2015 (10) TMI 1504 - AT - Income Tax

Entitlement to exemption under section 11 - merely because the assessee is charging fees from the patients for providing diagnostic service, whether exemption under section 11 of the Act could be denied or not ? - Held that - We have carefully gone through the trust deed of the assessee. Clause 15 of the trust deed clearly says that no funds shall be applied or paid or distributed among the trustees and shall be applied towards furtherance of the objects of the trust. Even at the time of dissolution, it shall be devoted to the objects similar to those of the trust. Therefore, the profit of the assessee-trust is applied only for charitable activity and there was a prohibition in the trust deed to divert the funds for any other object. Therefore, this Tribunal is of the considered opinion that merely because the assessee is charging fees for diagnostic service, it cannot be said that the assessee is not doing any charitable activity. Thus, the lower authorities are not justified in denying the assessee relief under section 11 of the Act as it is not doing any charitable activity. Whether diagnostic service cannot be considered to be a medical relief? - Held that - In the modern medical field, no doctor could give any treatment without actually diagnosing the nature of illness. So, diagnostic service facilitates enabled the doctors to give proper treatment at the appropriate time. The assessee is providing diagnostic service which would enable the doctors to give proper treatment. Therefore, this Tribunal is of the considered opinion that diagnostic service would fall within the meaning of medical relief. Even otherwise, the same has to be treated as other public utility service. There is no justification in denying the claim of the assessee under section 11 of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Whether the assessee-trust providing diagnostic services is eligible for exemption under section 11 of the Income-tax Act, 1961.
2. Whether charging fees for diagnostic services disqualifies the assessee from claiming charitable institution status.
3. Whether diagnostic services provided by the trust can be considered as medical relief under the Act.

Analysis:
1. The appeal concerned the eligibility of an assessee-trust, running a diagnostic center, for exemption under section 11 of the Income-tax Act, 1961. The Assessing Officer disallowed the claim, arguing that providing diagnostic services at a cost did not qualify as a charitable activity. The representative for the assessee argued that charging minimal fees did not justify denial of exemption, emphasizing the importance of diagnosis in medical treatment. The Tribunal held that medical relief is a charitable activity under the Act, and as long as the trust's profit was reinvested for charitable purposes, exemption under section 11 should not be denied.

2. The Departmental representative contended that charging fees for diagnostic services rendered the trust ineligible for charitable status. It was argued that the trust, not operating a hospital, could not be considered a charitable institution. However, the Tribunal noted that the trust's funds were solely applied for charitable activities as per the trust deed, and the prohibition on diverting funds for other purposes indicated charitable intent. Therefore, charging fees for diagnostic services did not disqualify the trust from claiming exemption under section 11.

3. The Departmental representative further argued that diagnostic services did not constitute medical relief. The Tribunal disagreed, stating that diagnosis is essential for proper medical treatment and falls within the definition of medical relief. Additionally, the services provided by the trust were considered a public utility service. As long as the trust's income was applied for charitable activities and not diverted for other purposes, the Tribunal directed the Assessing Officer to grant deduction under section 11. Consequently, the lower authorities' orders were set aside, and the appeal of the assessee was allowed.