DDIT (E) -II(1), MUMBAI V. JASLOK HOSPITAL AND RESEARCH CENTTE, MUMBAI

ITA 6944/MUM/2008

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100672 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 13-02-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 05-12-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA P YADAV
• Keywords: Business income; Charitable institution; Additional evidence; Benefit of exemption
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI . , , BEFORE SHRI D. MANMOHAN , VP AND SHRI SANJAY ARORA , AM ./ I.T.A. N O. 6944/MUM/2008 ( / ASSESSMENT YEAR: 2005 - 06 ) DDIT(E) - II(1), 5 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, MUMBAI 400 012 / VS. JASLOK HOSPITAL AND RESEARCH CENTRE 15, DR. G. DESHMUKH MARG, MUMBAI - 400 026 ./ ./ P AN/GIR NO. AAAAJ 0028 Q ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI AKHILENDRA P. YADAV / RESPONDENT BY : SHRI NITESH JOSHI / DATE OF HEARING : 05.05.2015 / DATE OF PRONOUNCEMENT : 05 .08.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (A PPEALS) - XXX , MUMBAI (CIT(A) FOR SHORT) DATED 30.09.2008 , ALL OWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 20 0 5 - 06 VIDE ORDER DATED 31.12.2007. 2. 1 TH IS IS THE SECOND ROUND BEFORE THE TRIBUNAL. IT SHALL BE RELEVANT TO RECOUNT THE BACKGROUND FACTS OF THE CASE. THE ASSESSEE, A PUBLIC TRUST, UNDER THE PUBLIC TRUST ACT, 2 ITA NO. 6944/MUM/2008 (A.Y. 2005 - 06) DDIT(E) VS. JASLOK HOSPITAL AND RESEARCH CENTRE 1950, IS REGISTERED AS A CHARITABLE INSTITUTION U/S.12A(A) OF THE ACT. IT FUNCTION S THROUGH ITS TWO WI NGS, NAMELY , A H OSPITAL AND A R ESEARCH C ENTRE; THE LATTER BEING A NOTIFIED RESEARCH INSTITUTION U/S.35(1)(II) OF THE ACT. THE INCOME OF THE RESEARCH WING, FOR WHICH SEPARATE ACCOUNTS ARE BEING MAINTAINED, WAS CLAIMED EXEMPT U/S. 10(21) OF THE ACT. IN ASSESSMENT, THE ASSESSING OFFICER (A.O.) NOTED THAT THE APPROVAL U/S. 35(1)(II) TO THE ASSESSEES RESEARCH CENTRE WAS ONLY UP TO 31.03.2002. THERE WAS, ACCORDINGLY, NO QUESTION OF THE ASSESSEE BEING ALLOWED THE BENEFIT OF EXEMPTION U/S. 10(21) , I.E., QUA THE INCOME OF ITS RESEARCH W ING. THE EXEMPTION U/S.11 WAS ALSO DENIED, ASSESSING THE INCOME OF THE ASSESSEE - TRUST (AOP) FROM BOTH THE WINGS AS BUSINESS INCOME. IN APPEAL, THE ASSESSEES CLAIM WAS UPHELD BY THE FIRST APPELLATE AUTHORITY ; THE ASSESSEE BEING CONSISTENTLY HELD BY BOTH THE FIRST APPELLATE AUTHORITY A S WELL AS BY THE TR IBUNAL, THE SECOND APPELLATE AUTHORITY , TO BE WORKING WITH THE DOMINANT OBJECT TO RUN A HOSPITAL. THE APPROVAL U/S. 35(1)(II) HAD ALSO BEEN SINCE RECEIVED. THE ASSESSEE WAS , ACCORDINGLY , HELD AS ENTITLED TO EXEMPTION U/S S . 