2019 (9) TMI 915 - AT - Income Tax

Benefits of exemption u/s 11 - excessive payment to Doctors by way of salary and professional fees - assessee is a charitable trust registered since 21.11.1977 and is running medical institution (hospital) and also in the imparting of education - assesses trust besides have registered u/s 12AA was also approved u/s 10(23C)(via) is running the hospital in the name of BIMR Hospital and BIMR Heart Centre - HELD THAT - In the present case, the AO has brought on record the comparable instances of the Gajraja Chikitsa Mahavidhyalay and Chirayu Medical College on record but failed to bring on record expertise , qualification any other factors like seniority competence ,experience, qualification etc. AO has further failed to bring on record the revenue collected by these hospital or a period of three years and what was a salary paid to these doctors. AO failed to bring on record whether salary paid to these doctors as mentioned in order were in which proportion to revenue collected by the hospital or not. The Government medical college or salary paid to the government hospital cannot be compared with the salary paid by the private hospital to the private doctors. In the absence of necessary information with respect to that establishment of the hospital, the revenue collected by the hospital, the competence, experience and their ability to give result, it would not be safe use these as comparable instances with that of the assessee. Doctors who had passed out with the same degree in cardiology DM cannot be compared with experience doctor working in the field for the last ten years. No such fact and figure were brought on record by the AO in his order with respect to Dr. Viaks Goyal, Dr. R.K. Singh and Dr. Puneet Rastogi and Dr. Ram Kumar. In our view , intervention in heart by way angiography and surgical bypass and valve replacement needs different skills and expertise in the medical field. To day we are having specialists, super specialist and organ specialist in India and outside India with the same educational qualification. Dr. Ravi Shankar Dalmia having sufficient expertise in the field it is clear from the fact that from 2007 he was working with escort hospital Delhi and thereafter working with the assessee hospital with effect from F.Y. 2009-10. The contribution of doctor is clear from the fact that revenue collected from the A.Y. 2009-10 was 183.26 lakh whereas the revenue collected from the F.Y. 2011-12 was 337.14. The revenue has increased two times in from 2009-10 to 2011-12 and same with the same ration it increased for Dr. Ravi Shankar Dalmia. The finding recorded by the AO based on the comparable instances is wholly incorrect. In our view, the comparable instances brought on by the AO are not at all comparable as the services rendered by the professional like Dr. Ravi Shankar Dalmia cannot be compared with the other DM (Cardiologists) or assistant professional or professor in some medical college or working in other hospital. It is expected from the AO to bring on record the comparable only after bringing on record the comparison between two doctors not only on the basis of the medical degree but also on the basis of expertise etc as mentioned hereinabove. No such fact and figure were brought on record by the AO in his order with respect to Dr. Viaks Goyal, Dr. R.K. Singh and Dr. Puneet Rastogi and Dr. Ram Kumar. In our view , intervention in heart by way angiography and surgical bypass and valve replacement needs different skills and expertise in the medical field. To day we are having specialists, super specialist and organ specialist in India and outside India with the same educational qualification. Dr. Ravi Shankar Dalmia having sufficient expertise in the field it is clear from the fact that from 2007 he was working with escort hospital Delhi and thereafter working with the assessee hospital with effect from F.Y. 2009-10. The contribution of doctor is clear from the fact that revenue collected from the A.Y. 2009-10 was 183.26 lakh whereas the revenue collected from the F.Y. 2011-12 was 337.14. The revenue has increased two times in from 2009-10 to 2011-12 and same with the same ration it increased for Dr. Ravi Shankar Dalmia. Finding recorded by the AO based on the comparable instances is wholly incorrect. In our view, the comparable instances brought on by the AO are not at all comparable as the services rendered by the professional like Dr. Ravi Shankar Dalmia cannot be compared with the other DM (Cardiologists) or assistant professional or professor in some medical college or working in other hospital. It is expected from the AO to bring on record the comparable only after bringing on record the comparison between two doctors not only on the basis of the medical degree but also on the basis of expertise etc as mentioned hereinabove. - Decided against revenue

Summary

Issues Involved:
1. Justification of deletion of addition of ?7,34,12,020/- by CIT(A).
2. Entitlement of exemption under Section 11 of the Income Tax Act.
3. Reasonableness of payments made to persons referred to in Section 13(3) of the Act.

Detailed Analysis:

1. Justification of Deletion of Addition of ?7,34,12,020/- by CIT(A):
The Revenue challenged the order of CIT(A) that deleted the addition of ?7,34,12,020/- made by the Assessing Officer (AO). The AO had disallowed the exemption under Section 11 of the Income Tax Act, 1961, on the grounds that the payments made to certain individuals were excessive and unreasonable. The AO compared the salaries and fees paid to the doctors in the assessee's hospital with those paid in other medical institutions and concluded that the payments were excessive. The CIT(A), however, found that the payments were reasonable considering the expertise and contributions of the doctors, and thus allowed the exemption under Section 11.

2. Entitlement of Exemption Under Section 11 of the Income Tax Act:
The assessee, a charitable trust registered under Section 12AA, was running a hospital and educational institution. The AO denied the exemption under Section 11 on the grounds that the payments to certain related persons were excessive. The CIT(A) examined the payments and found them to be reasonable based on the services rendered and the revenue generated by the hospital. The CIT(A) noted that the AO had not provided a fair comparison or considered the full context of the payments. The Tribunal upheld the CIT(A)'s decision, noting that the payments were in line with the services provided and the revenue generated, thus qualifying for the exemption under Section 11.

3. Reasonableness of Payments Made to Persons Referred to in Section 13(3) of the Act:
The AO had identified payments made to certain individuals related to the trustees and concluded that these payments were excessive and unreasonable. The CIT(A) reviewed each payment in detail:

- Dr. Ravi Shankar Dalmia: The CIT(A) found the payment of ?54,00,000/- to be reasonable given his qualifications, expertise, and the revenue he generated for the hospital.
- Dr. Sunil Agrawal: The payment was found to be reasonable as it was consistent with the fees collected from surgeries performed by him.
- Dr. Prathistha Dalmia: The payment was also deemed reasonable based on the percentage of fees collected from her services.
- Smt. Kusum Agrawal: The payment for the use of a C-Arm machine was consistent with previous years and deemed reasonable.
- Sunil Dalmia: The payment for administrative services was consistent with previous years and found reasonable.

The Tribunal agreed with the CIT(A) that the payments were reasonable and not excessive, thus not violating Section 13(3) of the Act.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to delete the addition of ?7,34,12,020/- and allow the exemption under Section 11. The Tribunal emphasized the need for consistency in the Revenue's approach and noted that the payments made to the doctors were reasonable given their qualifications, expertise, and contributions to the hospital's revenue. The Tribunal also highlighted the importance of a fair comparison and the consideration of all relevant factors in determining the reasonableness of payments.