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2015 (12) TMI 1589 - AT - Income TaxExemption u/s 11 - pharmacy shop in hospital premises - activity of running a pharmacy shop as incidental to attainment of the objects of the trust - charitable trust - Held that - Identically Hon ble jurisdictional High Court in Baun Foundation Trust vs Chief Commissioner (2012 (4) TMI 172 - BOMBAY HIGH COURT ) wherein identically the activity of chemist of was held to be incidental or ancillary to the dominant object and purpose to run a hospital. The Hon ble Court held that running a chemist shop is not the dominant object for the purpose trust therefore the assessee s application was allowed u/s 10(23C) (via) of the Act by holding that application of approval cannot be rejected on the ground that running of a shop in the hospital is incidental for the purposes of the hospital. In the present appeal also the chemist shop is part and partial of the hospital being incidental/ancillary to achieve the objects of the hospital therefore following the aforesaid decisions and also the case of Franciscan Sisters of St. Joseph s Society (2014 (1) TMI 1754 - ITAT CHENNAI) wherein running of pharmacy by the assessee society as integral part of running a hospital ratio laid down in DIT (E) vs Agri-horticulture Society (2004 (7) TMI 44 - MADRAS High Court) we find no infirmity in the conclusion drawn by the ld. Commissioner of Income Tax (Appeals) more specifically when Karuna Medical Society the pharmacy shop is integral part and partial of the hospital. - Decided in favour of assessee.
Issues Involved:
1. Whether the income from the pharmacy shop within the hospital premises qualifies for exemption under Section 11(4A) of the Income Tax Act, 1961. 2. Whether the activity of running a pharmacy shop is incidental to the attainment of the objects of the trust. Issue-wise Detailed Analysis: Issue 1: Exemption under Section 11(4A) of the Income Tax Act, 1961 The primary issue revolves around the eligibility of the pharmacy shop's income for exemption under Section 11(4A) of the Income Tax Act, 1961. The Revenue challenged the orders of the First Appellate Authority, Mumbai, which allowed the pharmacy shop's income to be exempt under Section 11(4A). The Revenue argued that the pharmacy shop within the hospital premises operates with a profit motive and thus should not qualify for exemption. The Tribunal examined the provisions of Section 11, specifically Section 11(4A), which states that the income of a trust from a business is exempt if the business is incidental to the attainment of the objectives of the trust and separate books of accounts are maintained. The Tribunal referenced various judicial precedents, including CIT vs Thanthi Trust (2001) and DIT vs Bombay Billion Association Dharma NO Kanto Trust (2002), which elucidated that the business income of a trust is exempt if it is incidental to the trust's objectives. Issue 2: Incidental Nature of the Pharmacy Shop The second issue concerns whether the activity of running a pharmacy shop is incidental to the attainment of the trust's objectives. The Tribunal noted that the assessee is a registered society running a hospital and is registered under Section 12A of the Act. The main objects of the trust are education and medical relief to the public. The pharmacy shop is situated within the hospital premises and serves the patients of the hospital. The Tribunal considered the decision of the Hon'ble jurisdictional High Court in Baun Foundation Trust vs Chief Commissioner (2012), where it was held that running a chemist shop is incidental or ancillary to the dominant object of running a hospital. The Tribunal also referred to the case of Franciscan Sisters of St. Joseph's Society (ITA No.1897/MDS/2013), which supported the view that running a pharmacy is an integral part of operating a hospital. The Tribunal concluded that the pharmacy shop is an integral part of the hospital and incidental to achieving the objects of the hospital. Therefore, the income from the pharmacy shop qualifies for exemption under Section 11(4A) of the Act. Conclusion: The Tribunal affirmed the decision of the Commissioner of Income Tax (Appeals), holding that the pharmacy shop's income is exempt under Section 11(4A) as it is incidental to the attainment of the trust's objectives. Consequently, both appeals by the Revenue were dismissed. The order was pronounced in the open court on 14/12/2015.
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