1 0 (21) AND 11 OF THE ACT . IN FURTHER APPEAL BEFORE THE TRIBUNAL, I.E., IN THE FIRST ROUND, THE REVENUE CONTENDED THAT IN - AS - MUCH AS THE A.O. HAD DISALLOWED EXEMPTION U/S.11, THE LD. CIT(A) COULD NOT HAVE ALLOWED THE ASSESSEE EXEMPTION U/S S .10(21) AND 10(23C), WHICH W ERE NOT BEFORE HIM. HIS ALLOWING EXEMPTION U/S.10(21) WAS THUS INCORRECT. THE TRIBUNAL FOUND THE CONTENTION AS CORRECT . THE EXEMPTION U/S.10(2 3 C) HAD ALSO BEEN REJECTED FOR A.Y. 2008 - 09. ACCORDINGLY , IT DENIED EXEMPTION U/ S S.10(21) AND 10(23C), EVEN AS IT CON FIRMED THE EXEMPTION U/S.11 , FOLLOWING ITS OR DER FOR A.Y. 2001 - 02, WHICH IS A COMBINED ORDER FOR A.YS. 1995 - 96 AND 2001 - 02 (IN ITA NO. 3514/MUM/1999 AND 2607/ M UM/2005 RESPECTIVELY DATED 03.07.2007) VIDE ORDER DATED 20.03.201 3, WHICH IS AGAIN A COMBINED ORD ER FOR A.YS. 2005 - 06 AND 2008 - 09 (COPY ON RECORD ) . 2.2 THE ASSESSEE SUBSEQUENTLY MOVED AN A PPLICATION U/S.254(2) OF THE ACT, CONTENDING THAT THERE HAD OCCURRED A MISTAKE APPARENT FROM RECORD IN THE TRIBUNALS 3 ITA NO. 6944/MUM/2008 (A.Y. 2005 - 06) DDIT(E) VS. JASLOK HOSPITAL AND RESEARCH CENTRE ORDER DATED 20.03.2013 (SUPRA) IN - AS - MUCH AS THE TRIBUNAL HAD ASSUMED THAT EXEMPTION U/S.10(21) WAS NOT A N ISSUE BEFORE THE LD. CIT(A). THE ASSESSEE HAD IN FACT FURNISHED THE EXTENSION OF APPROVAL U/S. 35(1)(II), I.E., BEYOND 31.03.2002 , SINCE GRANTED, BEFORE THE FIRST APPELLATE AUTHORITY, AND WHO HA D DULY NOTED THE SAME. THE ASSESSEES ALTERNATE CONTENTION OF BEING ALLOWED EXEMPTION U/S.11 HAS ALSO BEEN DENIED. THE TRIBUNAL FOUND MERIT IN THE ASSESSEES CLAIMS. ACCORDINGLY, VIDE ORDER U/S.254(2) DATED 16.01.2015 (IN MA NO. 381/MUM/2014/COPY ON RECORD ), IT RECALLED ITS ORDER (FOR THE CURRENT YEAR) FOR THE LIMITED PURPOSE OF DECIDING THE ISSUE OF ASSESSEES ENTITLEMENT TO EXEMPTION U/S.10(21) OF THE ACT; THE RELEVANT PART OF ITS ORDER READING AS UNDER, AND HENCE THIS APPEAL: 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD RAISED THE ISSUE BEFORE THE FAA WITH REGARD TO EXEMPTION U/S. 10(21) OF THE ACT. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THERE IS A MISTAKE APPARENT ON RECORD IN THE ORDER PASSED BY THE TRIBUNAL ON 20.03.2013. THEREFORE , REGISTRY IS DIRECTED TO FIX THE CASE FOR HEARING ON 23.02.2015 BEFORE THE REGULAR BENCH TO PASS APPROPRIATE ORDER WITH REGARD TO CLAIM MADE BY THE ASSESSEE U/S.10(21) OF THE ACT. WE ARE CLARIFYING THAT WE ARE RECALLING OUR ORDER FOR THE LIMITED PURPOSE ONLY I.E. TO DECIDE THE ISSUE