IN THE INCOME TAX APPELLATE TRIBUNAL H BENC H, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER A ND SHRI AMARJIT SINGH, JUDICIAL MEMBER ./I.T.A. NO.560/M/2016 ( AY: 2009-2010 ) ./I.T.A. NO.561/M/2016 ( AY: 2006-2007 ) ./I.T.A. NO.562/M/2016 ( AY: 2008-2009 ) ./I.T.A. NO.563/M/2016 ( AY: 2007-2008 ) HIRANANDANI FOUNDATION, 514, DALAMAL TOWERS, 211 FPJ MARG, NARIMAN POINT, MUMBAI-21. / VS. ASST. DIRECTOR OF INCOME TAX, EXEMPTION 2(1), MUMBAI. ./PAN : AAATH0960N ( /APPELLANT) .. ( / RESPONDENT) / ASSESSEE BY : SHRI CHETAN A. KARIA / REVENUE BY : SHRI A.N. SONTAKKE, DR /DATE OF HEARING : 03.05.2016 ! /DATE OF PRONOUNCEMENT : 27.05.2016 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE FOUR APPEALS UNDER CONSIDERATION. ALL THESE APPEALS AR E FILED BY THE ASSESSEE INVOLVING THE ASSESSMENT YEARS 2006-07 TO 2009-2010. SINCE, THE ISSUES RAISED IN ALL THESE APPEALS ARE IDENTICAL A ND ALSO CONSIDERING THE CONNECTIVITY OF THESE APPEALS, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. APPEAL WISE ADJUDICATION IS GI VEN IN THE FOLLOWING PARAGRAPHS OF THIS ORDER. ITA NO.561/M/2016 (AY 2006-2007) 2. THIS APPEAL FILED BY THE ASSESSEE ON 5.2.2016 IS AGAINST THE ORDER OF THE CIT (A) I, MUMBAI FOR THE ASSESSMENT YEAR 2006-2007. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER:- 2 1. THE LD CIT (A) ERRED IN CONFIRMING THE ACTION O F THE AO IN HOLDING THAT ASSESSEE HAS VIOLATED PROVISIONS OF SECTION 11(4A) BY NOT MAINTAINING SEPARATE BOOKS OF ACCOUNT FOR PHARMACY, WHICH IS PART OF HOS PITAL RUN BY THE ASSESSEE TRUST. 2. THE LD CIT (A) ERRED IN CONFIRMING ACTION OF THE AO IN ESTIMATING INCOME FROM PHARMA MEDICINES AT RS. 36,20,520/- AND ASSESSING T HE SAME AS TAXABLE INCOME DENYING THE EXEMPTION U/S 11 TO THE SAID INC OME. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A REGISTERED CHARITABLE TRUST AND ENGAGED IN RUNNING SCHOOLS AND HOSPITALS. THE ASSESSEE WAS ESTABLISHED VIDE TRUST DEED DATED 14.12.1983 WITH T HE OBJECTS OF EDUCATION, MEDICAL RELIEF TO THE POOR. ASSESSEE RUNS A MULTISPECIALTY HOSPITAL AT HIRANANDANI GARDENS, POWAI AND A BASIC SECONDARY LEVEL CARE HOSPITAL AT THANE. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME AT RS. NIL. THE ASSESSMENT WAS ORIGINALLY COMPLETED U/S 143(3) OF THE ACT ON 13.3.2008 FOR AY 2006-07 AND THE ASSESSED INCOME WAS DETERMINED AT RS. NIL IN THE SAID ASSESSM ENT. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED U/S 148 OF THE ACT VIDE THE NOTICE DATED 30.10.2006 AND THE REASSESSMENT WAS COMPLETED ON 24.3.2014 U/S 143 (3) R.W.S 147 OF THE ACT. IN THE REASSESSMENT, THE ASSESSING OFFICER SEGREGATED THE PROFITS EARNED OUT OF THE PHARMACY BUSINESS OF THE SAID HOSPITAL AND SUM OF RS. 36,20,520/- WAS TAXED AS A BUSINESS INCOME OF THE ASSESSEE RAISING THE DEMAND OF RS. 23,03,223/- FOR THE AY 2006-2007. ASSESSING OFFICER IS OF THE OPINION THA T THE SAID