M/s Park Health Systems Private Limited V. The Principal Chief Commissioner of Income Tax

WP/21806/2020

AI Insights

The case involves M/s Park Health Systems Private Limited, operating The Deccan Hospital, which sought judicial relief against the denial of renewal of approval for tax exemption under Section 17(2)(viii) of the Income Tax Act, 1961. The denial was based on a show cause notice related to the hospital's revocation of permission to treat COVID-19 patients by the state government. The petitioner argued that the denial was arbitrary and violated principles of natural justice, as it was based on an outdated and non-existent basis at the time of the decision. The court found that the impugned order exceeded the scope of the show cause notice and violated natural justice, leading to the setting aside of the order.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 753474 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 28-09-2021
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Epidemic Diseases Act, 1897, Disaster Management Act, 2005
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: B SARMA
• Assessee Lawyers: A V KOUNDINYA
• Keywords: Natural Justice; Writ of Mandamus; Income Tax Approval; Covid-19 Treatment; Mechanical and Arbitrary Rejection
• Section: 17(2)(viii); 17(2)(ii)(b)

Judgement Text

"Between: M/s Park Health Systems Private Limited'19t,i!:|v,t/: The Deccan Hospital), 6-3-903/A & B, Soinajiguda, Hyderabad - 500 082' Telanqana' nJpL'.\",-t.o-tjv iit H,rii,lgi\"g 6i;;;;' Mr. c.Damodar n6oov, slo Prof D C Reddv ..,PETITIONER AND 1. The Principal Chief Commissioner of lncome-Tax' Andhra Pradesh and Telanoana. Hvoerauaj, 'rioo\",.,irtr\" gz2,-'th Ftoor' B Block' lT Towers' 10-2-3' R.C. duarOs, Hyderabad - 500 004' Telangana'.- 2. The Joint corri.rio'i3l of\";;;; iqlil;ll (recrr't' o/o rhe Principal chief Commissioner ot rnco,ielai]Indn'J pi-uo\"th ancl 16ianoana' Hvderabad' Room No. e22, eth Fl;'\";, :6'bil;i:'ii i;;;' ro-z-a' n i Guards' Hvderabad - 500 004, Telangana' ...RESPONDENTS PetitionunderArticle226oftheConstitutionoflndiaprayingthatinthe circumstances stated in the affidavit filed therewith' the High Court may be pleased to issue a writ of Nlandamus or any other appropriate writ, order or Direction, declaring the order of the 1st Respondent' dated 19/10/2020' vide DIN and Letter No ITBA/ co'tF l17l2ozo_21^028343448(1), denying the renewal of approval under proviso (ii)(b) to Sec 17(2)(viii) of the lncome Tax Act' 1961' as bad in law' illegal and violative of principles of natural justice' and that it has been reiected in a mechanical and arbitrary fashion' in total disregard of the statute' consequently set aside the same and direct the Respondents to grant renewal of approval under proviso (iiXb) to Sec. 17(2)(viii) of the lncome Tax Act' 1 961 ' lA No: 1 oF 2020 ' ' ' ^.'r ^'arrinn th2t in the circumstances stated in the Petition under Section 151 CPC praying that in affidavit filed in support of the petition' the High Court may be pleased to suspend the order of the '1st Respondent' dated 1gllOl2O2O' vide DIN and Letter No'ITBA/CONI/ FljTtzo2o-zj11028343448(1;, a\"nyrng the renewal for approval under proviso (ii)(b) to Sec. 17(2)(viii) of the lncome Tax Act' 1 961 ' pending disposal of the above Writ HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY,THE TWENTY EIGHTH DAY OF SEPTEMBER TWO THOUSAND AND TWENTY ONE PRESENT THE HONOURABLE THE ACTING CHIEF JUSTICE M.S. RAMACHANDRA RAO AND THE HONOURABLE SRI JUSTICE T. VINOD KUMAR Petition Between: 1 i:&ruHit1[#jj\",\".Til:'\"l\"t\"d;\":'?'#\"[iJx] aB,::?:f+:*il10.,.., WRIT PETITION NO: 2'1806 OF 2020 lA NO: 2 OF 2020 il2il 2. The Joint Commissioner of lncome Tax (Hqrs.) (Tech.), O/o The Principal Chief Commissioner of lncome Tax, Andhra Pradesh and T6langana, Hyderibad, Room No.922,9th Floor,'B'Block, lTTowers, i0-2-3, A.0. Guards, Hyderibad - 500 004, Telangana. AND ...petitioners/Res pondents yls lSJf^H^e1th Systems Private Limited, (Unit - M/s The Deccan Hospitat), g--3:9031A.