ASST CIT (E) 1(1), MUMBAI V. KARNUNA MEDICAL SOCIETY, MUMBAI

ITA 5861/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3273 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-09-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 31-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A RAMCHANDRAN
• Assessee Lawyers: KASHYAP S VEPARI
• Keywords: Business income
• Section: 143(3); 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE SHRI G.S.PANNU (AM) AND SHRI. RAM LAL NEGI ( JM) ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 THE ACIT(EXEMPTION) - 1(1), MUMBAI, ROOM NO. 506, 5 TH FLOOR, PIRAMAL CHAMBER, LALGAUG, MUMBAI- 400 012. VS. KARUNA MEDICAL SOCIETY, JEEVAN BIMA NAGAR, BORIVALI (WEST), MUMBAI- 400 103. PAN:- AAATK0426A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. A. RAMCHANDRAN RESPONDENT BY : MS. AARTI VISSANJI & SHRI. KASHYAP S. VEPARI DATE OF HEARING: 0 8 /0 9 /201 6 DATE OF PRONOUNCEMENT: 09/09/2016 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAI NST ORDER DATED 14/10/2015 PASSED BY CIT (APPEALS)-1 FOR THE ASST. YEAR 2012-1 3, WHEREBY THE LD. CIT(A) ALLOWED THE APPEAL PREFERRED BY THE ASSESSEE AGAIN ST ASSESSMENT ORDER DATED 27/02/2015 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE A REGISTERED SOCIETY, RUNNING A HOSPITAL, AND ALSO REGISTERED U/S 12A OF THE ACT, F ILED ITS RETURN OF INCOME FOR THE A.Y. 2012-12 AS NIL CLAIMING EXEMPTION U/S 11 OF THE ACT. ONE OF THE OBJECTS OF THE ASSESSEE TRUST IS TO PROVIDE MEDICAL RELIEF TO THE PUBLIC AT LARGE. THE A.O. WHILE COMPLETING THE ASSESSMENT ORDER BROU GHT RS. 1, 93,14,650/- TO 2 ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 TAX AS INCOME FROM PHARMACY STORE/PHARMACY SHOP SIT UATED AT THE PREMISES OF THE HOSPITAL ON THE GROUND THAT THE ASSESSEE HAS BE EN PAYING VAT TO THE SALES TAX DEPARTMENT. IN THE FIRST APPEAL THE LD. CIT(A) SET ASIDE THE IMPUGNED ASSESSMENT ORDER BY FOLLOWING THE ORDER OF HIS PRED ECESSOR PASSED IN ASSESSEES OWN CASE FOR A.Y. 2010-11. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER PASSED BY THE LD. CIT(A). 3. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL:- 1) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A), MUMBAI ERRED IN ALLOWING THE P HARMACY SHOPS INCOME U/S 11(4A)OF THE INCOME TAX ACT, AND HELD THAT ACTIVITY OF RUNNING A PHARMACY SHOP IS INCIDENTAL T O THE ATTAINMENT OF THE OBJECTS OF THE TRUST AS WELL AS R UNNING SHOP IS NOT A PLANNED ACTIVITY, THOUGH ASSESSEE IS PAYING V AT ON SALES, WITH AN INTENTION OF EARNING INCOME SIDE BY SIDE. 2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A), MUMBAI IS JUSTIFIED IN ALLOWI NG CLAIM OF THE ASSESSEE FOR EXEMPTION FOR EXEMPTION U/S11 BY IGNOR ING THE FACT THAT THE ASSESSING OFFICER IN HIS ORDER HAS POINTED OUT THAT ASSESSEE RUNS A PHARMACY STORE IN ITS HOSPITAL FOR PROFIT MOTIVE AND WITHOUT APPROACHING FACTS THAT THE ASSESSEES P ROFIT FROM THE PHARMACY STORE IS RS. 1,45,09,795/- AND GROSS RECEI PTS OF ASSESSEE SOCIETY ARE RS. 2,38,34,439/- INCLUDING OF PHARMACY SURPLUS. 4. BEFORE US THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) RELYING ON THE FINDING OF THE ASSESSING OFFICER SUBMITTED THAT SINCE EACH AND EVERY CASE HAS TO BE DECIDED 3 ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 ON ITS OWN MERITS. THE LD. CIT(A) HAS WRONGLY FOLLO WED THE ORDERS OF HIS PREDECESSOR. SINCE, THE ASSESSEE HAS BEEN RUNNING T HE PHARMACY STORE IN ITS HOSPITAL FOR EARNING PROFIT, THE ASSESSEE IS NOT EN TITLED FOR EXEMPTION U/S 11 OF THE ACT. HENCE, THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 5. ON THE OTHER HAND THE AUTHORISED REPRESENTATIVE (AR) FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOU R OF THE ASSESSEE BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2010-1 1 & 2011-12 IN ITA NO. 6861/MUM/2014 & ITA NO. 4307/MUM/2015 AND THE ASSES SEES CASE IS SQUARELY COVERED BY THE SAID DECISION. 