ACIT(E), New Delhi V. Balaji Medical & Diagnostics Research Centre, New Delhi

ITA 5189/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4369 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 03-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB SENIOR
• Assessee Lawyers: ATUL NANAWAT
• Section: 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI. BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5189/DEL./2016 (ASSESSMENT YEAR : 2012-13) ACIT, CIRCLE 1(1), VS. M/S. BALAJI MEDICAL & DIAGN OSTICS NEW DELHI. RESEARCH CENTRE 108, I.P. EXTENSION, PATPARGANJ, NEW DELHI 110 092. (PAN : AAABB0018M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ATUL NANAWAT, CA REVENUE BY : MS. ASHIMA NEB, SENIOR DR DATE OF HEARING : 19.12.2018 DATE OF ORDER : 12.02.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, ACIT, CIRCLE 1(1), NEW DELHI (HEREIN AFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 13.07.2016 PASSE D BY LD. CIT (APPEALS)-40, NEW DELHI QUA THE ASSESSMENT YEAR 201 2-13 ON THE GROUNDS INTER ALIA THAT :- 1. LD. CIT (A) HAS ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE BY IGNORING THE FACT THAT THOUGH THE O BJECTS OF THE ASSESSEE SEEM TO BE CHARITABLE IN NATURE BUT THE ITA NO.5189/DEL./2016 2 ACTIVITIES WHICH YIELDED INCOME TO THE ASSESSEE ARE COMMERCIAL IN NATURE. 2. THE SOCIETY I.E. BALAJI MEDICAL AND DIAGNOSTICS RESEARCH CENTRE WHICH WAS ALLOWED REGISTRATION U/S 12A HAS CEASED TO HAVE ANY EFFECTIVE FUNCTION AS FA R HAS HOSPITAL IS CONCERNED. THE RUNNING OF THE HOSPITAL IS GOVERNED BY THE PROFIT MOTIVE FOR THE BENEFIT OF MA X GROUP; HENCE CLAIM FOR EXEMPTION U/S 11 & 12 OF THE ASSESSEE IS NOT LONGER JUSTIFIABLE. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSEE SOCIETY BEING RE GISTERED UNDER SOCIETIES REGISTRATION ACT ALSO ACCORDED REGISTRATI ON UNDER SECTION 12A OF THE INCOME-TAX ACT, 1961 VIDE ORDER DATED 21 .08.1997 CLAIMED EXEMPTION UNDER SECTIONS 11 AND 12 OF THE A CT. ASSESSING OFFICER DECLINED THE EXEMPTION CLAIMED BY THE ASSES SEE SOCIETY UNDER SECTIONS 11 AND 12 ON THE GROUND THAT THE ASS ESSEE SOCIETY IS RUNNING HOSPITAL ON COMMERCIAL LINE WITH PROFIT MOT IVE AS IS APPARENT FROM THE FEE STRUCTURE OF THE HOSPITAL FOR VIP ROOMS, CLASSIC DELUXE ROOMS, DELUXE ROOMS ETC. AND MOREOVE R ALL THE HOSPITAL ACTIVITIES WERE ENTIRELY DEPENDENT UPON IT S AGREEMENT WITH MAX HEALTHCARE INSTITUTE LIMITED. AO ALSO NOTICED T HAT SUBSTANTIAL FEE CHARGED FROM THE PATIENTS FOR THE ROOMS ETC. SH OWS THE REAL INTENTION OF THE ASSESSEE THAT IT IS ESTABLISHED TO EARN THE PROFIT AND IS OUT OF THE REACH OF THE COMMON MAN. AO ALSO OBSE RVED THAT THE ITA NO.5189/DEL./2016 3 ASSESSEE HAS NOT BEEN PROVIDING ANY FREE TREATMENT TO THE PATIENTS, SO CANNOT BE SAID TO BE ENGAGED IN CHARITABLE ACTIV ITIES. AO ACCORDINGLY ASSESSED THE TOTAL INCOME OF THE ASSESS EE SOCIETY AT RS.15,96,95,870/- UNDER THE HEAD PROFIT AND GAINS OF BUSINESS OR PROFESSION. 