PROFITS ARE NOT ELIGIBLE FOR EXEMPTION IN VIEW OF NON COMPLIANCE TO THE PROV ISION OF SECTION 11 (4A) OF THE ACT. SIMILAR DEMANDS WERE RAISED FOR SIMILAR REASON S FOR THE AYS 2007-08; 2008-09 AND 2009-2010 AND THE TAX DEMANDS RAISED BY THE ASS ESSING OFFICER IN ALL THE FOUR AYS ARE AS UNDER:- AY APPEAL NO. DEMAND RAISED 2006-07 561/M/2016 23,03,223/- 2007-08 563/M/2016 36,39,246/- 2008-09 562/M/2016 30,83,957/- 2009-10 560/M/2016 37,18,242/- THE MAIN REASON FOR MAKING THE ABOVE ADDITIONS REVO LVES AROUND THE CONDITION SPECIFIED IN SUB-SECTION 4A OF SECTION 11 OF THE ACT IE ASSESSEES FAILURE TO MAINTAIN THE SEPARATE BOOKS OF ACCOUNTS FOR THE BUS INESS OF PHARMACY. 4. RELEVANT FACTS IN THIS REGARD INCLUDE THAT THE A SSESSEE RUNS A PHARMACY STORE IN ITS HOSPITAL AND THE OVERALL TURNOVER OF THE HOS PITAL IS ABOVE RS. 4 CRS. THE PHARMACY TURNOVER IS PART OF IT. ASSESSEE BUYS THE MEDICINE AND SELLS THE SAME TO 3 THE PATIENTS AT MRP. THIS PHARMACY IS LOCATED WITH IN THE PREMISES OF THE HOSPITAL. BEFORE THE AO, ASSESSEE MADE ELABORATE SUBMISSIONS STATING THAT THE PHARMACY BUSINESS IS INTEGRAL PART OF THE HOSPITAL BUSINESS AND THE BOOKS OF AC COUNTS SINCE MAINTAINED SEPARATELY FOR THE BUSINESS OF HOSPITAL, THERE EXIST SEPARATE ACCOUNTS FOR THE PHARMACY BUSINESS AS WELL. AS THE TWIN CONDITI ONS SPECIFIED IN SUB-SECTION 4A OF SECTION 11 OF THE ACT IE (I) INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIV ES OF THE TRUST AND (II) SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED B Y SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS ARE MET BY THE ASSESSEE, THEREFORE, THE PROFITS OF THE PHARMACY BUSINESS IS ENTITLED FOR EXEMPTION U/S 11( 4A) OF THE ACT. IN SUPPORT OF THE ABOVE, ASSESSEE RELIED ON A COUPLE OF DECISIONS IE (I) THE JUDGMENT OF THE HONBLE HIGH COURT IN THE CASE OF BAUN FOUNDATION TRUST VS. CCIT (251 CTR 237) AND THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF SAIFEE HOSPITAL TRUST VS. DEPARTMENT OF INCOME TAX IN ITA NO.5686/MUM/2011. T HE ABOVE SAID DECISIONS ARE RELEVANT FOR THE PROPOSITION THAT MAINTAINING OF PHARMACY IS INCIDENT TO THE HOSPITAL BUSINESS, WHICH IS ENTITLED FOR EXEMPTION U/S 11 OF THE ACT. ONCE THE PHARMACY BUSINESS IS INCIDENT TO THE RUNNING OF A HOSPITAL, A CONSOLIDATED BOOKS OF ACCOUNT MAINTAINED BY THE HOSPITAL BUSINESS, IT MEETS THE R EQUIREMENTS OF THE CONDITION RELATING TO MAINTAIN THE SEPARATE BOOKS OF ACCOUNT BY THE TRUST. 5. ON THE OTHER HAND, THE CASE OF THE REVENUE IS TH AT THE ASSESSEE CANNOT CLAIM EXEMPTION IN RELATION TO ANY INCOME OF THE TRUST (B EING PROFITS AND GAINS OF THE BUSINESS) UNLESS, THE BUSINESS IS INCIDENTAL TO THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST AND (II) SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS . AS PER THE REVENUE, HOSPITAL BUSINESS, IN ANY CASE, REQUIRES M AINTAINING THE BOOKS OF ACCOUNTS