6. WE HAVE HEAD THE RIVAL SUBMISSIONS AND ALSO GONE THROUGH MATERIAL PLACE BEFORE US INCLUDING THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE REFERRED ABOVE. THE SOLE GRIEVANCE OF THE REVENUE I S THAT THE LD. CIT(A) HAS WRONGLY TREATED THE INCOME OF THE ASSESSEE FROM THE ACTIVITY OF PHARMACY STORE/SHOP EXEMPT U/S 11(4A)OF THE ACT, BECAUSE ACC ORDING TO THE ASSESSING OFFICER SUCH AN ACTIVITY IS NOT INCIDENTAL TO ITS M AIN ACTIVITY. WE NOTICE THAT THE CO-ORDINATE BENCH HAS DECIDED THE IDENTICAL ISSUE I N FAVOUR OF THE ASSESSEE HOLDING AS UNDER:- IF THE AFORESAID PROVISIONS IS ANALYZED, SUB-SECTI ON (4A) SAYS THAT SUB-SECTION (1) OR SUB-SECTION (2) OR SUB-SECTION ( 3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION OF ANY INCOME OF A TRUST OR ANY INSTITUTION, BEING PROFIT & GAINS OF BUSINESS, UNLE SS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVE OF TH E TRUST OR, AS THE CASE MAY BE, INSTITUTION, AND SEPARATE BOOKS OF ACC OUNTS ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. SECTION 11(4A) WAS INSERTED BY THE FINANCE ACT, 198 3 W.E.F. 01/04/1984, IN RELATION TO ANY INCOME BEING PROFIT & GAINS OF ANY BUSINESS, UNLESS (A) THE BUSINESS IS CARRIED ON BY THE TRUST WHOLLY FOR PUBLIC RELIGIOUS PURPOSES/CHARITABLE PURPOSES A ND IS CARRIED OUT. 4 ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 IT HAS BEEN FURTHER ELABORATED IN THE DEPARTMENTAL CIRCULAR NO.372 DATED 08/12/1983 AND FURTHER DISCUSSED IN CIT VS TH ANTHI TRUST (2001) 247 ITR 785, 795 (SC) HOLDING THAT SECTION 1 1(4A), AS IS STOOD FROM A.Y. 1984-85 TO 1991-92, RESTRICTED THE BENEFI T SO THAT IT WAS NOT AVAILABLE FOR INCOME DERIVED FROM BUSINESS UNLE SS THE CONDITIONS CONTEMPLATED IN CLAUSES (A) & (B) ARE SATISFIED. IT IS PERTINENT TO NOTE THAT BY SECTION 11(4A), THE BENEFIT DUE TO AN ASSES SEE IN CASE OF AN INCOME FROM A BUSINESS HELD INTEREST IS EXTENDED TO AN INCOME FROM A BUSINESS CARRIED ON BY IT ON ITS SATISFYING THE C ONDITIONS LAID DOWN THE UNDER CLAUSES (A) & (B) OF THE SECTION (CIT VS DHARMODAYAM COMPANY (1997) 225 ITR 686, 692 (KERALA), WHEREIN, THE ASSESSEE WAS HELD TO BE ENTITLE TO CLAIM EXEMPTION U/S 11(1) OF THE ACT. IN RESPECT OF THE INCOME FROM KURY BUSINESS, WHICH ITS ELF WAS HELD IN TRUST BY THE ASSESSEE. THIS DECISION WAS SET-ASIDE BY HONBLE APEX COURT IN (2001) 248 ITR 816 (SC). IN DIT VS BOMBAY BILLION ASSOCIATION DHARM A NO KANTO TRUST (2002) 254 ITR 708 (BOM.), WHEREIN, THE GENERAL PUB LIC WAS BENEFICIARY, THEREFORE, THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT SINCE THERE WAS SUBSTANTIAL COMPLIANCE OF SECTION 1 1(4A)(B), THEREFORE, THE TRUST WAS ENTITLED TO EXEMPTION. IDE NTICAL RATIO WAS LAID DOWN IN DIT (E) VS SHILPAM (1998) 230 ITR 126 (CAL.). AS A RESULT OF SUBSTITUTION BY THE FINANCE NO.