.31 CRORES IS NOT BORNE OUT OF THE DIRECTION GIVEN BY THE CH ARITY COMMISSIONER. HE SUBMITTED THAT IT IS NOT UNDERSTOOD AS TO HOW MAKING A SLIGHTLY LESSER PROVISION FOR IPF WOULD RESULT IN D ENIAL OF EXEMPTION U/S 11. REFERRING TO THE PROVISIONS OF SECTIO N 11 HE SUBMITTED THAT IT IS NO WHERE STATED THAT IF THE ASSESS EE VIOLATES ANY CONDITION LAID DOWN BY CHARITY COMMISSIONER, THE EXEMPTION U /S 11 IS TO BE DENIED. IN THIS CASE THE AO HAS GONE BEYOND THE PROVISIONS OF THE ACT WHICH IS NOT JUSTIFIED. HE SUBMITTED THAT DUE TO BONAFIDE CONFUSION REGARDING THE INTERPRETATION OF THE TERM, THE AS SESSEE MADE PROVISION OF 2% OF THE HOSPITAL RECEIPTS AS PROVISION FOR IPF . HOWEVER, WHEN THE MATTER WAS CLARIFIED BY THE CHARITY COMMISSIONER, THE ASSESSEE MADE A PROVISION RIGHT FROM OCTOBER, 2006. HE SUBMITTED THAT THE PURPOSE OF CREATION OF THIS FUND IS TO HELP INDIGE NT AND WEAKER SECTION OF THE PUBLIC AND THE SAME HAS BEEN ACHIE VED. SINCE THE ASSESSEE HAS SUBSEQUENTLY RECTIFIED THE LESSER PROV ISION MADE FOR THE IPF IT IS NOT PROPER FOR THE AO TO DENY THE CLAIM OF EXEMPTION U/S.11. 32. SO FAR AS THE DENIAL OF GRANT OF EXEMPTION DUE TO SU RPLUS GENERATED BY THE ASSESSEE TRUST IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT A GOVERNM ENT AIDED HOSPITAL AND DOES NOT RECEIVE ANY AID FROM THE GOVT . HE SUBMITTED THAT THE SURPLUS GENERATED DURING THE YEAR IS HARDLY 18%. F URTHER, THE AO HAS NOT CONSIDERED THE CAPITAL EXPENDITURE INCURRED BY T HE ASSESSEE. IF THE SAME IS CONSIDERED, THEN THE SURPLUS GENERATED IS NO T EVEN 5% OF THE GROSS RECEIPTS. REFERRING TO PAGE 576 OF THE PAPER B OOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO THE FOLLOWING TABLE AND SUBMITTED THAT FOR THE IMPUGNED ASSESSM ENT YEAR 22 ITA NO.2046/PN/2012 & 761/PN/2013 THE SURPLUS IS ONLY RS.5,72,54,100/-, I.E. 4.98% OF THE RECEIP TS WHEREAS IN THE SUBSEQUENT YEAR THERE IS EXCESS APPLICA TION OF RS.2,70,34,512/- : A.Y. 2009 - 10 2008 - 09 2007 - 08 2006 - 07 2005 - 06 F.Y. 2008 - 09 2007 - 08 2006 - 07 2005 - 06 2004 - 05 GROSS INCOME AS PER COMPUTATION 1,148,586,404 903,196,502 7 33,322,641 552,034,152 409,652,559 REVENUE EXPENDITURE 1,073,193,775 798,643,996 674,418,995 514,885,424 386,018,823 CAPITAL EXPENDITURE 102,427,141 47,298,406 42,605,994 188,214,534 96,298,008 TOTAL EXPENSES AS PER COMPUTATION 1,175,620,916 845,942,402 717,024,989 703,099,958 482,316,831 EXCESS OF APPLICATION OVER INCOME 27,034,512 (57,254,100) (16,297,652) 151,065,806 72,664,272 % OF INCOME APPLICATION 102 94 98 127 118 33. HE SUBMITTED THAT EVEN THE LEGISLATURE HAS ALLOWED AC CUMULATION OF UPTO 15% OF THE RECEIPTS AND THE ABOVE AMOUNT IS NOT REQUIRED TO BE APPLIED IMMEDIATELY. THUS GENERATION OF SURPLUS IS PERMITTED UNDER THE ACT ITSELF. HE SUBMITTED THAT WHATEVER SURPLUS HAS B EEN GENERATED HAS BEEN UTILIZED BY THE ASSESSEE TRUST FOR THE OBJECT S OF THE TRUST AND SUCH SURPLUS HAS NOT BEEN UTILIZED FOR NON MEDICAL PURPOSES. 34. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN THE CASE OF VANITA VISHRAM TRUST REPORTED IN 327 ITR 12 1 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISIO N, WHILE DELIVERING THE JUDGMENT UNDER THE PROVISIONS OF SECTION 10 (23C)(VI) OF THE ACT, HAS HELD THAT A SURPLUS MAY INCIDENTALLY ARISE FRO M THE ACTIVITIES OF THE TRUST AFTER MEETING THE EXPENDITURE INCUR RED FOR CONDUCTING EDUCATIONAL ACTIVITIES WOULD NOT DISENTITLE THE TR UST OF THE BENEFIT OF SECTION 10(23C). SIMILAR VIEW HAS BEEN TAKEN BY TH E HONBLE SUPREME COURT IN THE CASE OF QUEENS EDUCATIONAL SOCIETY VIDE CIVIL APPEAL NO.5167/2008 ORDER DATED 16-03-2015 AND THE DE CISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF TOLANI EDUCATION SOCIETY REPORTED IN 351 ITR 184. HE SUBMITTED THAT THE HONBLE BOMBAY HIGH 23 ITA NO.2046/PN/2012 & 761/PN/2013 COURT IN THE CASE OF TOLANI EDUCATION SOCIETY (SUPRA) HAS H ELD THAT PROVISIONS OF SECTION 10(23C) CANNOT BE INTERPRETED REGRES SIVELY TO DENY EXEMPTIONS TO INSTITUTION WHICH EXISTED SOLELY FOR ED UCATIONAL PURPOSES MERELY BECAUSE INCIDENTAL SURPLUS WAS USED TO UPGRADE EDUCATIONAL FACILITIES IN EDUCATION INSTITUTION. 35. REFERRING TO THE CBDT CIRCULAR NO.14/2015 DATED 17-0 8-2015 WHICH WAS ISSUED IN THE CONTEXT OF SECTION 10(23C)(VI) HE SUB MITTED THAT THE CBDT HAS ALSO ACCEPTED THAT MERE GENERATION OF SURPLUS YEAR AFTER YEAR CANNOT BE THE REASON FOR DISALLOWING THE CLAIM OF EXEMPTION. HE ACCORDINGLY SUBMITTED THAT AFTER CONSIDERING THE CAPIT AL EXPENDITURE THERE IS HARDLY ANY SURPLUS WHICH HAS BEEN GENERATED. FURTHER, MERE GENERATION OF SURPLUS IS NO REASON TO DISALLO W THE CLAIM OF EXEMPTION. 36. AS REGARDS THE DENIAL OF EXEMPTION U/S.11 ON THE GRO UND THAT ASSESSEE IS NOT ENGAGED IN CHARITABLE ACTIVITY AND HAS NO T PROVIDED SERVICES TO THE UNDERPRIVILEGED SECTION OF THE SOCIETY IS C ONCERNED, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAME IS NOT CORRECT AND THE ASSESSEE HAS PROVIDED SERVICE TO THE WEAKER S ECTION OF THE SOCIETY. THE ASSESSEE HAS ALSO GIVEN THE DETAILS OF THE P ATIENTS TO WHOM FREESHIPS WAS PROVIDED IN THE CURRENT YEAR. HE SUB MITTED THAT THE ARGUMENT OF THE AO THAT ONLY IF THE ASSESSEE PROVIDE S THE SERVICE TO THE POOR PEOPLE, THEN ONLY THE ASSESSEE WOULD BE CONSID ERED AS A CHARITABLE TRUST IS NOT CORRECT. 37. REFERRING TO THE PROVISIONS OF SECTION 2(15) WHICH DEFINES THE TERM CHARITABLE PURPOSE HE SUBMITTED THAT AS PER THE SAID DEFINITION, CHARITABLE PURPOSE WOULD INCLUDE RELIEF OF THE POOR, EDUCATION , MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. NOW-A -DAYS EVEN 24 ITA NO.2046/PN/2012 & 761/PN/2013 YOGA, PRESERVATION OF ENVIRONMENT AND PRESERVATION OF MON UMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORICAL INTEREST IS ALSO CONSIDERED AS CHARITABLE PURPOSE. HE SUBMITTED THAT RELIEF OF THE POOR IS ONE OF THE PURPOSE BUT THERE IS NO CONDITION THAT EDUCATION OR ME DICAL SERVICES SHOULD BE PROVIDED ONLY TO THE POOR. SO LONG AS THE TRU ST IS ENGAGED IN MEDICAL ACTIVITIES, IT WOULD FALL WITHIN THE DEFINITION OF CHARITABLE PURPOSE AND THE SAID TRUST CAN ENJOY THE BENEFIT OF EX EMPTION U/S 11 OF THE I.T. ACT. 38. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN THE CASE OF ITO VS. KAUSHALYA MEDICAL FOUNDATION REPORTE D IN 31 SOT 119 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION H AS HELD THAT WHERE CHARITABLE TRUST RUNNING A HOSPITAL IS CLAIMING TAX E XEMPTION, THERE IS NO REQUIREMENT THAT MEDICAL AID SHOULD BE PROVIDE D ONLY TO THE POOR NOR THERE IS ANY REQUIREMENT THAT SOME PARTIC ULAR PERCENTAGE OF SERVICES SHOULD BE RENDERED FREE. SO LONG AS IT IS NOT SHOWN THAT THE HOSPITAL WAS RUN WITH THE OBJECT OF EARNING PROFITS THE T RUST CANNOT BE DENIED EXEMPTION. 39. AS REGARDS THE DENIAL OF EXEMPTION ON THE GROUND TH AT THE ASSESSEE TRUST IS RUNNING A CANTEEN IS CONCERNED HE SUBMITTED T HAT THE ASSESSEE IS RUNNING A HUGE HOSPITAL FOR WHICH CANTEEN FAC ILITY IS REQUIRED TO BE PROVIDED TO THE PATIENTS AND FOR THEIR FA MILIES. FURTHER, THE RATES CHARGED FOR THE FOOD IS VERY REASONABLE AND M UCH LESSER TH THE STANDARD RATES. HE SUBMITTED THAT THE PROFIT COMPUTED AT RS .78.81 LAKHS BY THE AO IS NOT CORRECT AND THE PROFIT IS ONLY RS .18.95 LAKHS WHICH IS VERY NOMINAL. REFERRING TO THE COPY OF THE INCOME AND EXPENDITURE ACCOUNT OF THE CANTEEN FOR THE YEAR ENDING 31-03-2008 PLACED AT PAGE 220 OF THE PAPER BOOK, HE SUBMITTED THA T AS AGAINST THE TOTAL RECEIPT OF RS.2.29 CRORES THE SURPLUS IS ONLY RS.18.95 LAKHS. 25 ITA NO.2046/PN/2012 & 761/PN/2013 FURTHER, THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THE CANTEEN ACTIVITY. HE SUBMITTED THAT EVEN IF IT IS ASS UMED THAT THE CANTEEN ACTIVITY AMOUNTS TO CARRYING OUT BUSINESS, IN VIEW OF SECTION 11(4A) THE ASSESSEE CAN CARRY OUT SUCH BUSINESS SO LONG AS THE SAME IS INCIDENTAL TO THE ATTAINMENT OF THE MAIN OBJECTS OF THE TRUST. FOR THE ABOVE PROPOSITION, THE LD. COUNSEL FOR THE ASSESSEE REFERR ED TO THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. THANTHI TRUS T REPORTED IN 247 ITR 785 WHERE IT HAS BEEN HELD THAT AFT ER THE AMENDMENT TO SECTION 11(4A), A CHARITABLE TRUST CAN CARR Y OUT A BUSINESS SO LONG AS THE BUSINESS IS INCIDENTAL TO THE OBJE CTS OF THE TRUST. IT HAS FURTHER BEEN HELD THAT BUSINESS IS INCIDENT AL TO THE OBJECT OF THE TRUST WHEN THE SURPLUS GENERATED FROM THE BUSINE SS IS UTILIZED FOR THE OBJECTS OF THE TRUST. SINCE IN THE PRESENT CASE , THE SURPLUS GENERATED FROM CANTEEN FACILITY IS BEING UTILIZED FOR MEDICAL RE LIEF AND SINCE NOTHING HAS BEEN BROUGHT ON RECORD THAT SURPLUS GENERATED HAS NOT BEEN UTILIZED FOR CHARITABLE PURPOSE OR HAS BEEN UTILIZE D FOR NON CHARITABLE PURPOSE, THEREFORE, THE DENIAL OF EXEMPTION U/S.1 1 BY THE AO IS NOT JUSTIFIED. 40. AS REGARDS THE OBJECTION OF THE AO THAT THE ASSES SEE TRUST HAS ORGANIZED MUSICAL NIGHTS WHICH ARE NOT WARRANTED IN CASE OF A CHARITABLE TRUST FOR WHICH THE AO HAS DENIED EXEMPTION U/ S.11, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE MUSICAL N IGHTS WERE ORGANIZED IN ORDER TO REDUCE THE STRESS OF THE PATIENTS , RELATIVES, STAFF MEMBERS ETC. IT WAS SUBMITTED BEFORE THE AO THAT THE ASSESSEE TRUST STARTED INNOVATIVE ENDEAVOR CALLED DEENAYAN KALAPARV FROM AUGUST, 2004 WHEREIN RENOWNED ARTISTS PERFORMED AND SUCH PROGR AMMES WERE BROADCASTED IN THE ROOMS OF THE PATIENTS. IT WAS EXPLAINE D THAT THE PERFORMING ARTIST PERFORMED FREE OF COST AND THE MAIN INTE NTION OF 26 ITA NO.2046/PN/2012 & 761/PN/2013 ORGANIZING SUCH PROGRAMMES WAS TO REDUCE TO STRESS LEV EL OF THE PATIENTS AND THEIR RELATIVES. THEREFORE, THE AO IS NOT JU STIFIED IN HOLDING THAT SUCH MUSICAL NIGHTS WERE NOT REQUIRED. HE SU BMITTED THAT THE AO CANNOT DICTATE THE ASSESSEE AS TO HOW TO CONDUCT ITS AFFAIRS. 41. AS REGARDS THE DENIAL OF EXEMPTION U/S.11 ON THE GRO UND THAT ASSESSEE HAD ISSUED DONATION RECEIPTS IS CONCERNED, HE S UBMITTED THAT PAYMENTS WERE INFACT MADE BY THE PERSONS FOR THE SERVIC ES OBTAINED FROM THE ASSESSEE. AS REGARDS THE DONATION RECEIVED FR OM SHAH FAMILY IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE TRUST HAD CONDUCTED A PROJECT CALLED SHWAS WHICH WAS A RESEARCH PROJECT ANALYZING THE EFFECT OF YOGA ON THE FUN CTION OF THE HEART. THERE WERE AROUND 104 PEOPLE WHO PARTICIPATED IN THE SAID PROJECT AND OUT OF THE 104 PERSONS, ONLY 25% GAVE VOLU NTARY DONATIONS TO THE ASSESSEE TRUST. SINCE SHAH FAMILY COMPRISES OF 6 PERSONS, THEY GAVE DONATION OF RS.3,000/- PER PERSON. REFERRING TO THE A FFIDAVIT OF THE MEMBERS OF THE SHAH FAMILY, A COPY OF WHICH IS PLACED AT PA GE 52 AND 53 OF THE PAPER BOOK, HE SUBMITTED THAT THEY HAVE CLARIFIE D THAT THE DONATION WAS GIVEN VOLUNTARILY. HE SUBMITTED THAT HAD TH E DONATION BEEN COMPULSORY FOR ALL THE PERSONS, THEN IN THAT CASE AL L THE 104 PERSONS WOULD HAVE GIVEN DONATIONS TO THE ASSESSEE TR UST. ALTHOUGH THESE DETAILS WERE GIVEN TO THE AO, HOWEVER, HE HAS NO T CONSIDERED THE SAME PROPERLY. 