2018 (3) TMI 76 - AT - Income Tax

Exemption u/s 11 eligibility - proof of charitable activities - assessee trust while calculating 2% of the Gross Billing has excluded the doctor s fees which has resulted in shortfall in the transfer to Indigent Patient Fund (IPF Account)- Held that - As decided in assessee s own case for AY 2010-11 and AY 2011-12 2017 (2) TMI 1324 - ITAT MUMBAI non-compliance of one of the statutory stipulations should not nullify its efforts made towards achieving its charitable objectives. The same can be observed from the fact that it has appropriated 88% of its Income towards achieving the objectives of the trust. Further, the assessee has not altogether shrugged off its responsibility towards the Indigent and Weaker Section Patients. There is a difference of opinion w.r.t the amount of funds to be transferred to the Indigent Patient s Fund (IPF). It is noteworthy, that the assessee has not simply waited for the clarification and stalled the appropriation of funds to the IPF and its utilization towards the requisite purpose. Rather, until clarification on such matter, the assessee has chosen to transfer 2% of the total hospital billing net of doctor s fees to the IPF and has utilized the same towards the medical treatment of the Indigent and Weaker Section Patients. There is no single evidence which would suggest otherwise. The rationale behind the same being that the doctor s fees is not a part of the hospital s earnings, but rather a reimbursement to the hospital. The hospital merely acts as a collecting agent between the two for this particular aspect. Neither is there any evidence which would suggest the assessee s status of that of a Charitable Trust registered under the Bombay Public Trusts Act, 1950 being revoked by the Charity Commissioner. In such a scenario, we are of the view that the AO has no role in law by usurping the role of the Charity Commissioner and declaring that the assessee has breached the covenants of the Scheme. Hence, in light of the above, we confirm the order of CIT(A) and the appeal of Revenue is dismissed.

Summary

Issues:
1. Exemption u/s 11 of the Income Tax Act - Calculation of 2% of Gross Billing and transfer to Indigent Patient Fund (IPF Account).
2. Compliance with directions of the Bombay High Court regarding the creation and transfer of funds to IPF Account for the benefit of poor and Indigent patients.

Analysis:
1. The appeal by the Revenue challenged the order of the Commissioner of Income Tax (Appeals)-1, Mumbai regarding the exemption u/s 11 of the Income Tax Act for the assessment year 2012-13. The Revenue contended that the assessee trust excluded doctor's fees while calculating 2% of Gross Billing, resulting in a shortfall in the transfer to the Indigent Patient Fund Account. The Assessing Officer (AO) denied exemption and taxed the surplus amount. However, the Ld. CIT(A) allowed the appeal of the assessee, following the order for the previous assessment year. The Tribunal, considering similar issues in previous years, upheld the order of the Ld. CIT(A) based on the trust's efforts towards its charitable objectives, utilization of funds for the intended purpose, and lack of evidence suggesting a breach of trust status or directions by the Charity Commissioner.

2. The Revenue also raised concerns about the violation of directions by the Bombay High Court regarding the creation and transfer of funds to the IPF Account. However, the Tribunal, relying on previous decisions and the trust's actions in utilizing funds for the benefit of Indigent and Weaker Section Patients, dismissed the appeal, emphasizing that the AO cannot usurp the role of the Charity Commissioner in declaring a breach of covenants without evidence. The Tribunal confirmed the order of the Ld. CIT(A) based on the trust's responsible approach towards fulfilling its charitable objectives and utilizing funds appropriately.

In conclusion, the Tribunal dismissed the appeal by the Revenue, upholding the order of the Ld. CIT(A) regarding the exemption u/s 11 of the Income Tax Act and compliance with the directions of the Bombay High Court for the creation and transfer of funds to the Indigent Patient Fund Account. The decision was based on the trust's demonstrated efforts in utilizing funds for charitable purposes and following a responsible approach towards fulfilling its obligations.