2015 (5) TMI 1116 - AT - Income Tax

Exemption u/s 10(23C) - Held that - The aggregate annual receipts of the institution/hospital from all sources including the running of the hospital received by the assessee for providing treatment should be covered by section 10(23C)(iiiae) of the Act. When the hospital has house property which was held under the trust the income earned by the assessee from such house property shall also form part of the aggregate annual receipts of the institution provided the same is utilized for providing treatment. It is well settled principles of law that the taxation law has to be interpreted without adding any word to the language employed by the Parliament. When the Parliament does not say that the income shall be derived from hospital for medical relief it may not be proper for the Assessing Officer to say that income shall be derived from the hospital. When the assessee has income from other sources including the income from house property and the aggregate annual receipts exceeds 1 crore the assessee is not entitled for exemption u/s 10(23C)(iiiae). However if the annual receipts do not exceed 1 crore the assessee is definitely entitled for exemption u/s 10(23C)(iiiae) of the Act. Standard deduction allowed u/s 24(a) while computing income from house property - Held that - The gross income from house property has to be taken without allowing any deduction u/s 24(a) of the Act. Accordingly the order of the lower authority is set aside and the Assessing Officer is directed to take the gross rental income from house property without any deduction u/s 24(a) of the Act. However it is made clear that the actual expenditure incurred by the assessee for maintenance of the building shall be allowed as application of income either u/s 11 or 10(23C) of the Act.

Summary

Issues involved:
Exemption u/s 10(23C) of the Income Tax Act.

Comprehensive Analysis:

Issue 1: Exemption u/s 10(23C) of the Act
The case involved a dispute regarding the exemption u/s 10(23C) of the Income Tax Act. The Revenue contended that the income from house property received by the assessee, a registered society, should not be allowed as exempt under section 10(23C)(iiiae) of the Act. The Departmental Representative argued that the standard deduction claimed by the assessee was inconsistent with revenue recognition principles for charitable organizations. However, the CIT(A) had allowed the claim based on a previous Tribunal decision in favor of the assessee for a different assessment year. On the other hand, the Counsel for the assessee argued that the issue was covered by the previous Tribunal order, indicating that the assessee was eligible for exemption u/s 10(23C) of the Act. The Tribunal analyzed the provisions of section 10(23C)(iiiae) and concluded that if the aggregate annual receipts of the institution, including income from house property utilized for providing treatment, did not exceed Rs. 1 crore, the assessee would be entitled to the exemption. The Tribunal emphasized that the income need not be solely from the hospital but could be from any source as long as it was utilized for treatment purposes. The Tribunal also clarified that standard deduction under section 24(a) was not applicable when income was exempted under sections 10 or 11 of the Act. Therefore, the Tribunal directed the Assessing Officer to consider the gross rental income from the house property without allowing the standard deduction under section 24(a) of the Act, while allowing actual expenditure on maintenance as application of income under sections 10(23C) or 11 of the Act.

In conclusion, the Tribunal partly allowed the Revenue's appeal, setting aside the lower authority's order and directing the computation of gross rental income without the standard deduction under section 24(a) of the Act. The judgment clarified the interpretation of the provisions of section 10(23C)(iiiae) and emphasized that income utilized for treatment purposes, even from sources other than the hospital, could be eligible for exemption under the Act.