42. AS REGARDS THE DONATION RECEIPTS ISSUED TO 3 PERS ONS, NAMELY SUJATA DILIP NAYAKUDE, S.N. WAGHLE AND SHRI RAJESH DEEPAK P HADKE ARE CONCERNED, HE SUBMITTED THAT THE ABOVE 3 PERSONS HAVE GIVEN THE DONATIONS OUT OF THEIR OWN WILL. THEREFORE, IT IS TOTALLY INCO RRECT ON THE PART OF THE AO TO HOLD THAT THE ASSESSEE HAD DEMANDED FEES AND ISSUED 27 ITA NO.2046/PN/2012 & 761/PN/2013 DONATION RECEIPTS. REFERRING TO THEIR STATEMENTS, COPIES OF WHICH ARE PLACED AT PAGES 203 TO 207 OF THE PAPER BOOK, HE SUBMIT TED THAT THEY HAVE CLARIFIED THE REASONS FOR GIVING DONATIONS. HE SUBMITTE D THAT IN RESPECT OF SMT. KAVITA WAGHLE THE DONATION GIVEN BY HER W AS RS.9,000/- WHILE THE CONCESSION GIVEN TO HER FOR THE MEDICA L TREATMENT WAS RS.24,342/-. IN THE CASE OF SHRI DILIP NAYAKUDE THE CO NCESSION GIVEN TO HIM WAS RS.12,862/- WHILE THE DONATION GIVEN BY HIM WAS RS.5,100/-. THEREFORE, IT IS WRONG TO HOLD THAT THE ASSES SEE HAS ISSUED BOGUS DONATION RECEIPTS. FURTHER, HE SUBMITTED THAT THIS CANNOT BE A GROUND FOR REJECTION OF CLAIM U/S.11 OF THE ACT. 43. SO FAR AS THE DENIAL OF EXEMPTION U/S.11 FOR VIOLATION O F SECTION 13(1)(C) IS CONCERNED, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE ASSESSEE TRUST HAD PAID RS.90,000/- TO MRS. MEENA K ELKAR AND RS.6 LAKHS TO MRS. BHARTI MANGESHKAR. HE SUBMITTED THAT M RS. MEENA KELKAR IS THE MOTHER OF SHRI DHANANJAY KELKAR, WHO IS ONE OF THE TRUSTEES. HE SUBMITTED THAT THE TRUST HAD PAID FEES OF RS.33,62,944/- TO DOCTOR DR. DHANANJAY KELKAR IN THE CURRENT YEAR FOR VARIOUS SERVICES OFFERED BY HIM WHICH HAS BEEN ACCEPTED BY THE AO. THERE FORE, THERE IS NO REASON TO DOUBT THE SALARY AMOUNT OF RS.90,000/- PAI D TO MRS. MEENA KELKAR, THE MOTHER OF DR. DHANANJAY KELKAR, WHO WAS RESPONSIBLE FOR THE HOUSE KEEPING ACTIVITY OF THE HOSPITAL. 44. AS REGARDS THE OBSERVATION OF THE AO IN THE ASSESS MENT ORDER THAT MRS. MEENA KELKAR HAD NO PRIOR WORK EXPERIENCE AS ADMITTED BY DR. DHANANJAY KELKAR IS CONCERNED, HE SUBMITTED THAT DR. DHANANJAY KELKAR HAD CLEARLY STATED THAT THE REMARK MADE BY THE AO WAS INCORRECT AND HE HAD NOT MADE ANY SUCH STATEMENT DUR ING THE ASSESSMENT PROCEEDINGS. REFERRING TO THE COPY OF THE AFFID AVIT OF DR. DHANNANJAY KELKAR PLACED AT PAGES 77 AND 78 OF THE PAP ER BOOK AND 28 ITA NO.2046/PN/2012 & 761/PN/2013 WHICH WAS PRODUCED BEFORE THE AO IN REMAND PROCEEDINGS HE SUBMITTED THAT THE AO HAS NOT CONTROVERTED THE SAID A FFIDAVIT. REFERRING TO THE CONTENTS OF THE AFFIDAVIT HE SUBMITTED TH AT DR. DHANNANJAY KELKAR HAD STATED IN THE SAID AFFIDAVIT THAT MR S. MEENA KELKAR WAS LOOKING AFTER THE HOUSE KEEPING OF SANJEEVAN H OSPITAL. REFERRING TO PAGES 230 TO 237 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO SOME OF TH E BILLS WHICH HAVE BEEN APPROVED BY MRS. MEENA KELKAR. IN ONE OF THE INVOICES MRS. MEENA KELKAR HAS EVEN NOTED FOR REDUCTION IN THE INVOICE AMOUNT ON ACCOUNTS OF NON-SATISFACTORY WORK OF THE VENDOR. REFERR ING TO THE AFFIDAVIT OF SHRI VISHAL PAVANIKAR, SHRI MAHESH GHATGE, SHRI PURUSHOTTAM ANANT, SHRI WADEKAR, SHRI PARESH GARUD, SMT. MEGHA NAIR, COPIES OF WHICH ARE PLACED AT PAGES 455 TO 458 OF TH E PAPER BOOK HE SUBMITTED THAT THESE PEOPLE HAVE CONFIRMED THAT MRS . MEENA KELKAR IS LOOKING AFTER THE HOUSE KEEPING ACTIVITY OF THE ASSESSEE TRUST. REFERRING TO THE AFFIDAVIT OF SHRI MANOJ SHELKE OF THE HOUSE KEEPING DEPARTMENT, COPY OF WHICH IS PLACED AT PAGES 83 AND 84 O F THE PAPER BOOK, HE SUBMITTED THAT SHRI SHELKE HAS CLARIFIED THAT HE WAS REPORT ING TO MRS. MEENA KELKAR IN THE HOUSE KEEPING DEPARTMENT. H E SUBMITTED THAT THESE EVIDENCES WERE ALSO FURNISHED BEFORE THE AO IN THE REMAND PROCEEDINGS AND THE AO HAS NOT CONTROVERTED THE SAME . FURTHER, SMT. SARIKA SHELKE WAS LOOKING AFTER HOUSE KEEPING ACTIVITY AND SALARY PAID TO HER WAS RS.16,000/- PER MONTH WHEREAS THE SALARY PA ID TO MRS. MEENA KELKAR IS MUCH LESS THAN THAT FOR THE SAME WORK. THEREFORE, MERELY BECAUSE THE PERSON EMPLOYED IS MORE THAN 58 YE ARS AND IS THE MOTHER OF ONE OF THE TRUSTEES, THE SAME CANNOT BE A GROUND FOR DENY ING EXEMPTION U/S.11 WHEN THE SAID PERSON HAS BEEN PAID REM UNERATION 29 ITA NO.2046/PN/2012 & 761/PN/2013 WHICH IS MUCH LESS THAN THE AMOUNT PAID TO THE EARLIER PE RSON FOR THE SIMILAR NATURE OF WORK. 45. AS REGARDS THE PAYMENT MADE TO MRS. BHARTI MANGE SHKAR, TRUSTEE IS CONCERNED, HE SUBMITTED THAT SHE IS LOOKING AFT ER THE GENERAL ADMINISTRATION OF THE HOSPITAL. FURTHER, THE AO IN THE ASSES SMENT ORDER HAS STATED THAT MR. BOMI BHOTE OF RUBY HALL CLINIC WA S PAID A SALARY OF RS.1 LAKH AND HE WAS ALSO HANDLING THE GENERAL ADMINISTRATION. ACCORDING TO THE AO, MRS. MANGESHKAR WAS N OT REGULAR AT THE HOSPITAL FOR WHICH HE HELD THAT THE REMUNERATION PAID TO MRS. MANGESHKAR IS IN VIOLATION OF PROVISIONS OF SECTION 13(1)(C). HE SUBMITTED THAT THE CONTENTION OF THE AO IS TOTALLY INCORR ECT AND BASELESS. THERE IS NO EVIDENCE WITH THE AO FOR ARRIVING AT THE ABOVE CONCLUSION. REFERRING TO THE CONFIRMATIONS OF SHRI AMAR SHELK E, MANAGER PERSONNEL DEPARTMENT AND SHRI SACHIN VYAWHARE, EXECUTIVE ASSISTANT OF ADMINISTRATIVE DEPARTMENT, COPIES OF WHICH ARE PLACED AT PAGES 103 AND 104 OF THE PAPER BOOK HE SUBMITTED THAT THEY HAVE CONFIRMED THAT THEY USED TO DISCUSS ALL THE IMPORTANT MA TTERS WITH MRS. MANGESHKAR. REFERRING TO THE CONFIRMATIONS AND AFFIDAV ITS OF CERTAIN PERSONS, COPIES OF WHICH ARE PLACED AT PAGES 459 TO 466 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE DREW THE A TTENTION OF THE BENCH TO THE CONFIRMATIONS/AFFIDAVITS WHEREIN THEY HAVE CO NFIRMED THEIR INTERACTION/DEALING WITH MRS. MANGESHKAR FOR THE HOS PITAL ACTIVITIES. HE ACCORDINGLY SUBMITTED THAT THERE IS NO VIO LATION OF PROVISIONS OF SECTION 13(1)(C) OF THE I.T. ACT ON ACCOUNT OF P AYMENT TO THE ABOVE PERSONS SINCE BOTH OF THEM HAVE RENDERED SE RVICES TO THE ASSESSEE TRUST. FURTHER, THE PAYMENTS MADE TO THEM IS REASONABLE AND NOT EXCESSIVE. 30 ITA NO.2046/PN/2012 & 761/PN/2013 46. THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE FO LLOWING DECISIONS AND SUBMITTED THAT THE COURTS HAVE HELD THAT FOR INVOKING PROVISIONS OF SECTION 13(1)(C) THE ONUS IS ON THE AO TO PRO VE THAT THE PAYMENTS MADE TO THE TRUSTEES OR THE RELATIVES IS EXCE SSIVE AND UNREASONABLE : 1. BABA GANDHA SINGH EDUCATIONAL TRUST REPORTED VS. CIT IN 138 TTJ 1 (CHD.) 2. ACIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATIO N REPORTED IN 121 ITR 1 (SC) 3. CIT VS. JANAKIAMMAL AYYANDAR TRUST REPORTED IN 277 IT R 274 (MAD.) 4. DR.D.Y. PATIL PRATISTHAN VS. DCIT REPORTED IN 154 TTJ 320 (PUNE) 5. ACIT VS. MANAV BHARTI CHILD INSTITUTE & CHILD PSYCHOLO GY REPORTED IN (2008) 20 SOT 517 (DELHI). 