&,q, Qgnlajiguda, Hyderabad - tjOO oAZ, Tetangana. Represented by its Managing Director, Mr. c.Damodar n6doy, slo prof. D.c.Reddy. ... RespondenUpetitioner Petition under section 151 cpc praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be pleased to vacate the interim order dated 0211212020 in r.A.No.1 or 2020 in w.p.No.21806 of 2020. counsel for the petitioner: sRr A.v. KRT.HNA KouNDrNyA, sENroR couN.EL FOR SRI. A.V.A. SIVA KARTIKEYA Counsel for the Respondents: SRI B. NARASIMHA SARMA SENIOR S.C. FOR INCOME TAX The Court made the following: ORDER THE HON'BTE THE ACTING CHIEF JUSTICE SRI M.S.RAMACFIANDR,A R^O AND THE HON'BTE SRI JUSTICE T,VINOD KUMAR E 8 f 2 o R D ER : (per Honb/e Sri Jus ce T.Vinod Kumar) in this Writ petition the petitioner has assailed the order of the letter number: ITBA/COM/F /17 /2020-21l!O2B34344B(1), denying the renewat of approval under proviso (ii) (b) to section 17 (2) (viii) of the Income Tax Act, 1 96 i (for short ,Act). 1 st respondent dr. 19 .10 .2020 vide DIN & 2. The petitioner contends that, it is into providing medical treatment to the patients at its hospital having ultra modern medical facilities; that it was granted approval by the Ist respondent under clause (ii) (b) of the proviso to section 17(2)(viii) of the Act, irritially in the year 2011-12 for a period of three years vide proceedings dt. 09.08.2011; that the said approval was renewed during the year 20 14-15 vide proceedings dt. lZ.O7.2Ol4; and that the said approval was renewed for a further period of three years effective from 22.O3.2017 to 21.03.2020 vide proceedings dt. 22.O3.2017 . 3. The petitioner further contends that in terms of the renewal granted vide proceedings dt. 17.03.2017, the petitioner was required to make an application for renewal before the expiry of current approval valid till 2l.O3.2O2O; that the petitione r applied on 13.01.2020 for renewal of the approval for a furl.her period; and that the petitioner hospital was confirming to the conditions prescribed under proviso (ii)(b) to clause(viii) of sub-section (2) to section 17 of 1 or', {for short the Act, and Rule 3A (1) of the income Tax Ruies' 'Rules) ' 4. lt is the contention of the petitioner that the petitioner filed application seeking renewal of the approval well in advance' the same was not renewed before the last date specified in the approval granted vide proceedings dt' l7 'o3 '2017 and the same is kePt pending; and that in the meantime Covid-l9 pandemic had hit the nadon; the petitioner had been granted approval for providing reatment for Covid- 19 patients by the State Government' Pubiic Health and Family Welfare Department' vide G'O Rt'No 248 HM&FW(D) Department' Dt' 15'06'2020' and that the State Government revoked the permission granted to treat Covid- 19 Patients on 03'08 2O20' 5. The petitioner further contends that while it rvas pursuing the matter with the State Government in relation to revocation of permission granted to provide treatment to Covid- 1 9 Patients and the matter was under active consideration' the 1st respondent issued a show cause notice dt' 12 'lO '2O2O ' calling upon the petitioner to submit its response by 16 10 2020 as to why the cancellation order of the State Government of the mandate for Covid treatment be not considered for deciding the aPPlication under section 17(2)(ii)(b) of filed by the Petitioner for recognition petitioner filed its explanation dt 16 10 2O2O with the 1st respondent' 6. By the explanation fi1ed, petitioner contended that' at the time when application for renewal of approval was made' there is no such covid- 19 pandemic outbreak; that the State Government gfanted permission lor providing treatment to Covid- 19 in the middie of June, the Act; and that the 2O2O but the same was revoked in the first week of August, 2020, based on media propaganda wiihout taking into consideration the actual facts; that the State Government revoked the permission for Covid- 19 treatment only and not for other medical treatments; that the petitioner is in the process of getting permission again for Covid_ 19 treatment from the State Government very soon; and accordingly, requested the 1\"r resp0ndent to grant approval for the renerval application filed on cli. i 3.01.2020 7\" The petitioner contends that the 1st respondent, without considering the explanation offered vide letter dt. 16. |O.2O2O had, passed the impugned order dt. 19.1O.2A2O holding that the petitioner is ineligible for approval uncler Section 17 of t-he Act; that vrhile tlre show. cause noticc issued onlv referred to the cancellation of mandate for Covid treatment issued by the Stare Government, the impugned order passed by the 1.