FOR CLAIMING OF EXEMPTION, ABOUT WHICH THERE IS NO DISPUTE. IN ADDITION, THE PHARMACY BUSINESS ALSO REQUIRES MAINTAINING OF TH E SEPARATE BOOKS OF ACCOUNT IN THE PHARMACY BUSINESS, IF THE BENEFIT OF EXEMPTION IS CLAIMED IN RESPECT OF INCOME FROM THE BUSINESS OF PHARMACY. REVENUE DISMISSED T HE RELIANCE OF THE ASSESSEE ON THE ABOVE CITED JUDGMENT / ORDERS ON THE GROUND THA T THE SAID DECISIONS WERE DELIVERED IN THE CONTEXT OF APPLYING THE PROVISIONS OF SECTION 10(23C) OF THE ACT. OF COURSE, THERE IS NO DISPUTE ON THE FACT THAT THE LA NGUAGE USED IN THE PROVISO TO SECTION 10(23C) AND SUB-SECTION 4A OF SECTION 11 OF THE ACT IS IDENTICAL. THERE IS NO CLARITY ON IF THE SAID DECISIONS WERE DELIVERED ON THE FACT THAT IF THE SAID TRUST 4 MAINTAINED SEPARATE BOOKS OF ACCOUNTS FOR THE BUSIN ESS OF PHARMACY. OTHERWISE, FOR THE ASSESSMENT YEAR 2006-2007, IT WAS OBSERVED THAT ASSESSEE PURCHASED MEDICINE TO THE TUNE OF RS. 2.4 CRS (ROUNDED OF) (PARA 6.1 O F THE IMPUGNED ORDER) AND THE SAID MEDICINES WERE SOLD AT THE RATE AS EXISTS IN T HE OPEN MARKET. AO NOTICED THAT THE NET PROFIT MARGIN VARIES FROM 15-25% OF THE COS T PRICE. AO CONSIDERED ONLY 15% AS THE NET PROFIT RATE AND CALCULATED PROFIT @ 15% OF THE SAID 2.4 CRS AND THE INCOME DETERMINED AS RELATABLE TO THE PHARMACY BUSINESS AT RS. 36,20,250/-. THE SAID AMOUNT WAS TAXED AS TAXABLE INCOME OF THE ASSESSEE U/S 11(4A) OF THE ACT. SIMILAR CALCULATIONS WERE DONE FOR THE OTHER ASSESS MENT YEARS A WELL. DURING THE FIRST APPELLATE PROCEEDINGS, SIMILAR CONTENTION S WERE SUBMITTED BY THE ASSESSEE AND PLEADED FOR RELIEF. FURTHER, ASSESSEE SUBMITTE D THAT IT DOES NOT SELL MEDICINE TO THE OUTSIDE PATIENTS BUT ONLY FOR THE INDOOR PATIEN T OR OPD. THE CONTENTS OF PARA 5.2 CONSTITUTES AN OPERATIONAL PARA, WHERE THE CIT (A) EVENTUALLY CONFIRMED THE DECISION OF THE AO. IN THIS PARAGRAPHS, CIT (A) DISCUSSED T HAT THE PHARMACY BUSINESS CONSTITUTES A SEPARATE BUSINESS INDEPENDENT OF THE HOSPITAL BUSINESS AND CONFIRMED THE AOS DECISION IN MAKING THE SAID DECISION FOR W ANT OF SEPARATE BOOKS OF ACCOUNT FOR PHARMACY STORES. CIT (A) ALSO DISCUSSED THE FAC T OF ASSESSEE EARNING 17.18% AS A GP RATE AND DISMISSED THE ASSESSEES CONTENTION T HAT IT DOES NOT HAVE A PROFIT MARGIN. HE FURTHER MENTIONED THAT WHEN SUCH BUSINE SS OF PHARMACY CONSTITUTES AN INDEPENDENT BUSINESS, THE PHARMACY BUSINESS OF THE FOUNDATION SHOULD NOWHERE BE EXEMPTED FROM THE SAID PROVISIONS OF SECTION 11 OF THE ACT. AGGRIEVED WITH THE ABOVE DECISION OF THE CIT (A), ASSESSEE IS IN APPEA L BEFORE US WITH THE ABOVE EXTRACTED GROUNDS. 