47. AS REGARDS THE OBJECTION OF THE AO THAT ASSESSEE HAS RECEIVED RENT OF RS.2,88,100/- FROM VARIOUS PARTIES WHICH INCLUDES RS.1,80,000/- FROM BHARTI AIRTEL FOR ALLOWING THEM TO ERECT TH EIR TOWER IS CONCERNED, HE SUBMITTED THAT THE SAME IS FOR SUPPLEMEN TING THE MAIN OBJECTS OF THE ASSESSEE TRUST. BY ERECTING THE TO WER THE SIGNAL FOR TELECOMMUNICATION HAS IMPROVED WHICH INDIRECTLY HELP THE PA TIENTS AND THEIR WARDS AND IT IS INCIDENTAL TO THE MAIN OBJECTS O F THE ASSESSEE TRUST. FURTHER, SUCH MONEY HAS BEEN UTILIZED FOR THE OBJE CTS OF THE TRUST, THEREFORE, THERE IS NO VIOLATION. HE SUBMITTED THAT THE LD.CIT(A) HAS APPRECIATED THE ABOVE AND ACCORDINGLY ALLOWED THE C LAIM OF EXEMPTION WHICH IS IN ORDER. THEREFORE, THE ORDER OF THE CIT(A) SHOULD BE UPHELD AND THE GROUNDS RAISED BY THE REVENUE SHOULD BE DISMISSED . 48. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT IS A CHARITABLE TRUST FORMED ON 20-08-1988. THE ASSESSEE TRUST HAS BE EN REGISTERED 31 ITA NO.2046/PN/2012 & 761/PN/2013 U/S 12A OF THE INCOME TAX ACT VIDE ORDER DATED 27-12- 1988 ISSUED BY THE CIT, PUNE, A COPY OF WHICH HAS BEEN PLACED AT PAGE 1 6 OF THE PAPER BOOK. THE ASSESSEE TRUST RUNS A HOSPITAL UNDER THE NA ME AND STYLE OF DEENANATH MANGESHKAR HOSPITAL AT PUNE. THE ASSESSEE TR UST FILED ITS RETURN OF INCOME CLAIMING EXEMPTION U/S.11 OF THE I.T. ACT. WE FIND THE AO DENIED THE CLAIM OF EXEMPTION U/S 11 AND DETERMIN ED THE TOTAL INCOME OF THE ASSESSEE AT RS.11,34,45,230/- ON THE FOLLOWING GROUNDS : 1. THE ASSESSEE TRUST HAS NOT FURNISHED PROPER INFORMATION TO THE CHARITY COMMISSIONER AND THERE IS SHORTFALL IN MAKING PROVISION FOR IPF. 2. THE ASSESSEE TRUST IS RUNNING A HOSPITAL WITH AN INTENTION OF MAKING PROFIT. 3. THE ASSESSEE TRUST HAS GENERATED HUGE SURPLUS AND IS ALSO NO T CARRYING OUT ANY CHARITABLE ACTIVITY. 4. THE ASSESSEE IS RUNNING A CANTEEN IN THE HOSPITAL AND HAS EARNED HUGE PROFIT. 5. THE ASSESSEE TRUST HAS ORGANIZED MUSICAL NIGHTS WHICH IS NO T ACCEPTABLE IN HOSPITAL. 6. THE ASSESSEE TRUST HAS ISSUED DONATION RECEIPTS WHICH ARE NO T VOLUNTARY DONATIONS BUT MEDICAL FEES CHARGED BY THE T RUST. 7. THE ASSESSEE TRUST HAS PAID SALARY TO MRS. BHARTI MANGESHKAR (TRUSTEE) AND MRS. MEENA KELKAR (MOTHER OF THE TRUSTEE). 8. THE ASSESSEE HAS RECEIVED RENT OF RS.2,88,100/- FROM VARI OUS PARTIES WHICH INCLUDES RS.1,80,000/- FROM BHARTI AIRTEL. 49. WE FIND THE LD.CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE B Y REJECTING THE VARIOUS OBJECTIONS RAISED BY THE AO. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). WE FIND THE FIRST OBJECTIO N OF THE AO FOR DENYING CLAIM OF EXEMPTION IS DUE TO INCORRECT INFORM ATION TO CHARITY COMMISSIONER AND SHORTFALL IN MAKING PROVISION FOR IND IGENT PATIENT FUND (IPF) AS PER THE GUIDELINES ISSUED BY CHARIT Y COMMISSIONER. AS PER THE GUIDELINES ISSUED BY THE CHARITY COMMISSIONER/, EACH HOSPITAL SHOULD MAKE A PROVISION OF 2% OF THE 32 ITA NO.2046/PN/2012 & 761/PN/2013 HOSPITAL RECEIPTS FOR IPF. ACCORDING TO THE AO, THE ACTUA L RECEIPT OF THE TRUST IS RS.72.31 CRORES AS AGAINST RS.21.09 CRORES DISC LOSED TO THE CHARITY COMMISSIONER. THEREFORE, THE ASSESSEE SHOULD HAVE CREDITED AN AMOUNT OF RS.1.44 CRORES TO THE IPF FUND WHEREAS IT HAS CREDITED RS.66.06 LAKHS ONLY. THUS THERE IS SHORTFALL IN MAKING PROVIS ION FOR THE INDIGENT PATIENT FUND. 50. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT THERE HAD BEEN NO PROPER CLARIFICATION REGARDING THE INTER PRETATION OF THE CONCEPT OF 2% OF PATIENTS RECEIPTS. ACCORDING TO HIM , THE COMPUTATION OF GROSS RECEIPTS WAS A DEBATABLE ISSUE WITH CHARITY COMMISSIONER FOR WHICH THE HOSPITALS ASSOCIATION OF PUNE HAD TAKEN UP THE MATTER WITH THE CHARITY COMMISSIONER. IT IS ALSO T HE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE G ROSS RECEIPTS OF THE ASSESSEE WAS ONLY THE HOSPITAL CHARGES EXCLUDING THE OPD FEES, MEDICINE CHARGES, DOCTOR FEES ETC. FOR WHICH IT HAS MADE TH E PROVISION OF 2% OF THE HOSPITAL RECEIPTS FOR IPF. AFTER THE VISIT OF TH E CHARITY COMMISSIONER, HE DIRECTED TO INCLUDE THE OPD FEES ONLY TO THE HOSPITAL CHARGES AND MEDICINE CHARGES AND DOCTOR FEES WERE NOT CONSIDERED FOR THE PURPOSE OF MAKING PROVISION FOR INDIGENT FUND. THE ASS ESSEE ACCORDINGLY MADE PROVISION FOR THE BALANCE AMOUNT ON 31- 05-2010 FOR THE PERIOD FROM OCTOBER 2006 TO NOVEMBER 2009. WE FIND FORCE IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. WE ALSO FIND MERIT IN THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSE E THAT AFTER THE INSPECTION OF RECORDS BY THE CHARITY COMMISSIONER, THE ASSESSEE HAS MADE PROVISION FOR THE SHORTFALL AND THE CHARITY COMMISSIONER HAS NEITHER CANCELLED THE REGISTRATION NOR LEVIED ANY PENALTY, T HEREFORE, THIS CANNOT BE A GROUND FOR DENYING THE EXEMPTION U/S.11 OF THE I.T. ACT. 33 ITA NO.2046/PN/2012 & 761/PN/2013 51. WE FIND ALTHOUGH THE ASSESSEE IN THE INSTANT CASE HA S CLARIFIED THE ABOVE FACTS BEFORE THE AO, HOWEVER, IT WAS NOT APPR ECIATED BY HIM. WE FIND THE CIT(A) AFTER PROPERLY APPRECIATING THE FACTS HA S GIVEN A FINDING THAT THE SHORTFALL COMPUTED BY THE CHARITY COMMISSIO NER WAS MUCH LESS THAN THE SHORTFALL COMPUTED BY THE AO. FURTHE R, THE SHORTFALL IN THE CREATION OF IPF WAS DUE TO CERTAIN CONFUSIO N REGARDING THE AMOUNT TO BE PROVIDED FOR THE SAID FUND AND THE AS SESSEE HAS MADE PROVISION FOR THE SHORTFALL IN IPF. UNDER THESE CIRCUMS TANCES, WE FIND NO INFIRMITY IN THE ORDER OF CIT(A) ON THIS ISSUE. THEREFORE, THIS OBJECTION OF THE AO HAS NO MERIT. 