\", respondent travels beyond the show cause notice; and is thus, passed in violation of principles of natural justice. L It. is aiso the cont,:ntion cf the petitioner that rvhile the i st respondent had issued the shou, cause notice on the basis of the cancellation of mandate for Covid treatment by the State Gcvernrnent, he ciid not cause any el-rquiry with the State Government as to ti,herher the cancellat.ior against the petitioner had been revoked, in spite ol lhe potir.ioner s:tirring irL its repl-v that it is the process of g.ettlng permission agaiir 1br Covid- 19 t:eatment; and t'hat if onl-\"-' the i*r respondent cat-ised verification or enquiry, it would have come to knou' of the State Governmenl granring permission to admit and treat Covici-19 patients by its proceeciing dt. 13.i0 2020' Therefore, it is contended that since tht basis fo:: issuance of show cause notice by the iirst respondent is ncrv non-existent, the impugned order hoiding 17 of the Act, has had brought to the notice of the 1\"t respondr-Iit' the permlsslotl granted again b1' the State Gove rnment lor providing Coi'id- 19 thepetitionerineiigibleforappror,alunderSectron no legs to stand and is liable to be set aside' g. Per contra, learned Senior Standing Counsel appearing for the respondents supports the impugned order passed by the 1st respondent. On behalf of the respondents' it is contended that though the show cause notice only refers to the cancellation of mandate for Covid 19 treatment as the basis' the impugned order passed deals with the explanation fi1ed by the petitioner to the show cause notice and therefore, it cannot be aileged to have been passed in violation of principles of natuial jr-Lslice' 10. It is also contended by the resporldents that if the petitioner treatment vide proceedings clt 13 ' fi 2O2O, the sarne u'ould have bcen taken into consideration. As the peLitioner,jid riol trring the said fact oi the State Government having issued pernlission '.tnder proceedings dt. 13.10.2020. no l'au1t can be lound in'ith the irnpuSlned order passed by the 1st respondent L2. It is not in dispute that the petitioner rvas granted approval under Section 17 {2) of the Act, initially in the year 2oll-72 and the same was renewed during the year 2014-15 and again during the year 2OI7-18 with each renewal being valid for a period of three years. 1 1. Heard Sri. A.V. Krishna Koundinya, lear:re<:l Senior Counsel appearing for Sri. A.V.A. Siva Kartikeya, learned Counsel for the petitioner and Sri. B. Narasimha Sarma, iearned Senior Standing Counsei appearing for the Respondents. We have noted the submissions made by both the parties. The iast of the renewal granrcd was on 22.O3.2O17, which u,a s va.Ld til|2-1.a3.2020 13. Further the lact of petitioner making application on 13.01.2020 seeking renerval ol approval granted under section r7{2) of the Act, two months prior to the expiry of the validity oI approval granted on 22.03.2O17 , is admitted by rhe respondent. 14. Tl-:e elfect of g:arrl cI approvai under Section 17(2) r:f the Act, to the petitioner, q,ot.tir-1 r,.lsult in the amount paid by an ernplover oirecilr, lo the i:e,-it_ioner fo:: ihl. pur.pose of provirling n:reCical treatment for the splcilir:cl discasl:s; or:iilmei-rts menticneci in Rule 3A. of Rules to its emplr;vr:€rs oi .1 1, (rernller of faimily of such entplovr:r: nct being treatec ::s a perq,;isitc :rovirled to the empiol.ee ibr. the purpose of Section 15 reao u,ith Scctron l7 of the Act, and shall be exel'ni]t {iom lncorne l'zrx tl tiie iraricls ol rhe emplovee. 