6. DURING THE PROCEEDINGS BEFORE US, SHRI CHETAN KA RIA APPEARED FOR THE ASSESSEE. BRINING OUR ATTENTION TO THE FACTS OF TH E CASE, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ISSUE RAISED IN THE GROUNDS STAN DS COVERED IN FAVOUR OF THE ASSESSEE. HE REITERATED THE ARGUMENTS THAT THE PH ARMACY BUSINESS IS AN INTEGRAL PART OF THE HOSPITAL BUSINESS AS THERE CANNOT BE AN Y HOSPITAL WITHOUT A PHARMACY STORE. PHARMACY STORE IS AN INTEGRAL PART OF THE HOSPITAL BUSINESS. THEREFORE, THE ASSESSEE MAINTAINED A SEPARATE BOOKS OF ACCOUNT FOR THE HOSPITAL BUSINESS INCLUDING THE TRANSACTIONS RELATING TO THE PHARMACY BUSINESS. THE PROVISIONS OF SUB-SECTION 4A OF SECTION 11 MANDATE THE MAINTENANCE OF SEPARATE B OOKS OF ACCOUNT FOR ALL STREAMS OF INCOME OF THE HOSPITAL BUSINESS. HE FAIRLY SUBM ITTED THAT AS SUCH NO SEPARATE 5 BOOKS OF ACCOUNTS ARE MAINTAINED BY THE TRUST EXCLU SIVELY FOR THE PHARMACY BUSINESS. FURTHER, LD COUNSEL FOR THE ASSESSEE BRO UGHT OUR ATTENTION TO THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT I N THE CASE OF BAUN FOUNDATION TRUST (SUPRA) FOR THE PROPOSITION THAT THE ACTIVITY OF CHEMISTS SHOP IS AN ACTIVITY WHICH IS INCIDENTAL OR ANCILLARY OR INCIDENTAL TO D OMINANT OBJECT OF RUNNING A HOSPITAL . PARA 4 OF THE SAID JUDGMENT IS RELEVANT. FURTHER, IT IS ALSO MENTIONED IN THE SAID JUDGMENT THAT A HOSPITAL MUST OF NECESSITY HAVE A SECTION OR DEP ARTMENT WHERE MEDICINES CAN BE DISPENSED AND IT IS NOT UNCOMMON F OR A MEDICAL HOSPITAL................TO HAVE A CHEMIST SHOP WHER E PHARMACEUTICAL PRODUCTS ARE SOLD. LD COUNSEL FOR THE ASSESSEE IS OF THE VIEW THAT RUN NING OF A PHARMACY STORE IS A ANCILLARY ACTIVITY OF RUNNING OF HOSPITAL, WHICH IS FOR PHILANTHROPIC PURPOSES AND THEREFORE, ASSESSEE IS ENTITLED FOR EXEMPTION U/S 1 1 OF THE ACT. 7. ON THE OTHER HAND, LD DR FOR THE REVENUE RELIED HEAVILY ON THE ORDER OF THE AO AND THE CIT (A) AND THE PROVISIONS OF SECTION 11 (4A) OF THE ACT. READING THE PROVISIONS OF SUB-SECTION 4A OF SECTION 11 OF THE A CT, LD DR MENTIONED THAT THE ASSESSEE NEVER INTENDED TO CLAIM EXEMPTION U/S 11(4 A) OF THE ACT WITH A SUPPORT OF AN ARGUMENT THAT REVOLVES AROUND THE INTEGRAL BUSIN ESS OPERATIONS OF THE PHARMACY SHOP WITH THE HOSPITAL BUSINESS. LD DR ARGUED THAT THE TRUST HAS BUSINESS OF RUNNING A HOSPITAL, BUSINESS OF RUNNING SCHOOLS AND ALSO BU SINESS OF RUNNING A PHARMACY SHOP. THE REQUIREMENT OF MAINTAINING THE SEPARATE B OOKS OF ACCOUNT FOR PHARMACY SHOP TO BECOME ELIGIBLE FOR EXEMPTION U/S 11 OF THE ACT WAS NOT MET BY THE ASSESSEE. WHEN A PHARMACY SHOP IN THE OPEN MARKET MAINTAINS SEPARATE BOOKS OF ACCOUNT, WHY SHOULD THE ASSESSEE FAIL TO DO SO AND RESORT TO INCLUDE TRADING TRANSACTION OF MEDICINE IN THE HOSPITAL BUSINESS. HE ALSO DISMISSED THE ASSESSEES ARGUMENT THAT THE MEDICINES / DRUGS ARE NOT SOLD, T HE WAY THEY ARE SOLD IN THE OPEN MARKET. EARLIER, LD COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE MEDICINES WERE CHARGED IN THE COMPREHENSIVE BILL RAISED IN A CLIEN TS CASE WHICH ALSO INCLUDES THE OTHER CHARGES IE DOCTOR FEES, THEATRE CHARGES ETC. CONSIDERING THE INTRICATE LINKAGE OF THE MEDICINE TO THE PATIENT THROUGH THE DIRECT