3. ASSESSEE CARRIED THE MATTER BY WAY OF AN APPEAL BEFORE THE LD. CIT (A) WHO PARTLY ALLOWED THE APPEAL. FEELING AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF F ILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. IN ORDER TO DECIDE THE CONTROVERSY AT HAND, IT I S NECESSARY TO LOOK INTO THE MAIN OBJECTIVES OF THE ASSESSEE SOCIE TY WHICH ARE AS UNDER :- A. TO UNDERTAKE THE DEVELOPMENT OF RESEARCH IN MEDICAL FILED. B. TO PROMOTE, DEVELOP AND IMPROVE SCIENTIFIC EXCHANGE OF KNOWLEDGE AS WELL AS TECHNICAL AND MEDICAL CO-OPERATION BETWEEN SIMILAR RESEARCH INSTITUTIONS. C. TO ORGANIZE THE TECHNICAL COURSES, CONFERENCES AND PUBLICATION. ITA NO.5189/DEL./2016 4 D. TO DEVELOP / IMPROVE METHODS FOR EARLY DETECTION OF ALL DISEASES. E. TO DEVELOP / IMPROVED MEDICINES FOR TREATMENT OF DISEASE. F. TO DEVELOP NEW/IMPROVED SURGICAL EQUIPMENTS AND TO MAKE INNOVATION IN THE FIELD OF BIO-MEDICAL ENGINEERING. G. TO INITIATE THE PROJECTS FOR THE DEVELOPMENT OF RESEARCH CENTERS SUPPORTED BY LABORATORIES, OPERATI ON THEATRES PARTICULARLY FOR RESEARCH AND DEVELOPMENT OF MEDICAL AND SURGICAL TECHNIQUES. H. TO PROVIDE FOR ALL FACILITIES, INCLUDING FINANCI AL ASSISTANCE FOR ANY MEDICAL RESEARCH WORK. I. TO BUILD, MAINTAIN AND RUN NECESSARY INFRASTRUCTURE INCLUDING REALIZATION OF ANY OR ALL THE OBJECTIVES FOR REALIZATION OR ALL THE OBJECTIVES OF RESEARCH AND PREVENTION OF DISEASE SET FORTH ABOVE. 6. UNDISPUTEDLY, VIDE AGREEMENT DATED 12.05.2005, A SSESSEE SOCIETY HAS ENTERED INTO AN AGREEMENT WITH MAX HEAL TH CARE INSTITUTE LTD. (MHC) TO OUTSOURCE ALL ACTIVITIES LI KE RUNNING AND OPERATING THE HOSPITAL FROM THE MHC. IT IS ALSO NOT IN DISPUTE THAT ALL THE HOSPITAL ACTIVITIES LIKE MEDICAL ADVISORY S ERVICES IN MEDICAL DOMAIN, EMPLOYMENT OF NURSES, DEPENDS UPON RECOMMEN DATION AND ASSISTANCE FROM MHC. IT IS ALSO NOT IN DISPUTE THAT OUT OF THE TOTAL EXPENSES OF RS.182,94,53,917/- INCURRED BY THE ASSE SSEE SOCIETY, RS.69,63,06,278/- WAS PAID TO MHC AND ALSO A LOAN O F RS.104,46,57,932/- WERE PAYABLE TO MHC ON 31.03.201 2. IT IS ALSO ITA NO.5189/DEL./2016 5 NOT IN DISPUTE THAT THE ASSESSEE SOCIETY HAS SUBMIT TED AUDITED FINANCIALS DURING THE ASSESSMENT PROCEEDINGS. IT I S ALSO NOT IN DISPUTE THAT DDA HAS GIVEN THE LAND TO THE ASSESSEE SOCIETY FOR RUNNING HOSPITAL ON CONCESSIONAL RATE. IT IS ALSO NOT IN DISPUTE THAT THE LD. CIT (A) HAS RELIED UPON ONE INSPECTION REPO RT GIVEN BY THE DIRECTORATE OF HEALTH SERVICES, WHEREIN IT IS STATE D THAT THE ASSESSEES HOSPITAL IS PROVIDING FREE TREATMENT TO PATIENTS. 7. LD. DR FOR THE REVENUE CHALLENGING THE IMPUGNED ORDER CONTENTED INTER ALIA THAT THE LD. CIT (A) HAS IGNOR ED THE FACT THAT THE ASSESSEE SOCIETY WAS NO LONGER OPERATING AS A CHARI TABLE INSTITUTION WITHIN THE MEANING OF SECTION 2(15) OF THE ACT; THA T LD. CIT (A) HAS ALSO IGNORED THE PREDOMINANT OBJECT OF THE ASSESSEE SOCIETY AS PROFIT MAKING AND IN THESE CIRCUMSTANCES, CHARITABL E PURPOSE CEASED TO EXIST. 