15. Whiie the said application liled by the petitioner is pencli;-rg for renewal, Covid-19 pandemic struck the entire world and India was no exception. As a matter of fact, t-he Government of India announced nation$,ide lockdon,n starting from 24 .O3.2O2O. As Coronavirus disease struck the cor-lntry, peopie u'ere getting affected requiring :nedical attention to prevent ioss of life as there is no identifie'C o: prescribed medicine to tackle the virus. Apart from the fact that ther'^ ras no prescribed rnedrcine to be aciministered, each of the persons affected b1,' coronal,irus disease had to be treated separatel-v clepcnding on the sevcrilt' of t1-re infection and lhe resultant complications. This had resulted irr the hospitals charging high amounts from the pattents admitted inro hospitals and simullaneous plc,:q;sts frorn thi, ;-rtt-,iir: iesuitil;g ih lodgii-rg oi ccrnpi:iinrs again:;i hospitals with the concernerl StaLe a -rthoritics rr taking action against such hosPitals 16. Based on complaints received from certain section of people' the State Medical and Health Officer on 03'08 2020 revoked the permission granted to the petitioner for providing Covid- 19 treatment' The petitioner, llpon invocation of permission b]' the State Medical authorities, submitted its explanation on 04 08 2020 and sought for recalling the order of the petitioner dt 03'08'2020' While the said explanation offered by the petitioner was under cor-'sideration bv the State authorities, the 2'd respondent issued notice dt 12 1O 2O2O cailing upon the petitioner to show cause a's to 'hy the canceliation order of the state Government be not considerecl for deciding the application for recognition uncler se r:tion 17 (21 (ii) (b) of the Act' The contents of the show cause notice issued to the petitioner reads as under: 3. Kindly subrn.it the response bl,j 16-10-2A20.\" 17. By letter ctt. i6-10-'20'20 adrlrr:ssccl t(, the :ir;t respondent, the petitioner ofl'ered its expianation io t-hc slioi,. causc notice dt. l'2.1O.2A2O. By the said explanatirn lileci t he pctitioner contended that, when the petitioner made crppiicatio;r for rer-reu'al of approval u/s 17(2)(ii)(b), there /as no Ccvid-i9 pancernrc cutbreak; thal the Department of Public Heallh anC Pamily Weiiare revoked the pe rmission for Covid- 19 treatment or-r11, anC not lbr ot]rer medical \"2. Kindly refer to Aour application u/ s. 17(2)(ii)(b) of the income tax act, 1961, for recognitior, of Mis. Th\"e Deccan Hospitals (A unit of Park Heattl't Sgstems Put. Ltd) by the Fr. Chief Commi,ssioner of Income To-r, Andhra Pradesh and Telangana,. In this regard, cancellation af the mandate for COVID treatment has beert iss'-t.ed bg the State Gouernment of Familg Vlel.fcLre uiCe Order dated 03.08.2020. Kindl shott cause as to uhA the cancellation order oi the Stote Gouemment be not considered for decidtng gour apytii\"ccLtion .for recognition u/ s. 112)(ir(b) of the Income To-x Act, 1961 . treatments; that rhe petitioner aggressively condemned the acr of the said authority which is based on knee jerk reactions, misinformation and baseless propaganda made by the media withour taking into consideration the actuai facts by the said authority; that the petidoner is under the process ol getting permission again for Covid_ l9 treatment from the state Governrnent Department of pubric Health and Family Welfare; and requested to grant the renewal of application under Sectjon tZ (2)(ii){bl of rhe Acr. 18. Upon submission of the explanation by the pedtioner, the 1\"t respondent passed the impugned order dt. 1g_lO-2A2A. In the impugned order the 1\"t responc{ent not only took into consideration the explanation offered by the petitioner to the contents of the show cause notice issued, but also referred to provisions of Epidemrc Diseases Act, l9g7 and also provisions ol Disaster Management Act, 2005 apart Irom placing reliance on certain judicial precedents. The 1st respondent also came to conclr-rsion that Covid evidently is a dtsease aifecting the ies;:iratory s., slern, u,hich rs a ciisease inentioneci iri rule 3A ol the IT' ruies and ther-efo:-e the lirst condition that the disease should. be one v,,hich is prescribed, is satislied. The 1sr respondent further held that as the petitioner is barred by an order of the appropriate aurhoril], to cease-and desist administering medical treatme:nt, since, the hospital l,iolated authorities binding clirections tc regulate the paiicr.t l:e at the t_imr_, of great ciistress, and ignoring rhe impugned order of ihe State Gorzernment in deciding a case oi approv:r1 under tl-:c Act, urouid hence, be in:ipruclent. FLlrrher the 'l si r,'spondent also c:ti:te ilJ conclusion thai excessive, exorbitant, and unconscionable pncing ivhile being a misconduct_ and/or an offence --.. under other laws also renders the petitioner ineligible for approval under Section 17 of the Act' 79. A reading of the impugned order passe