2019 (5) TMI 273 - AT - Income Tax

Exemption u/s 11 - Registration application u/s 12AA rejected - assessee is running medical shop inside the hospital - No separate books of accounts were maintained for Pharmacy inside the hospital, which was for inhouse consumption of medicines and treatment packages and for the urgent need of medicines to in-house patients - HELD THAT - Assessee society is also providing medical relief and facilities to every person, conducting blood donation, eye operation, tikakaran, family planning, mother child safety, AIDS, malaria, T.B, Kustorog and awareness to general public by way of awareness of medical camps. Therefore, to run the medical shop inside the hospital is fully charitable purpose and not for commercial purpose. The assessee is not maintaining separate books of account for the said medical shop does not mean that the assessee is not entitled for obtaining registration u/s. 12AA. We note that in order to grant registration the objects of the assessee society is to be examined. Therefore, the ld. CIT(E) should not deny the grant of registration u/s. 12AA merely because assessee is running medical shop inside the hospital. Therefore, we direct the ld. CIT(E) to grant the registration u/s. 12AA, in accordance with law. - Decided in favour of assessee.

Summary

Issues:
1. Rejection of registration application under section 12AA of the Income Tax Act based on non-maintenance of separate books for Pharmacy inside the hospital.
2. Interpretation of the requirement for registration under section 12AA focusing on the charitable objects of the society.
3. Examination of whether running a medical shop inside a hospital for in-house patients qualifies as a charitable purpose.
4. Assessment of the significance of maintaining separate books of accounts for registration under section 12AA.

Issue 1:
The appeal was filed against the order rejecting the registration application under section 12AA due to the non-maintenance of separate books for the Pharmacy inside the hospital. The appellant argued that the rejection was unjustified as the objects of the Society were not doubted, and the Pharmacy was for in-house consumption of medicines and treatment packages. The appellant had started maintaining separate books for the Pharmacy upon becoming aware of the requirement.

Issue 2:
The Tribunal noted that for registration under section 12AA, only the charitable objects of the trust need to be examined. The main object of running a hospital was considered a charitable purpose under section 2(15) of the Act, falling under "medical relief." Therefore, the mere non-maintenance of separate books for the Pharmacy could not be a valid ground for rejecting the registration application.

Issue 3:
The Tribunal found that the society's operation of a medical shop inside the hospital, providing medical relief and facilities to in-house patients, was indeed a charitable purpose and not for commercial gain. The society also engaged in various medical activities for the benefit of the general public. Therefore, the Tribunal concluded that running the medical shop inside the hospital was fully aligned with charitable objectives.

Issue 4:
The Tribunal emphasized that the lack of separate books of account for the medical shop should not preclude the society from obtaining registration under section 12AA. It was reiterated that the focus should be on examining the charitable objects of the society rather than technicalities like separate bookkeeping. The Tribunal directed the Commissioner to grant registration under section 12AA to the appellant in accordance with the law.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing that the registration under section 12AA should not be denied solely based on the operation of a medical shop inside the hospital without separate books of accounts. The judgment highlighted the importance of focusing on the charitable objectives of the society when considering such registration applications.