INTE RVENTION OF THE DOCTORS, MAINTAINING THE BOOKS OF ACCOUNT IS NOT AS EASY AS THE ONE MAINTAINED BY THE PHARMACY SHOPS IN THE OPEN MARKET. THESE THINGS WE RE DISMISSED BY THE LD DR FOR THE REVENUE WHO MENTIONED THAT THE PHARMACY IS AN I NDEPENDENT BUSINESS ACTIVITY SO FAR AS MAINTENANCE OF BOOKS OF ACCOUNTS IS CONCE RNED. HE ALSO DISTINGUISHED THE 6 OTHER JUDGMENTS BY STATING THAT THE SAME WERE DELIV ERED IN FAVOUR OF THE RESPECTIVE ASSESSEE IN THE FACTUAL MATRIX OF THE MAINTENANCE O F THE BOOKS OF ACCOUNTS FOR THE PHARMACY STORES BY THE RESPECTIVE ASSESSEES. FURTH ER, HE MENTIONED THAT THE SAID DECISIONS WERE NOT DELIVERED IN THE CONTEXT OF 11(4 A) OF THE ACT, ABOUT WHICH THERE IS NO DISPUTE. FURTHER, HE BROUGHT OUR ATTENTION TO T HE REPORTED DECISION OF THE TRIBUNAL IN THE CASE OF INDIAN MACHINE TOOLS MFRS. A SSOCIATION VS. ADIT [1999] 70 ITD 304 (MUM.) AND SUBMITTED THAT THE SAID ASSESSEE WAS NOT GRANTED EXEMPTION U/S 11 IN RESPECT OF THE CERTAIN RECEIPTS EARNED BY THEM WHEN BOOKS OF ACCOUNTS WERE NOT MAINTAINED. FURTHER, RELYING ON THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT VS. THANTHI TRUST [2001] (247 ITR 785), LD DR SUBMITTED THAT BOOKS OF ACCOUNTS HAVE TO BE MAINTAINED. DURI NG REBUTTAL TIME, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE SAID JUDG MENT IN THE CASE OF THANTI TRUST (SUPRA) AND MENTIONED THAT IN CASE OF ANY AMBIGUITY IN THE LANGUAGE / LAW, THE BENEFIT SHOULD BE GIVEN IN FAVOUR OF THE ASSESSEE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES AS WELL AS THE DECISIONS CITED BY BOTH THE LD REPRESENTATIVES AND ALSO THE RELEVANT MATERIAL PLACED BEFORE US. THE CASE OF TH E REVENUE IS THAT THE PHARMACY SHOP CONSTITUTES AN INDEPENDENT BUSINESS THAT REQUI RES MAINTENANCE OF THE BOOKS OF ACCOUNT SEPARATELY IN ADDITION TO THE BOOKS OF ACCO UNT MAINTAINED FOR THE PURPOSE OF BUSINESS OF THE HOSPITAL RUN BY THE ASSESSEE. WHEN , SUCH SEPARATE BOOKS OF ACCOUNTS ARE NOT MAINTAINED FOR PHARMACY, THERE IS A VIOLATION OF PROVISIONS OF SECTION 11(4A) OF THE ACT RESULTING IN DENIAL OF EX EMPTION IN RESPECT OF PROFITS RELATABLE TO THE SAID PHARMACY SHOP. 9. ON THE CONTRARY, THE CASE OF THE ASSESSEE IS THA T THE RUNNING OF A HOSPITAL INCLUDES A RUN OF PHARMACY AS WELL. THEREFORE, THE PHARMACY BUSINESS IS NOT AN INDEPENDENT BUSINESS ACTIVITY SO FAR AS THE ASSESSE E IS CONCERNED. IN FACT, THE SAME CONSTITUTES AN INTEGRAL PART OF THE BUSINESS OF RUNNING OF A HOSPITAL. FOR THIS PROPOSITION, ASSESSEE RELIED ON VARIOUS DECISIONS, WHICH WERE ALREADY CITED ABOVE. AS THE ASSESSEE HAS UNDISPUTEDLY MAINTAINED THE BOO KS OF ACCOUNT FOR THE HOSPITAL SEPARATELY, THE ASSESSEE FULFILS THE CONDITION OF M AINTAINING THE SEPARATE BOOKS OF ACCOUNT FOR THE INTEGRAL BUSINESS ACTIVITY FOR ALL INTEGRAL BUSINESS ACTIVITIES OF RUNNING OF A HOSPITAL IE PHARMACY SHOP AS WELL. THEREFORE, THERE IS NO VIOLATION