(2) ACT, 1 991 W.E.F 01/04/1992, THE PROVISIONS OF SECTION 11(1) OR 11(2 ) OR 11(3) OR 11(3A) SHALL NOT APPLY FOR AND FROM A.Y. 1992-93 IN RELATION TO ANY INCOME OF THE TRUST OR ANY INSTITUTION, BEING PROFI T & GAINS OF BUSINESS UNLESS (A) THE BUSINESS IS INCIDENTAL TO ATTAINMENT OF OBJ ECTIVE OF THE TRUST OR THE INSTITUTION AS THE CASE MAY BE AND 5 ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 (B) SEPARATE BOOKS OF ACCOUNTS ARE MAINTAINED BY SU CH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. IN ACIT VS THANTHI TRUST (2001) 247 ITR 785 (SC), AFFIRMING THANTI TRUST VS ACIT (1999) 238 ITR 635 (MAD.) IT W AS HELD THAT THE SCOPE OF SECTION 11(4A) OPERATIVE FOR AND FROM A.Y. 1992-93, IS MORE BENEFICIAL TO A TRUST OF INSTITUTION THEN WAS THE S COPE OF SECTION 11(4A), AS IT WAS OPERATIVE FOR A.Y. 1984-85 TO 199 1-92. SECTION 11(4A), AS IT STAND FOR AND FROM A.Y. 1992-93, ALL THAT IS REQUIRED FOR THE BUSINESS INCOME OF A TRUST OR A INSTITUTION TO BE EXEMPT FROM A TAX IS THAT THE BUSINESS SHOULD BE INCIDENTAL TO TH E ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR INSTITUTION. IN VIEW OF THE MATTER, THE TRUST WAS HELD TO BE ENTITLED TO EXEMPTION AS THE BUSINES S OF THE TRUST WAS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE T RUST. IF THE LANGUAGE USED IN THE SECTION IS KEPT IN JUXTAPOSITION WITH V ARIOUS DECISIONS, IT CAN BE SAID THAT THE DOMINANT NATURE OF THE PURPOSE FOR WHICH THE TRUST EXIST HAS TO BE CONSIDERED. THE RATIO LAID DO WN IN ADITANAR EDUCATIONAL INSTITUTION ETC. VS ADDL. CIT 224 ITR 3 10 (SC) WHEREIN, THE HONBLE APEX COURT, WHILE CONSTRUING THE PROVIS IONS OF SECTION 10(22) OBSERVED THE DECISIVE OR ACID TEST IS WHETHE R ON AN OVERALL VIEW OF THE MATTER, THE OBJECT HAS TO BE CONSIDERED . IDENTICALLY, HONBLE JURISDICTIONAL HIGH COURT IN BAUN FOUNDATIO N TRUST VS CHIEF COMMISSIONER (2012) 251 CTR (BOM) 237, WHEREIN, IDE NTICALLY, THE ACTIVITY OF CHEMIST OF WAS HELD TO BE INCIDENTAL OR ANCILLARY TO THE DOMINANT OBJECT AND PURPOSE TO RUN A HOSPITAL. THE HONBLE COURT HELD THAT RUNNING A CHEMIST SHOP IS NOT THE DOMINAN T OBJECT FOR THE PURPOSE TRUST, THEREFORE, THE ASSESSEES APPLICATIO N WAS ALLOWED U/S 10(23C) (VIA) OF THE ACT, BY HOLDING THAT APPLICATI ON OF APPROVAL CANNOT BE REJECTED ON THE GROUND THAT RUNNING OF A SHOP IN THE 6 ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 HOSPITAL IS INCIDENTAL FOR THE PURPOSES OF THE HOSP ITAL. IN THE PRESENT APPEAL ALSO, THE CHEMIST SHOP IS PART AND PARTIAL O F THE HOSPITAL BEING INCIDENTAL/ANCILLARY TO ACHIEVE THE OBJECTS O F THE HOSPITAL, THEREFORE, FOLLOWING THE AFORESAID DECISIONS AND AL SO THE CASE OF FRANCISCAN SISTERS OF ST. JOSEPHS SOCIETY (ITA NO. 1897/MDS/2013) ORDER DATED 06/01/2014, WHEREIN, RUNNING OF PHARMAC Y BY THE ASSESSEE SOCIETY AS INTEGRAL PART OF RUNNING A HOSP ITAL, RATIO LAID DOWN IN DIT (E) VS AGRI-HORTICULTURE SOCIETY (2005) 273 ITR 198, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD . COMMISSIONER OF INCOME TAX (APPEALS), MORE SPECIFICALLY WHEN THE PH ARMACY SHOP IS INTEGRAL PART AND PARTIAL OF THE HOSPITAL. WE AFFIR M THE SAME. 8. SINCE, THE IDENTICAL ISSUE HAS ALREADY BEEN DEC IDED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE, WE HAVE NO REASON TO DEVIAT E FROM THE VIEW TAKEN BY THE CO-ORDINATE BENCH. HENCE, RESPECTFULLY FOLLOWING TH E DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE AFORESAID, WE DECIDE T HE SOLE ISSUE URGED BY THE ASSESSEE IN HIS FAVOUR. ACCORDINGLY, THE ORDER PAS SED BY THE LD. CIT(A) IS UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE FOR T HE ASST. YEAR 2012-13 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH SEPTEMBER, 2016 SD/- SD/- ( G.S.PANNU ) (RAM LAL NEGI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 09/09/2016 7 ITA NO.5861/MUM/2015 ASSESSMENT YEAR: 2012-13 / 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. / BY ORDER, ) //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI PRAMILA