52. AS REGARDS THE OBJECTION OF THE AO THAT THE ASSES SEE TRUST HAS GENERATED SURPLUS AND IS NOT CARRYING ANY CHARITABLE ACT IVITY IS CONCERNED, WE FIND THE ALLEGATION OF THE AO IS ALSO BASELESS . THE INCOME AND EXPENDITURE ACCOUNT OF THE ASSESSEE TRUST H AS ALREADY BEEN REPRODUCED AT PARA 32 OF THIS ORDER. IF THE CAPITA L EXPENDITURE IS CONSIDERED THEN THE SURPLUS IN EACH YEAR IS LESS THAN 1 5% AND IN SOME CASES THERE IS DEFICIT. WE ALSO FIND MERIT IN THE SUBMISSION O F THE LD. COUNSEL FOR THE ASSESSEE THAT LEGISLATURE HAS ALLOWED ACCU MULATION UPTO 15% OF THE RECEIPTS. FURTHER, THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT WHATEVER SURPLUS HAS BEEN GENER ATED HAS BEEN UTILIZED FOR THE PURPOSE OF THE TRUST COULD NOT BE CONTRO VERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. 53. WE FIND THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION REPORTED IN 121 I TR 1 HAS HELD AS UNDER (HEAD NOTES) : CHARITABLE TRUST CHARITABLE PURPOSE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL UTILITY NOT INVOLVING CARRYING ON OF ANY ACTIVITY FOR PROFIT WHERE, THE PURPOSE OF A TRUST OR INSTITUTION IS RELIE F OF THE POOR, EDUCATION OR MEDICAL RELIEF, THE REQUIREMENT OF THE DEFINITIO N OF CHARITABLE PURPOSE WOULD BE FULLY SATISFIED, EVEN IF AN ACTIVITY FOR PRO FIT IS CARRIED ON IN THE 34 ITA NO.2046/PN/2012 & 761/PN/2013 COURSE OF THE ACTUAL CARRYING OUT OF THE PRIMARY PUR POSE OF THE TRUST OR INSTITUTION IT IS THE OBJECT OF GENERAL PUBLIC UTIL ITY WHICH MUST NOT INVOLVE THE CARRYING ON OF ANY ACTIVITY FOR PROFIT AND NOT ITS ADVANCEMENT OR ATTAINMENT WHAT IS INHIBITED BY THESE LAST TEN WORDS IS THE LINKING OF ACTIVITY FOR PROFIT WITH THE OBJECT OF GENERAL PUBL IC UTILITY AND NOT ITS LINKING WITH THE ACCOMPLISHMENT OR CARRYING OUT OF T HE OBJECT IT IS NOT NECESSARY THAT THE ACCOMPLISHMENT OF THE OBJECT OR THE MEANS TO CARRY OUT THE OBJECT SHOULD THAT THE ACCOMPLISHMENT OF THE OBJE CT OR THE MEANS TO CARRY OUT THE OBJECT SHOULD NOT INVOLVE AN ACTIVITY FOR PROFIT WHERE THE PREDOMINANT OBJECT OF THE ACTIVITY IS TO CARRY OUT T HE CHARITABLE PURPOSE AND NOT TO EARN PROFIT, IT WOULD NOT LOSE ITS CHARAC TER OF A CHARITABLE PURPOSE MERELY BECAUSE SOME PROFIT ARISES FROM THE ACTIV ITY EXCLUSIONARY CLAUSE DOES NOT REQUIRE THAT THE ACTIVITY MUST BE CARRIED ON IN SUCH A MANNER THAT IT DOES NOT RESULT IN ANY PROFIT . 54. WE FIND THE CBDT VIDE CIRCULAR NO.14/2015 DATED 17-08 -2015 HAS GIVEN CLARIFICATION ON CERTAIN ISSUES RELATED TO GRANT OF APPROVAL AND CLAIM OF EXEMPTION U/S.10(23C)(VI) OF THE ACT, 1961. IN PAR A 3 OF THE SAID CIRCULAR IT HAS BEEN STATED AS UNDER : A DOUBT HAS BEEN RAISED WHETHER GENERATION OF SURPLUS OUT OF GROSS RECEIPTS WOULD NECESSARY BREACH THE THRESHOLD CONDITI ON THAT THE EDUCATIONAL INSTITUTION SHOULD EXIST SOLELY FOR EDUCAT IONAL PURPOSE AND NOT FOR THE PURPOSE OF PROFIT. PERUSAL OF PRESCRIBED PRO VISIONS CLEARLY REVEAL THAT MERE GENERATION OF SURPLUS CANNOT BE A BASIS FOR R EJECTION OF APPLICATION U/S.10(23C)(VI) ON THE GROUND THAT IT AM OUNTS TO AN ACTIVITY OF THE NATURE OF PROFIT MAKING. IN FACT, THE THIRD PR OVISO TO THE SAID CLAUSE CLEARLY PROVIDES THAT ACCUMULATION OF INCOME IS PERMI SSIBLE SUBJECT TO THE MANNER PRESCRIBED THEREIN PROVIDED SUCH ACCUMULATION IS TO BE APPLIED WHOLLY AND EXCLUSIVELY TO THE OBJECTS FOR WHICH IT I S ESTABLISHED. HENCE, IT IS CLARIFIED THAT MERE GENERATION OF SURPLUS BY EDUCA TIONAL INSTITUTION FROM YEAR TO YEAR CANNOT BE A BASIS FOR REJECTION OF APPLI CATION U/S.10(23C)(VI) IF IT IS USED FOR EDUCATIONAL PURPOSES UNLESS THE ACCUM ULATION IS CONTRARY TO THE MANNER PRESCRIBED UNDER LAW. 55. WE FIND THE HONBLE BOMBAY HIGH COURT IN THE CASE OF VANITA VISHRAM TRUST (SUPRA) HAS HELD THAT SURPLUS THAT MAY INCID ENTALLY ARISE FROM THE ACTIVITIES OF THE TRUST AFTER MEETING THE E XPENSES INCURRED FOR CONDUCTING EDUCATIONAL ACTIVITIES WOULD NOT DIS ENTITLE THE TRUST OF THE BENEFIT OF SECTION 10(23C) OF THE ACT. THE HO NBLE BOMBAY HIGH COURT IN THE CASE OF TOLANI EDUCATION SOCIETY (SUPRA) HAS ALSO TAKEN SIMILAR VIEW. IT HAS BEEN HELD IN VARIOUS DECISIONS TH AT MERE GENERATION OF SURPLUS YEAR AFTER YEAR CANNOT BE THE REA SON FOR DISALLOWING THE CLAIM OF EXEMPTION U/S.11. FURTHER, IN THE INS TANT 35 ITA NO.2046/PN/2012 & 761/PN/2013 CASE, AS MENTIONED EARLIER, THE CLAIM OF EXEMPTION U/S.11 HAS BEEN ALLOWED BY THE AO FROM A.YRS. 2002-03 TO 2007-08 IN ASSES SMENTS COMPLETED U/S.143(3) OF THE ACT. UNDER THESE CIRCUMSTANCE S, WE DO NOT FIND ANY REASON AS TO WHY THE EXEMPTION U/S.11 SHOU LD BE DENIED TO THE ASSESSEE MERELY BECAUSE THERE IS SOME SURPLUS. SINCE THE LD.CIT(A) WHILE DEALING WITH THIS ISSUE HAS GIVEN JUSTIFIABLE REA SONS AND ACCEPTED THE CONTENTION OF THE ASSESSEE, THEREFORE, WE DO NOT FIND ANY INFIRMITY ON THIS ISSUE. 56. THE NEXT OBJECTION OF THE AO IS THAT THE ASSESSEE IS NOT ENGAGED IN CHARITABLE ACTIVITY SINCE THE ASSESSEE HAS NOT PROVIDED SERVICES TO THE UNDERPRIVILEGED CLASS OF THE SOCIETY. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE WE FIND THE ASSESSEE HAS GIVEN FREESHIPS TO PATIENTS. FURTHER, IT IS NOT MANDATORY THAT THE ASSESSE E SHOULD PROVIDE MEDICAL SERVICES ONLY TO THE POOR PEOPLE. AS PER THE PROVISIONS OF SECTION 2(15) THE TERM CHARITABLE PURPOSE INCLUDES RELIE F OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. RELIEF TO THE POOR IS ONE O F THE PURPOSE BUT THERE IS NO CONDITION THAT EDUCATION OR MEDICAL SERVIC ES SHOULD BE PROVIDED ONLY TO THE POOR. IN OUR OPINION, SO LONG AS T HE TRUST IS ENGAGED IN MEDICAL ACTIVITIES IT WOULD FALL WITHIN THE DEFINITION O F CHARITABLE PURPOSE AND THE SAID TRUST CAN ENJOY THE BENEFIT OF EXEMPTION U/S.11. 57. WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF KAUSHALYA MEDICAL FOUNDATION (SUPRA) HAS HELD THAT WHERE A CHARITABLE TRUST RUNS A HOSPITAL AND IS CLAIMING TAX EXEMP TION, THERE IS NO REQUIREMENT THAT MEDICAL AID SHOULD BE PROVIDED ONLY T O THE POOR NOR THERE IS ANY REQUIREMENT THAT SOME PARTICULAR PERCE NTAGE OF SERVICES SHOULD BE RENDERED FREE. SO LONG AS IT IS NOT SH OWN THAT THE 36 ITA NO.2046/PN/2012 & 761/PN/2013 HOSPITAL WAS RUNNING WITH THE OBJECT OF EARNING PROFITS, T HE TRUST CANNOT BE DENIED EXEMPTION. 58. WE FIND THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF NOBLE MEDICAL FOUNDATION AND RESEARCH CENTRE AT PARA 23 OF T HE ORDER HAS OBSERVED AS UNDER : 23. ANOTHER ASPECT OF THE DENIAL OF DEDUCTION UNDER SECTION 11 OF THE ACT TO THE ASSESSEE WAS THAT THE ASSESSEE HAD FAILED TO PROVIDE CONCESSIONAL TREATMENT TO INDIGENT / POOR PATIENTS. ADMITTEDLY, T HIS WAS THE FIRST YEAR OF OPERATION OF THE HOSPITAL AND THE PLEA OF THE ASSESSEE WAS THAT IT COULD NOT PROVIDE FREE MEDICAL RELIEF TO LARGE NUMBERS OF INDI GENT / POOR PATIENTS. HOWEVER, AS PER THE DATA SUBMITTED BEFORE THE ASSESSING O FFICER, WHICH IS INCORPORATED UNDER PARA 9 AT PAGE 10 OF THE ASSESSMENT ORDER, SUCH SERVICES TO INDIGENT / POOR PATIENTS WAS NUMBERING 808 WAS PROVIDED BY THE ASSESSEE TRUST AND 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. UNDER THE INCOME-TAX ACT, THERE IS NO PROVISION FOR PROVIDING A PERCENTAGE OF THE CONCESSION TO INDIGENT / POOR PATIENTS. BUT CERTAIN LIMITS HAVE BEEN LAID DOWN OTHE RWISE. HOWEVER, IN THE ABSENCE OF ANY LIMIT BEING PROVIDED IN THE INCOM E-TAX ACT, VIOLATION, IF ANY, OF THE SAID LIMIT DOES NOT ENTITLE THE REVENUE A UTHORITIES TO DISALLOW THE CLAIM OF EXEMPTION UNDER SECTION 11 OF THE ACT T O THE ASSESSEE TRUST, WHICH OTHERWISE HAD CARRIED OUT THE ACTIVITIES AS PER ITS OBJECTS AND HENCE, IS ENTITLED TO THE DEDUCTION UNDER SECTION 11 OF THE ACT. ACCORDINGLY, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM OF ASSESSEE IN THIS REGARD. 59. SINCE THE CIT(A) WHILE DEALING WITH THIS ISSUE HAS ALSO GIVE N JUSTIFIABLE REASONS, THEREFORE, THE SAME BEING IN ORDER WE DO NOT FIND ANY INFIRMITY ON THIS ISSUE. 60. ANOTHER OBJECTION OF THE AO IS THAT THE ASSESSEE IS RUNNING A CANTEEN IN THE HOSPITAL WHICH IS NOT ONE OF THE OBJECTS OF THE TRUST AND IS NOT PROVIDING FREE MEALS EVEN TO THE INDIGENT PATIENTS AND IT IS IN THE NATURE OF BUSINESS CONDUCTED BY THE ASSESSEE. ACCORDIN G TO HIM, THE INCOME FROM SUCH BUSINESS CANNOT BE EXEMPT UNLESS IT IS IN THE COURSE OF THE ACTUAL CARRYING OUT OF THE PRIMARY PURPOSE OF THE TRUST. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE A SSESSEE IS RUNNING A HUGE HOSPITAL AND THEREFORE CANTEEN FACILITY IS RE QUIRED TO BE PROVIDED TO THE PATIENTS AND THEIR FAMILIES. THUS, CANTEEN IS AN 37 ITA NO.2046/PN/2012 & 761/PN/2013 ESSENTIAL PART AND A NECESSITY. ACCORDING TO HIM, THE RAT ES CHARGED FOR THE FOOD IS VERY REASONABLE AND MUCH LESSER THAN THE ST ANDARD RATES WHICH HAS BEEN ACCEPTED BY THE CIT(A). HE HAS ALSO BRO UGHT TO OUR NOTICE THAT THE PROFIT GENERATED BY THE CANTEEN IS ONLY RS.18.95 LAKHS AS AGAINST RS.78.81 LAKHS COMPUTED BY THE AO. FURTHER, THE ASSESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT FOR THE CANTEE N ACTIVITY. IT IS ALSO HIS SUBMISSION THAT EVEN ASSUMING THAT THE CANTEE N ACTIVITY AMOUNTS TO CARRYING OUT BUSINESS, STILL IN VIEW OF PROVISIONS OF SECTION 11(4A) THE ASSESSEE CAN CARRY OUT A BUSINESS SO LONG AS THE BUSINE SS IS INCIDENTAL TO THE OBJECTS OF THE TRUST. 61. WE FIND MERIT IN THE ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF TAN THI TRUST (SUPRA) HAS HELD THAT AFTER THE AMENDMENT TO SECTION 11(4 A) A CHARITABLE TRUST CAN CARRY OUT A BUSINESS SO LONG AS TH E BUSINESS IS INCIDENTAL TO THE OBJECTS OF THE TRUST. IT HAS FURTHER BEEN HELD THAT BUSINESS IS INCIDENTAL TO THE OBJECTS OF THE TRUST WHEN T HE SURPLUS GENERATED FROM THE BUSINESS IS UTILIZED FOR THE OBJECTS OF THE TRUST. THE RELEVANT OBSERVATION OF THE HONBLE SUPREME COURT AT PA RA 21 OF THE ORDER READ AS UNDER : 20. WE NOW ADDRESS THE THIRD CONTROVERSY, WHICH RELAT ES TO SUB-SECTION (4A) OF SECTION 11 AS SUBSTITUTED WITH EFFECT FROM APRI L 1, 1992. THE LEARNED SOLICITOR-GENERAL SUBMITTED THAT WHILE THE SU BSTITUTED SUB-SECTION (4A) GAVE TRUSTS AND INSTITUTIONS A WIDER LATITUDE THAN THE EARLIER SUB- SECTION (4A), IT HAD STILL TO BE CONSTRUED TO MEAN THA T A TRUST OR INSTITUTION WOULD NOT GET THE BENEFIT OF SECTION 11 UNLESS THE BUSI NESS IT CARRIED ON WAS CARRIED ON IN THE COURSE OF THE ACTUAL CARRYING O UT OF A PRIMARY PURPOSE OF THE TRUST OR INSTITUTION. DR. PAL, ON THE O THER HAND, SUBMITTED THAT THE SUBSTITUTED SUB-SECTION (4A) WAS COUCHED IN WID E LANGUAGE AND A TRUST WAS ENTITLED TO THE BENEFIT OF SECTION 11 IF IT UTILISED THE INCOME OF ITS BUSINESS FOR THE PURPOSES OF ACHIEVING ITS OBJECTS. 21. THE SUBSTITUTED SUB-SECTION (4A) STATES THAT THE INC OME DERIVED FROM A BUSINESS HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE TRUST OR INSTITUTION IF 'THE BUSINESS IS INCIDENTAL T O THE ATTAINMENT OF 38 ITA NO.2046/PN/2012 & 761/PN/2013 THE OBJECTIVE OF THE TRUST OR, AS THE CASE MAY BE, INST ITUTION' AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED IN RESPECT OF SUCH BUSI NESS. CLEARLY, THE SCOPE OF SUB-SECTION (4A) IS MORE BENEFICIAL TO A TRUST OR INSTITUTION THAN WAS THE SCOPE OF SUB-SECTION (4A) AS ORIGINALLY ENACTED. IN FACT, IT SEEMS TO US THAT THE SUBSTITUTED SUB-SECTION (4A) GIVES A TRUST OR INSTITUTION A GREATER BENEFIT THAN WAS GIVEN BY SECTION 13(1)(BB). IF THE OBJECT OF PARLIAMENT WAS TO GIVE TRUSTS AND INSTITUTIONS NO MORE BENEFIT THAN THAT GIVEN BY SECTION 13(1)(BB), THE LANGUAGE OF SECTION 1 3(1)(BB) WOULD HAVE BEEN EMPLOYED IN THE SUBSTITUTED SUB-SECTION (4A). AS I T STANDS, ALL THAT IT REQUIRES FOR THE BUSINESS INCOME OF A TRUST OR INSTITUTIO N TO BE EXEMPT IS THAT THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAINMEN T OF OBJECTIVES OF THE TRUST OR INSTITUTION. A BUSINESS WHOSE INCOME IS UTILI SED BY THE TRUST OR THE INSTITUTION FOR THE PURPOSES OF ACHIEVING THE OBJE CTIVES OF THE TRUST OR THE INSTITUTION IS, SURELY, A BUSINESS WHICH IS INCIDENT AL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST. IN ANY EVENT, IF THERE B E ANY AMBIGUITY IN THE LANGUAGE EMPLOYED, THE PROVISION MUST BE CONSTRUED IN A MANNER THAT BENEFITS THE ASSESSEE. THE TRUST, THEREFORE, IS ENTITLED TO THE BENEFIT OF SECTION 11 FOR THE ASSESSMENT YEAR 1992-93 AND THEREAFT ER. IT IS, WE SHOULD ADD, NOT IN DISPUTE THAT THE INCOME OF ITS NEWSPAPER B USINESS HAS BEEN EMPLOYED TO ACHIEVE ITS OBJECTIVES OF EDUCATION AND RELIEF TO THE POOR AND THAT IT HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT IN R ESPECT THEREOF. 