8. BARE PERUSAL OF THE IMPUGNED ORDER PASSED BY THE LD. CIT (A) GOES TO SHOW THAT FIRSTLY, LD. CIT (A) HAS GIVE N FINDING ON FACT THAT MHC IS NOT HAVING TOTAL CONTROL OVER THE HOSPI TAL AS HAS BEEN HELD BY AO, RATHER DETAIL OF EXPENDITURE TABULATED AT PAGE 13 OF THE IMPUGNED ORDER SHOWS THAT OUT OF THE TOTAL EXPENDIT URE INCURRED BY THE ASSESSEE SOCIETY IN RUNNING THE HOSPITAL LESS T HAN 50%, HAS BEEN GIVEN TO MHC. ITA NO.5189/DEL./2016 6 9. HOWEVER, AT THE SAME TIME, THE LD. CIT (A) BASED HIS FINDINGS PRIMARILY ON THE FACT THAT THE IN COMPLIAN CE TO THE DIRECTION ISSUED BY HONBLE DELHI HIGH COURT, ASSES SEE SOCIETY PROVIDED FREE / CONCESSIONAL TREATMENT TO OPD / IPD PATIENTS OF WHICH DETAILS WERE SUBMITTED TO THE DIRECTORATE OF HEALTH SERVICES AT REGULAR INTERVALS. LD. CIT(A) HAS ALSO RELIED U PON THE INSPECTION REPORT DATED 29.02.2008 ISSUED BY THE DIRECTORATE OF HEALTH SERVICES, GOVERNMENT OF NCT, WHICH IS AVAILABLE AT PAGES 106 & 107 OF THE PAPER BOOK. 10. SO FAR AS ISSUE AS TO THE RUNNING OF THE HOSPIT AL BY THE ASSESSEE SOCIETY WITH A PROFIT MOTIVE FOR BENEFIT O F MAX GROUP IS CONCERNED, THIS ISSUE HAS ALREADY BEEN DECIDED IN F AVOUR OF THE ASSESSEE SOCIETY BY THE CO-ORDINATE BENCH OF THE TR IBUNAL IN ASSESSEES OWN CASE VIDE ORDER DATED 05.08.2016 PAS SED IN ITA NO.4317/DEL/2012 FOR AY 2018-19, WHEREIN IT IS HELD THAT, THE FINDINGS OF THE AO THAT MHC WAS HAVING DE FACTO CON TROL OF THE HOSPITAL WITH THE MOTIVE OF PROFIT EARNING WAS NOT BASED ON ANY FACTUAL OR LEGAL GROUND, RATHER THE FINDINGS ARE R ETURNED ON INCORRECT APPRECIATION OF FACTS. 11. HOWEVER, AT THE SAME TIME, WE ARE OF THE CONSID ERED VIEW THAT WHEN PROVIDING FREE MEDICAL AID TO THE POOR PE RSONS BY THE ASSESSEE HOSPITAL IS A PREDOMINANT OBJECT TO CLAIM EXEMPTION UNDER ITA NO.5189/DEL./2016 7 SECTIONS 11 & 12 OF THE ACT AND TO PROVE THIS FACT, NO FINDINGS HAVE BEEN BROUGHT ON RECORD. THE LD. CIT (A) HAS RELIE D UPON THE REPORT GIVEN BY THE DIRECTORATE OF HEALTH SERVICES, GOVERNMENT OF NCT DATED 29.02.2008 TO PROVE THE FACT THAT IT HAS BEEN PROVIDING FREE MEDICAL AID TO THE POOR IN THE HOSPITAL CANNOT BE RELIED UPON FOR THE YEAR UNDER ASSESSMENT I.E. AY 2012-13 AS TH E SAID REPORT CAN AT THE MOST BE RELIED UPON FOR AY 2008-09. SO, IN THESE CIRCUMSTANCES, ORDER PASSED BY THE LD. CIT (A) IS L IABLE TO BE SET ASIDE AND AS SUCH, CASE IS REMANDED BACK TO THE LD. CIT (A) TO DECIDE AFRESH AFTER GETTING THE DISCREET INQUIRY DO NE IF THE ASSESSEE SOCIETY HAS PROVIDED FREE MEDICAL AID TO THE POOR P ATIENTS DURING THE YEAR UNDER ASSESSMENT, BY PROVIDING AN OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE. CONSEQUENTLY, APPEAL FILED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 12 TH DAY OF FEBRUARY, 2019. SD/- SD/- (R.K. PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 12 TH DAY OF FEBRUARY , 2019/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-40, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.