OF ENTITLEMENT OF EXEMPTION U/S.10(21) OF THE ACT. 3 . BEFORE US, THE ASSESSEE PLACED RELIANCE ON THE DECISION BY THE TRIBUNAL IN ITS OWN CASE FOR A.YS. 1995 - 96 AND 2001 - 02 (SUPRA), STATING THE ISSUE OF GRANT OF EXEMPTION U/S. 10(21) OF THE ACT TO BE COVERED THEREBY IN - AS - MUCH AS THE ASSESSEE HAD RECEIVED THE APPROVAL U/S.35(1)(II) FOR THE PERIOD 01.04.2002 ONWARDS ON 27.06.2008 (COPY ON RECORD). THE REVENUE, ON THE OTHER HA N D , WOULD SUBMIT THAT THE SAID ISSUE IS AT LARGE SINCE THE COMPLIANCE OF THE CONDITIONS OF APPROVAL U/S.35(1)(II) HAD NO T BEEN EXAMINED FOR THEIR SATISFACTION, I.E., AT ANY STAGE. FURTHER AND, IN FACT, PLACING A COPY OF THE ORDER U/S. 10(23C)(VIA) DATED 31 .12.2008 ON RECORD, IT WAS CLAIMED THAT THE ASSESSEES APPLICATION FOR APPROVAL THERE - UNDER STAND S SINCE REJECTED , HOLDING, AFTER AN ANALYSIS OF THE ASSESSEES FACTS AND FIGURES, INDICATIVE OF A ND INCLUDING THE MANNER OF 4 ITA NO. 6944/MUM/2008 (A.Y. 2005 - 06) DDIT(E) VS. JASLOK HOSPITAL AND RESEARCH CENTRE ITS FUNCTIONING, THAT THE ASSESSEE IS NOT AN INSTITUTION EXISTING SOLELY FOR PHILANTHROPIC PURPOSES AND NOT FOR PROFIT AND, ACCORDINGLY, DENIED APPROVAL THERE - UNDER VIDE THE SAID ORDER . 4 . WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. OUR MANDATE, BEING DERIVED FROM THE ORDER U/S.254 ( 2) , WHICH HAS ATTAINED FINALITY, RECALLING THE ASSESSEES APPEAL FOR THE LIMITED PURPOSE, IS FOR DECIDING ON THE MAINTAINABILITY OR OTHERWISE IN LAW OF THE EXEMPTION U/S.10(21) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND TH AT THE LD. CIT(A) HAS ALLOWED THE ASSESSEE RELIEF FOR THE CURRENT YEAR FOLLOWING THE DECISION BY THE TRIBUNAL FOR THE EARLIER YEARS. THE ONLY OTHER ORDER BY THE TRIBUNAL ON RECORD IS THE COMBINED ORDER FOR A.YS. 1995 - 96 AND 2001 - 02 (SUPRA), WHEREIN THIS IS SUE DID NOT ARISE FOR CONSIDERATION. IN FACT, IT WAS THE ASSESSEES SPECIFIC PLEA BEFORE THE TRIBUNAL THAT THE GROUNDS ASSUMED BY THE REVENUE RELATING TO EXEMPTION U/S. 10(21) , WHICH READ AS UNDER, ARE MISCONCEIVED (REFER PARA 12 OF THE ORDER ) : 1) ON TH E FACTS, AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN STATING THAT THE EXEMPTION UNDER SECTION 10(21) IS ALREADY ALLOWED TO THE RESEARCH CENTRE WITHOUT APPRECIATING THE FACT THAT IT IS THE POWER OF THE ASSESSING OFFIC ER TO ALLOW SUCH EXEMPTION IF THE CONDITIONS ARE FULFILLED BY THE ASSESSEE. 