OF THE TWIN CONDITIONS SPECIFIED IN SECTION 11(4A) OF THE ACT. 7 10. WE HAVE PERUSED THE RELEVANT PROVISIONS OF SECT ION 11(4A) OF THE ACT AND THE SAME READS AS UNDER:- SEC:11(4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SU B-SECTION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUS T OR AN INSTITUTION, BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTA L TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST ....... FURTHER, AS CITED BY THE ASSESSEE, WE HAVE ALSO EXA MINED THE RELEVANT PROVISO TO SECTION 10(23C) OF THE ACT AND THE RELEVANT PORT IONS ARE EXTRACTED AS UNDER: PROVIDED ALSO THAT NOTHING CONTAINED IN SUB-CLAUSE (IV) OR SUB-CLAUSE (V) [OR SUB- CLAUSE (VI) OR SUB-CLAUSE (VIA)] SHALL APPLY IN REL ATION TO ANY INCOME OF THE FUND OR TRUST OR INSTITUTION [OR ANY UNIVERSITY OR OTHER ED UCATIONAL INSTITUTION OR ANY HOSPITAL OR OTHER MEDICAL INSTITUTION], BEING PROFITS AND GA INS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF ITS OBJ ECTIVES AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY IT IN RESPECT OF SUCH BUSINESS; 11. FROM THE COMPARISON OF THE LANGUAGE OF THE TWO PROVISIONS EXTRACTED ABOVE, WE FIND, THE LANGUAGE USED IN THE PROVISIONS ARE CO MPARABLE AND THEREFORE, THE COMMON PURPOSE IS EASILY DECIPHERABLE BY THE ABOVE PROVISIONS APPEARING IN TO DIFFERENT SECTIONS FROM THE ACT. THEREFORE, WE AGR EE WITH THE RELEVANT ARGUMENT PROPOUNDED BY THE LD COUNSEL FOR THE ASSESSEE ON TH E APPLICABILITY OF THE CITED JUDGEMENTS. 12. REGARDING THE ARGUMENT PERTAINING TO WHETHER TH E PHARMACY SHOP IS AN INTEGRAL PART OF THE HOSPITAL BUSINESS, AS MENTIONE D ABOVE, WE HAVE PERUSED THE RELEVANT PARAS FROM THE JURISDICTIONAL HIGH COURT I N THE CASE OF BAUN FOUNDATION TRUST (SUPRA), WHICH WAS OF COURSE DELIVERED IN THE CONTEXT OF THE PROVISIONS OF SECTION 10(23C) OF THE ACT AND FIND RELEVANT TO EXT RACT THE RELEVANT PARA WHICH IS AS FOLLOWS:- 4. IN AD I T A N A R E DU CA TION I NS TIT U T E ET C . V . A DD I TI ONA L C OM M ISS I ONE R O F I N CO ME TAX ( 1 9 9 7 ) 224 I TR 3 1 0 ( SC ), T H E S U PR E M E C OURT H AS OB SE R V E D , WH I L E C O N S T R U I N G T HE P R OVI S I ON S O F S EC T I ON 1 0(22) T HA T TH E D ECI S I V E O R AC ID T E S T I S WH ETHE R O N A N O V E RA L L V IE W OF T HE M A T T E R TH E O B J EC T I S T O M AKE A P R O F I T . I F AF T E R M E E T I N G TH E EXP E N DI T U R E A N Y SU RP L U S RES UL T S IN C ID E N T A L L Y F R O M T H E A C T I V I TY LA W F U LL Y C A RR I E D O N B Y T H E IN S T I T UT IO N , I T W I LL N O T CEASE T O B E O NE EX I STI N G SOL E L Y FOR T H E ST A T UT O R I L Y S T I PU L A TED PURPO S E SO L O NG A S TH E O BJ EC T IS N O T T O M A KE A PR O F I T . A G AI N , IT I S A W E L 1 SE T TLED P OSIT I ON IN L A W T H A T T H E D O M I NA NT N A TUR E OF T H E PU R POS E F O R W HIC H T HE T RU S T EX I S