2015 (5) TMI 226 - HC - Income Tax

Exemption u/s.11 - Assessing Officer pointed out specific defects in treating the income earned by levying surcharge at a specific rate for the bills raised on patients and doctors on the fees paid to them and treating them as corpus donation instead of income earned from the activities of the trust - ITAT allowed exemption - Whether ITAT is justified in ignoring the fact that application of the assessee u/s.10(23C)(via) has been rejected by the CCIT, Mumbai?- Held that - . The definition of the term charitable purpose is appearing in section 2(15) of the Income Tax Act, 1961 and which includes medical relief. Insofar as section 10(23C) is concerned, that pertains to any income received by any person on behalf of hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit. In relation to that, we find that the Commissioner passed an order denying the exemption and that order of the Commissioner has been challenged by the assessee by filing a Writ Petition in this Court and that is pending. In the present case, neither the Commissioner nor the Tribunal has decided anything by which it can be gathered that above exemption or the order in relation thereto forms the basis for the conclusion reached by the Commissioner and Tribunal concurrently. Insofar as exemption under section 11 is concerned It is clear from the Tribunal s order that there was no issue before the Commissioner in respect of any exemption under section 10(21) and 10(23C). The assessing officer had disallowed the claim of exemption under section 11 of the I.T. Act. The Tribunal s earlier orders are in relation to this exemption. The Tribunal concurred with its earlier order dated 10th January, 2005. The Tribunal, therefore, found that when the facts are identical to the Assessment order under consideration, then, there is no difficulty in applying and following its views for the earlier assessment years. No substantial question of law. The argument of Mr.Malhotra that the levy of surcharge on patients and doctors ought not to have been treated as income earned from the activities of the trust but a corpus donation, need not detain us. Mr.Malhotra himself had pointed to us that certain directions were issued to the Assessee by the Charity Commissioner of the State in exercise of his powers under section 34 of the Bombay Public Trust Act, 1950. They have been referred to in the order of the assessing officer as well. In the circumstances and when section 41-AA was inserted in the Bombay Public Trust Act by the Maharashtra Act of 1985 with a avowed and specific purpose, that we do not think that despite the directions of the Charity Commissioner, the revenue can insist that the amounts charged or sur-charges levied should not be treated as income from the activities of the trust. The authorities under the Income Tax Act are suppose to scrutinise the papers and related documents of the trust or the assessee so as to bring the income to tax and in accordance with the I.T. Act. - Decided against revenue.

Summary

Issues:
1. Granting of exemption under section 11 of the Income Tax Act.
2. Treatment of income earned from surcharges and fees paid to doctors.
3. Rejection of application under section 10(23C)(vi-A) of the Income Tax Act.

Analysis:
1. The appeal challenged an order by the Income Tax Appellate Tribunal granting exemption under section 11 of the Income Tax Act. The assessee, a registered public trust, applied for exemption under section 10(23C)(vi-A) which was denied. The assessing officer treated surcharges and fees collected as corpus donation, leading to the denial of exemption under section 11.

2. The Commissioner of Income Tax (Appeals) allowed the appeal, citing the Tribunal's previous orders. However, the distinction between income exempted under section 11 and exemption under section 10(23C) was contested. The court found that the definition of "charitable purpose" includes medical relief, and the exemption under section 10(23C) is specific to philanthropic purposes, which was being challenged separately in a pending Writ Petition.

3. The Tribunal's order for the assessment year 2005-06 was based on previous orders not challenged by the revenue. The argument that surcharges should be treated as corpus donations was dismissed, citing directions from the Charity Commissioner under the Bombay Public Trust Act. The court held that the directions did not change the character of the receipts, and the revenue cannot insist on a different treatment. The appeal was dismissed as not raising any substantial question of law.

This detailed analysis of the judgment covers the issues involved comprehensively, providing a clear understanding of the legal reasoning and outcomes.