62. IN VIEW OF THE ABOVE DECISION AND IN VIEW OF THE DETAILE D REASONING GIVEN BY THE CIT(A) THAT DENIAL OF EXEMPTION U/S.1 1 BY THE AO ON ACCOUNT OF RUNNING OF THE CANTEEN IS NOT CORRECT, WE FIND NO INFIRMITY IN HIS ORDER HOLDING THAT THE ASSESSEE CANNOT BE DENIED EXEMPTION U/S.11 OF THE ACT FOR RUNNING A CANTEEN AND MA KING PROFIT OUT OF IT. SO LONG AS THE SURPLUS GENERATED FROM THE CAN TEEN IS UTILIZED FOR MAKING RELIEF, THE EXEMPTION U/S.11 IN OUR OPINION CANNOT BE DENIED UNLESS IT IS BROUGHT ON RECORD THAT SUCH SURPLUS GENERATED HAS NOT BEEN UTILIZED FOR CHARITABLE PURPOSES OR HAS BEEN UTILIZ ED FOR NON CHARITABLE PURPOSES. SINCE THERE IS NO SUCH FINDING GIVEN B Y THE AO, THEREFORE, DENIAL OF EXEMPTION U/S.11 ON ACCOUNT OF RUNNING OF THE CANTEEN IS NOT JUSTIFIED. 63. AS REGARDS THE OBJECTION OF THE AO THAT ASSESSEE T RUST HAS ORGANIZED MUSICAL NIGHTS AND SUCH PROGRAMMES ARE NOT WA RRANTED IN CASE OF A CHARITABLE TRUST, WE FIND THIS OBJECTION OF THE AO IS ALSO NOT AT ALL JUSTIFIED. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSES SEE THAT THE ARTISTS HAVE PERFORMED FREE OF COST COULD NOT BE CO NTROVERTED BY THE 39 ITA NO.2046/PN/2012 & 761/PN/2013 LD. DEPARTMENTAL REPRESENTATIVE. FURTHER, THE AO CANNOT DICTATE AN ASSESSEE AS TO HOW ITS AFFAIRS SHOULD BE CONDUCTED. WHEN THE ASSE SSEE HAS CLARIFIED THAT THE MUSICAL NIGHTS WERE PERFORMED BY REN OWNED ARTISTS WHO DID NOT TAKE ANY REMUNERATION FROM THE TRUS T AND THE MAIN INTENSION OF ORGANIZING SUCH PROGRAMMES WAS TO REDUCE TH E STRESS LEVEL OF THE PATIENTS AND THEIR RELATIVES, THEREFORE, UNDER T HESE CIRCUMSTANCES DENIAL OF EXEMPTION U/S.11 IN OUR OPINION IS N OT WARRANTED. THE LD.CIT(A) HAS PROPERLY APPRECIATED THE FA CTS AND REJECTED THE OBJECTION OF THE AO ON THIS ISSUE BY GIVING VALID REASONS WHICH IN OUR OPINION IS PROPER AND JUSTIFIED. 64. THE NEXT OBJECTION OF THE AO IS THAT THE ASSESSEE H AD RECEIVED DONATIONS FROM THE PATIENTS IN LIEU OF MEDICAL SERVICES REND ERED FOR WHICH HE HAS GIVEN EXAMPLES SUCH AS MR. DILIP NAYAKUDE, MRS . KAVITA WAGHLE AND MR. RAJESH DEEPAK ETC. WE FIND THE ASSESSEE H AS CONCLUSIVELY PROVED BEFORE US THAT THE DONATION GIVEN BY THE ABOVE PERSONS ARE MUCH LESS THAN THE CONCESSION GIVEN TO THE M. IN THE CASE OF MRS. KAVITA WAGHLE DONATION GIVEN BY HER WAS RS.9,000/- WHEREAS THE CONCESSION GIVEN TO HER FOR THE MEDICAL TREATMENT WAS RS.24,34 2/-. IN THE CASE OF MR. DILIP NAYAKUDE THE CONCESSION WAS GIV EN TO HIM WAS RS.12,862/- WHILE THE DONATION GIVEN BY HIM WAS ONLY RS.5,10 0/-. SIMILARLY, IN THE CASE OF MR. DEEPAK PHADKE, THERE IS NO MAT ERIAL BEFORE THE AO THAT THE ASSESSEE HAS DEMANDED DONATION . THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE A BOVE PERSONS HAVE GIVEN DONATIONS ACCORDING TO THEIR FREE WILL AND THERE IS NO EVIDENCE BEFORE THE AO THAT THE ASSESSEE HAS DEMANDED THE SAME COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REP RESENTATIVE. WE FIND THE LD.CIT(A) WHILE DEALING WITH THIS ISSUE HAS HELD THAT THERE IS NO JUSTIFICATION FOR ARRIVING AT SUCH CONCLUSION. HE HAS ALSO OBSERVED 40 ITA NO.2046/PN/2012 & 761/PN/2013 THAT THE AO HAS RECORDED THE STATEMENTS OF FEW PERSON S WITHOUT GRANTING ANY OPPORTUNITY TO THE ASSESSEE TO REBUT THE SAME. SINCE THE CIT(A) HAS REJECTED THE OBJECTION OF THE AO AFTER CONSID ERING THE VARIOUS EVIDENCES FURNISHED BY THE ASSESSEE BEFORE HIM WH EREIN THE ABOVE PERSONS HAD CLARIFIED THAT THEY HAD GIVEN DONATIONS TO THE ASSESSEE TRUST ON THEIR OWN WILL AND SINCE THE AO IN THE REMAND PROCEEDINGS ALSO COULD NOT CONTROVERT THE VARIOUS SUBMIS SIONS GIVEN BY THE ASSESSEE, THEREFORE, THE ORDER OF THE CIT(A) HOLDING THAT THERE IS NO MERIT IN THE ALLEGATION OF THE AO THAT THE ASSESSEE T RUST HAS ISSUED DONATION RECEIPTS AND HAS EVADED TAX IS CORRECT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, WE UPHOLD THE OR DER OF THE CIT(A) ON THIS ISSUE. 65. AS REGARDS THE OBJECTION OF THE AO THAT THE ASSESS EE HAS VIOLATED THE PROVISIONS OF SECTION 13(1)(C) OF THE ACT BY PAYING REMUN ERATION OF RS.90,000/- TO MRS. MEENA KELKAR AND RS.6 LAKHS TO MRS. BH ARTI MANGESHKAR IS CONCERENED, WE FIND SUCH OBJECTION OF THE AO IS ALSO NO T CORRECT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSE SSEE WE FIND MR. MEENA KELKAR HAS BEEN PAID REMUNERATION OF RS.90,000/- . SHE WAS EARLIER LOOKING AFTER HOUSE KEEPING DEPARTMENT OF SAN JEEVAN HOSPITAL AND THUS WAS HAVING ENOUGH EXPERIENCE. FURTHER , SHE WAS APPOINTED IN PLACE OF SMT. SARITA SHELKE WHO WAS LOOKING AFT ER THE HOUSE KEEPING ACTIVITY AND SHE WAS PAID REMUNERATION OF RS.16,000/- PER MONTH. THE VARIOUS EVIDENCES FURNISHED BY THE ASSES SEE IN THE PAPER BOOK SHOW THAT MR. MEENA KELKAR WAS ACTUALLY LOOK ING AFTER THE HOUSE KEEPING ACTIVITY OF THE ASSESSEE TRUST. THE TRUS TEE DR. DHANANJAY KELKAR HAD ALSO FILED AN AFFIDAVIT BEFORE THE CIT(A) THAT THE REMARK MADE BY THE AO WAS INCORRECT AND HE HAD NOT M ADE ANY STATEMENT IN THE ASSESSMENT PROCEEDINGS AS ALLEGED BY THE AO. 41 ITA