TS H A S T O B E C O N SID E R ED . THE CHIE F CO M M ISS I ONE R H AS N O T DOUB T ED T H E G E NU INE NE S S O F T HE TR US T O R T HE F AC T T HA T IT I S CONDU C T ING A H O S PI T A L. E V E N I F T HE FI G U R E S W H I C H A R E T A KEN I N T O AC C OUNT BY T H E C H I E F COM M I SSI O N E R AR E T O B E H A D R EG A RD T O, I T I S E V I D E N T THAT T H E A C T I V ITY O F A C H E M I S T S H OP I S AN AC T IVITY W H I C H I S I N C I D E N T A L O R AN CI L L A RY T O T H E DO M I N A N T O B J E C T AND PU R P O S E W HIC H I S TO R UN A H O SP IT A L . T H E CH I E F COM MI SS I O N E R H A S A C C E P T E D T H A T TH E S UR P L U S WH IC H I S E A RN E D F R OM T H E O P E R A TI O N OF A C H E M IS T S HO P IS U T IL I Z E D .F O R THE P URPO SES O F T H E H O S PIT A L. A H OS PIT A L MU S T O F NECE SSI TY H A V E A SEC T IO N O R D E P A R TME NT WHE R E ME D I CI N ES CA N B E DIS P E N SED A ND 8 IT IS N O T UN CO MM O N F O R A M ED I C A L HO SPI TA L W HICH E XI S T S E V E N F O R PH I L A NT H ROPIC P U R P OS ES T O HAV E A C H E MIST S HOP WH E R E P HA R M ACE UTIC A L P R ODU C T S A R E SO L D . TH IS I S A F AC I LI TY WH IC H I S I NT E NDE D T O B E U S E D P R EDOM I NAN T L Y B Y P A TI ENT S A N D TH E IR R E LA T I V ES . TH O U G H T HE M E MBER S O F T HE G ENER A L P U B LI C A R E N O T P R O H IBI T ED F ROM USING T H E F A C I LI TY , T H E C RU C I A L QU ES T IO N T O A SK OR T H E T E ST T O AN S W E R I S W H E T H E R T H E ES T A B L I S HM E N T O F A C HE M IS T S HOP I S I NC I DE NT A L O R AN CI L L ARY T O T H E DOM I N A NT O B J EC T AND PURP O SE W HIC H IS T O SE T U P A N D C O ND UC T A H OSPITAL FOR P HILAN T H R OPIC PURP O S E S . AS A MAT T E R O F F A C T , S EC TI O N 1 0 (23 C ) PERMIT S T H E AC CUM U LA T ION OF I N C O ME U P T O A C E RT AI N ST I PUL A T E D AMO U N T O V E R A ST I PUL A TED PE R I O D . I N OUR V IEW, TH E CH IE F C OM MI S S I O N E R O F I NCO M E T AX H A S CL EA RLY M I SAPP L I E D H I M S E LF I N LA W BY H A V I NG R EGA R D T O A CLE A R LY A N C I LL A RY O R I N C I DE NT A L ACTI V IT Y A ND E L E V A T I N G I T TO T H E S T A TUS O F THE D O M I NAN T PURPO SE FO R WH IC H T HE H OS P I T A L H A S B EEN E S TA BL IS H E D . R U NN I N G T H E CHE M IS T S H OP I N T H E PRES E NT CA S E IS N O T TH E D OM I N A N T OB JE C T OR PU R P O S E O F T HE T RU S T . N O R W O ULD T H E F I GU R E AS D IS C L OSE D I N D I C A T E THA T TH E N A TUR E OF THE AC T I V I T Y H A S A SS U M E D SU C H A D OM I NA T I N G OR O V E R WH E L M I NG IMP O RT A N C E SO AS T O CAS T D O U BT ON T H E TRU E NAT U R E A ND C HA RA C T E R OF T HE HOS P I TA L WH I CH IS C O NDUC T ED B Y T H E P E T I TIO N E R . TH E C H I E F CO MM I S S IO N E R H AS ACTED CON T R A RY T O T HE J UDGM E N T S O F T HE SUPREME C O U R T WHICH HO LD THE F IE LD C O N SE QU E N T UP O N W H IC H T H E IMPUGNE D ORDER W O UL D H A VE T O B E S E T ASID E . 13. FROM THE ABOVE, IT IS CLEAR THAT THE RUNNING OF A PHARMACY IS A NECESSARY REQUIREMENT FOR RUNNING OF A HOSPITAL. IT IS IMPOS SIBILITY FROM MEDICAL POINT OF VIEW THAT THE HOSPITAL CAN RUN WITHOUT PHARMACY SHOP I N THE PREMISES OF THE HOSPITAL. CONSIDERING THE SAME, THE HONBLE HIGH COURT HAS HE LD THAT MAINTENANCE OF A PHARMACY SHOP IS ANCILLARY TO THE DOMINANT OBJECT O F RUNNING OF A HOSPITAL AND THUS, IT IS AN INTEGRAL PART OF THE HOSPITAL. WE NOTICED , ACTUALLY THE PHARMACY SHOP IS BEING MAINTAINED BY THE HOSPITAL ITSELF AND NOT BY ANY PR IVATE CONTRACTOR. DRAWING THE MEDICINE FROM SUCH PHARMACY SHOP BY THE DOCTORS IN RESPECT OF THE PATIENTS IS ALSO EVIDENT FROM THE RECORDS, COMMONLY MAINTAINED IN TH EIR MEDICAL REPORTS. IT IS NOT THE CASE OF THE REVENUE THAT THE PROFITS EARNED ON PHAR MACY WAS NOT SPENT FOR THE OBJECTS OF TRUST. THEREFORE, WE FIND, THAT THE CITE D JUDGMENTS (SUPRA) ARE APPLICABLE SQUARELY TO THE FACTS OF THE CASE SO FAR AS THE ARG UMENT RELATING TO IF THE PHARMACY IS AN INTEGRAL PART OF THE HOSPITAL BUSINESS OR NOT. CONSIDERING THE ABOVE, WE ARE OF THE OPINION, THE CONDITIONS OF MAINTENANCE OF BOOKS OF ACCOUNT IN RESPECT OF THE BUSINESS ACTIVITY OF TRADING OF MEDICINES, WHICH IS AN INTEG RAL PART OF THE HOSPITAL ACTIVITIES, IS NOT THE REQUIREMENT OF THE LAW ON THE FACTS OF THIS CASE. THUS, WE AFFIRM THE ASSESSEES CONTENTION THAT THE PHARMACY SHOP IS AN INTEGRAL PART OF THE HOSPITAL BUSINESS AND THE SAME IS NOT HIT ADVERSELY BY THE C ONDITIONS SPECIFIED IN THE PROVISIONS OF SECTION 11(4A) OF THE ACT. THEREFORE, SO LONG AS THE TRANSACTIONS OF SUCH PHARMACY WHICH ANCILLARY/ INCIDENTAL FOR THE BUSINE SS OF A HOSPITAL AND OBJECTS OF THE TRUST, THE CONDITIONS RELATING TO MAINTENANCE OF SE PARATE BOOKS OF ACCOUNTS ARE MET 9 WITHIN THE MENAING OF SECTION11(4A) OF THE ACT. AC CORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 14. CONSIDERING THE COMMONALITY OF THE ISSUE RAISED IN ALL THE OTHER APPEALS FOR THE AYS 2007-08; 2008-09 AND 2009-2010, THE DECISIO N GIVEN BY US IN THE ABOVE PARAGRAPHS OF THIS ORDER WHILE ADJUDICATING THE APP EAL FOR THE AY 2006-07 SQUARELY APPLIES TO THE SAID THREE APPEALS TOO. ACCORDINGLY , GROUNDS RAISED BY THE ASSESSEE IN ITS APPEALS FOR THE AYS 2007-08; 2008-09 AND 2009-2 010 ARE ALLOWED. 15. IN THE RESULT, ALL THE FOUR APPEALS OF THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH MAY, 20 16. SD/- SD/- (AMARJIT SINGH) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMB ER MUMBAI; '# 27.5.2016 . $ . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. % ( ) / THE CIT(A)- 4. % / CIT 5. &'( $$ )* , )*! , / DR, ITAT, MUMBAI 6. (+, - / GUARD FILE. & $ //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) !' , / ITAT, MUMBAI