2) ON THE FACTS, AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT (APPEALS) ERRED IN STATING THAT THERE ARE SEPARATE AUDITORS FOR JASLOK HOSPITAL AND JASLOK RESE ARCH CENTRE AND SEPARATE AUDIT IS DONE FOR RESEARCH CENTRE AS ALSO FOR THE HOSPITAL WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS NOT FILED EVEN AUDITED INCOME & EXPENDITURE ACCOUNT AND BALANCE SHEET FOR THIS YEAR. 3) ON THE FACTS, AND IN THE CIRC UMSTANCES OF THE CASE, AND IN LAW, THE LEARNED CIT(APPEALS) ERRED IN STATING THAT THE COMPUTATION OF THE ASSESSING OFFICER IS NOT CORRECT IN RESPECT OF INCOME FOR ASSESSMENT YEAR 1995 - 96 AFTER VERIFYING FROM THE AUDITED ACCOUNTS AND BALANCE SHEET OF THE AS SESSEE WITHOUT ALLOWING A REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER AS PROVIDED IN RULE 46A OF THE INCOME - TAX RULES, 1962. 5 ITA NO. 6944/MUM/2008 (A.Y. 2005 - 06) DDIT(E) VS. JASLOK HOSPITAL AND RESEARCH CENTRE THE SAME STOOD ACCEPTED BY THE TRIBUNAL; THE RELEVANT PART OF ITS ORDER DATED 03.07.2007 READING AS UNDER: 17. WE HEARD BOTH SIDES IN DETAIL AND CONSIDERED THE MATTER. THE GROUNDS NO. 1, 2 & 3 RAISED BY THE REVENUE IN THIS APPEAL ARE NOT IN FACT ARISING EVEN OUT OF THE ASSESSMENT ORDER. EVEN THOUGH THE ASSESSING OFFICER HAS STATED HIS REASONS TO BRING THE ASSESSEE OUT OF THE AMB IT OF SECTION 10(21), HE HIMSELF HAS ULTIMATELY GRANTED THE DEDUCTION, AS ASSESSEE WAS NOTIFIED U/S.35(1)(II). WE HAVE ALSO CONSIDERED THE OBSERVATIONS REGARDING AUDITED ACCOUNTS, WHICH ARE NOT SUPPORTED BY HIS OWN ORDER. THEREFORE GROUNDS NO. 1, 2, 3 DO N OT ARISE FOR ADJUDICATION. IT WOULD ACCORDINGLY BE INCORRECT TO SAY OF THE ISSUE AT HAND, I.E., THE APPLICABILITY OF SECTION 10(21), AS BEING COVERED BY THE SAID ORDER BY THE TRIBUNAL, AND THE LD. CIT(A) IS DECIDEDLY INCORRECT IN STATING SO. IN FACT, THE TRIBUNAL PER THE SAID ORDER ALSO ALLOWS EXEMPTION U/S.10(22A) OF THE ACT, WHICH PROVISION STANDS OMITTED BY FINANCE (NO.2) ACT, 1998 W.E.F. 01.04.1999, SO THAT THE SA ID ALLOWANCE WOULD BE OF NO CONSEQUENCE FOR THE YEARS SUBSEQUENT TO A.Y. 1998 - 99 , AND WOU LD THEREFORE NOT APPLY TO THE YEAR UNDER CONSIDERATION . THE ONLY ASPECT THAT THEREFORE SURVIVES IS THE BENEFIT OF EXEMPTION U/S.11, THE SATISFACTION OF WHICH PROVISION IS TO BE CONSIDERED BY THE A.O. AT THE TIME OF ASSESSMENT. THE SAME , AS AFORE - REFERRED, IS THOUGH OUTSIDE THE SCOPE OF THIS ORDER. COMING BACK TO THE ISSUE OF EXEMPTION U/S. 10(21) OF THE ACT, THE SAME WOULD THEREFORE HAVE TO BE CONSIDERED ON MERITS. THE ASSESSEE HAS BROUGHT ON RECORD THE APPROVAL U/S. 35(1)(II) DATED 27.06.2008 W.E.F. 01.0 4.2002, AND WHICH IS A PREREQUISITE FOR THE APPLICABILITY OF S. 10(21). THE SAME IS SUBJECT TO CERTAIN ADDITIONS SPECIFIED THEREIN, AND WHICH HAVE NOT BEEN EXAMINED FOR THEIR