NO.2046/PN/2012 & 761/PN/2013 66. SIMILARLY IN THE CASE OF MRS. BHARTI MANGESHKAR SHE HA S BEEN GIVEN REMUNERATION OF RS.50,000/- PER MONTH FOR LOOKING AFTE R THE GENERAL ADMINISTRATION OF THE HOSPITAL. THE AO HAS BROUGHT ON RECORD THE REMUNERATION PAID TO ONE MR. BOMI BHOTE OF RUBY HALL CLINIC AT RS.1 LAKHS PER MONTH WHO WAS ALSO HANDLING GENERATION ADMINISTRATION OF THE HOSPITAL. THUS, THE REMUNERATION PAID TO MRS. BHARTI MANGESHKAR IS MUCH LESS THAN THE REMUNERATION PA ID TO PERSONS PLACED IN SIMILAR CIRCUMSTANCES. AS REGARDS THE ALLEGATION OF THE AO THAT SHE WAS NOT REGULAR IN THE HOSPITAL IS CONC ERNED, WE FIND FROM THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS T HE CONFIRMATIONS FILED IN THE PAPER BOOK THAT VARIOUS PERSONS WERE REPORTING TO MRS. BHARTI MANGESHKAR AND THEY HAVE CONFIR MED THAT THEY USED TO DISCUSS ALL THE IMPORTANT MATTERS RELATING T O THE HOSPITAL WITH MRS. BHARTI MANGESHKAR. IN OUR OPINION, THERE IS NO V IOLATION OF PROVISIONS OF SECTION 13(1)(C) OF THE ACT IN RESPECT OF PAYME NT MADE TO THE ABOVE PERSONS WHO HAVE RENDERED SERVICES TO THE ASSESSEE TRUST. FURTHER, THE PAYMENTS MADE TO THE ABOVE PERSONS ARE NOT EXCESSIVE OR UNREASONABLE AS MENTIONED EARLIER. IT HAS BEEN HELD IN VA RIOUS DECISIONS THAT IN ORDER TO INVOKE PROVISIONS OF SECTION 13(1 )(C) OF THE ACT THE ONUS IS ON THE AO TO PROVE THAT THE PAYMENT MADE TO THE TRUSTEE OR THE RELATIVE IS EXCESSIVE OR UNREASONABLE. A S MENTIONED EARLIER, THE PAYMENT MADE TO MRS. MEENA KELKAR AND MRS. B HARTI MANGESHKAR ARE NOT EXCESSIVE OR UNREASONABLE. WE, THE REFORE, CONCUR WITH THE FINDINGS GIVEN BY THE LD.CIT(A) ON THIS ISSUE. ACCOR DINGLY, THE OBJECTION OF THE AO ON ACCOUNT OF VIOLATION OF SECTION 13(1)(C ) OF THE ACT IS NOT JUSTIFIED. 42 ITA NO.2046/PN/2012 & 761/PN/2013 67. THE NEXT OBJECTION OF THE AO IS THAT ASSESSEE HAS RECEIVED RENT OF RS.2,88,100/- FROM VARIOUS PARTIES WHICH INCLUDES RS.1,88,000/ - FROM BHARTI AIRTEL FOR ALLOWING THEM TO ERECT THEIR TOWER IN THE PREMISES OF THE TRUST WHICH IS COMMERCIAL EXPLOITATION OF THE PROPERTY. WE FIND THE CIT(A) HAS ALREADY HELD THAT THE SAME IS FOR SUPPLEMENTING THE MAIN OBJECT OF THE ASSESSEE TRUST. WE AGREE WITH THE ARGUM ENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT ERECTION OF SUCH TOWER IN THE PREMISES OF THE HOSPITAL ENHANCES THE SIGNAL FOR TELECOMMUNICATION. FU RTHER, AS THE RENT HAS BEEN SHOWN IN THE BOOKS OF ACCOUNT AND HAS BEEN UTILIZED FOR THE OBJECTS OF THE TRUST, THEREFORE, WE UPHOLD THE OR DER OF THE CIT(A) ON THIS ISSUE AND HOLD THAT EXEMPTION CANNOT BE DENIED FO R RECEIVING RENT FROM BHARTI AIRTEL FOR ERECTING TOWER IN THE HOSPITAL P REMISES. IN VIEW OF THE ABOVE DISCUSSION AND IN VIEW OF THE DETAILED REA SONING GIVEN BY THE CIT(A) ON VARIOUS OBJECTIONS RAISED BY THE AO, WE FIND NO INFIRMITY IN HIS ORDER ALLOWING THE BENEFIT OF EXEMPTION U/S.11 OF THE I.T. ACT. ACCORDINGLY, THE ORDER OF THE CIT(A) IS UPHELD AN D THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 68. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ITA NO.761/PN/2013 (A.Y. 2009-10) : 69. GROUNDS RAISED BY THE REVENUE ARE AS UNDER : 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-T AX (APPEALS) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO EXEMPTION UN DER SECTION 11 OF THE INCOME-TAX ACT. 1961. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN FAILING TO APPRECIATE THE VOLUMINOUS DATA AND EVI DENCES GATHERED AND USED BY THE ASSESSING OFFICER WHICH WOULD CLEARLY ESTABLI SH THAT THE ASSESSEE WAS RUNNING ITS HOSPITAL, CANTEEN AND OTHER ACTI VITIES ALONG COMMERCIAL LINES, AND, THEREFORE, COULD NOT BE TREAT ED AS PURSUING CHARITABLE OBJECTS. 43 ITA NO.2046/PN/2012 & 761/PN/2013 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN DILUTING THE CONCEPT OF CHARITY BEYOND RECOGNITI ON AND IN NOT TAKING ANY NOTE OF THE SPIRIT UNDERLYING THIS CONCEPT AS USED IN T HE INCOME-TAX ACT, 1961. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN HOLDING THAT THE ASSESSEE CANNOT BE CONSIDERED TO HA VE VIOLATED THE PROVISIONS OF SECTION 13 (1)(C) OF THE ACT. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) GR OSSLY ERRED IN ROUTINELY DISMISSING THE INSTANCES OF VIOLATIONS OF SEC TION 13 (1)(C) BROUGHT OUT IN THE ASSESSMENT ORDER, PARTICULARLY WITH REGARD TO THE UNJUSTIFIABLE PAYMENTS MADE BY THE ASSESSEE TO MRS. MEENA KELKAR, MR. SACHIN KSHIRSAGAR AND MRS. BHARTI MANHESHKAR. 7. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF THE HEARING, THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) MAY BE VACATED AND THAT OF THE A.O. BE REST ORED. 8. THE APPELLANT CRAVE LEAVE TO ADD, ALTER OR AMEND ANY OR ALL THE GROUPS OF APPEAL. 70. AFTER HEARING BOTH THE SIDES WE FIND THE ABOVE GROUN DS RAISED BY THE REVENUE ARE IDENTICAL TO THE GROUNDS RAISED IN ITA NO.2046/PN/2012. WE HAVE ALREADY DISCUSSED THE ISSUE AN D THE GROUNDS RAISED BY THE REVENUE HAVE BEEN DISMISSED. FOLLO WING THE SAME REASONINGS THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 71. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15-04-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE; ' DATED : 15 TH APRIL, 2016. 44 ITA NO.2046/PN/2012 & 761/PN/2013 $%& '&/ COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A) - I, PUNE 4. 5. 6. THE CIT - I, PUNE & $$+, +, / DR, ITAT, B PUNE; / / GUARD FILE. / BY ORDER, // TRUE COPY // // & $ //TRUE C // 12 $ + / SR. PRIVATE SECRETARY +, / ITAT, PUNE
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Tax Holiday Secrets for Startups
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Tax Holiday Secrets for Startups
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Sales Forecasting Sheet
₹100
Initial LLP Agreement
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