SATISFACTION BY THE A.O., BEING NOT FURNISHED BEFORE HIM. IT WAS THUS INCUMBENT O N THE LD. CIT(A) TO HAVE CAUSED SO AFTER ADMITTING THE SAID A PPROVAL BY WAY OF ADDITIONAL EVIDENCE UNDER R ULE 46A. NOT ONLY DOES HE NOT DO SO, HE ALSO DOES NOT ISSUE ANY FINDING QUA THE SATISFACTION OR OTHERWISE OF THOSE CONDITIONS, AND PR O CEE DS , AS AFORE - STATED, ON THE BASIS OF THE MATTER 6 ITA NO. 6944/MUM/2008 (A.Y. 2005 - 06) DDIT(E) VS. JASLOK HOSPITAL AND RESEARCH CENTRE BEING COVERED BY THE TRIBUNALS ORDER FOR THE EARLIER YEARS, AND WHICH IS DEFINITELY NOT THE CASE. THE REVENUE, ON ITS PART, HAS BROUGHT ON RECORD THE COPY OF THE ORDER U/S.10(23C)(VIA) DATED 31.12.2008 (FOR A.YS. 1999 - 20 00 TO 2007 - 08) BY THE PRESCRIBED AUTHORITY, REFUSING THE APPROVAL THERE - UNDER TO THE ASSESSEE, CLAIMING IT TO HAVE A BEARING IN THE MATTER. THE SAME, WE OBSERVE , CONTAINS FINDINGS ON THE ASPECT OF THE SURCHARGE @ 20% ON THE BILLS ISSUED TO THE INDOOR PATIE NTS, AND TRANSFERRING THE SAME, AS ALSO 25% OF THE FEES PAID TO THE DOCTORS, TO THE CORPUS FUND , EVEN AS THE SAME ARE NOT IN THE NATURE OF DONATIONS . THESE FACTORS ARE DULY NOTED BY THE A.O. AT PG. 2 OF HIS ORDER, AND WHICH THE ASSESSEE EXPLAINS BEFORE THE TRIBUNAL (FOR A.YS. 1995 - 96 AND 2001 - 02) AS BEING VOLUNTARY IN - AS - MUCH AS THIS WAS BEING SO DONE AT THE INSTANCE OF TH E C HARITY C OMMISSIONER AND, BESIDES, BEING EARMARKED FOR THE UPGRADATION OF THE HOS PITAL, STAND DIVERTED BY OVERRIDING TITLE (REFER PARA 18 OF THE TRIBUNALS ORDER ). THESE ASPECTS STAND DU LY CONSIDERED IN THE ORDER U/S.10(23C)(VIA) SUPRA . 5 . IN VIEW OF THE FOREGOING, WE, U NDER THE CIRCUMSTANCES, CONSIDER IT ONLY FIT AND PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE A.O. TO CONSIDE R AND DETERMINE THE ISSUE OF EXEMPTION U/S. 10(21) ON THE INCOME OF THE ASSESSEES RESEARCH CENTRE AFRESH. THIS IS A SUBSIST ING ISSUE IN THE ASSESSEES CASE. THE A.O. SHALL CONSIDER THE MATTER IN ALL ITS A SPECTS , AND DECIDE THE SAME IN ACCORDANCE WITH THE LAW PER A SPEAKING ORDER, TAKING INTO ACCOUNT ALL THE MATERIAL DEEMED RELEVANT FOR THE PURPOSE , ALLOWING REASONABLE OPPORTUNITY TO THE ASSESSEE TO STATE ITS CASE. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE R EVENUE S APPEAL IS ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 05 , 201 5 S D/ - SD/ - ( D. MANMOHAN ) (S ANJAY ARORA) / VIC E PRESIDENT / A CCOUNTANT MEMBER MUMBAI ; DATED : 05 . 0 8 .201 5 7 ITA NO. 6944/MUM/2008 (A.Y. 2005 - 06) DDIT(E) VS. JASLOK HOSPITAL AND RESEARCH CENTRE . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI