2020 (2) TMI 674 - HC - Indian Laws

Exemption from payment of tax under Section 83(1)(e) of the Tamil Nadu District Municipalities Act, 1920 - 1st petitioner being a Medical Foundation (Public Charitable Trust) collected amounts for treatment and cost of medicines from the patients/public - HELD THAT - By an order dated 22.03.2013, the court had quashed the demand and remitted back the case to the 2nd respondent therein to consider the claim of the petitioner whether the petitioner is indeed eligible for exemption or not. Since the Income Tax Department has given certificate post facto approval on 28.02.2016, eligibility for exemption would require fresh consideration on facts. Therefore, impugned order is set aside and the case is remitted back to the respondents. Petition allowed by way of remand.

Summary

Issues:
Challenge to impugned order demanding tax exemption under Section 86(e) of Tamil Nadu District Municipalities Act, 1920 for a Public Charitable Trust running a hospital.

Analysis:

1. Exemption Claim under Section 83(1)(e) of the Act:
The petitioner, a Public Charitable Hospital, claimed exemption from tax under Section 83(1)(e) of the Tamil Nadu District Municipalities Act, 1920. The petitioner cited the acknowledgment letter from the Commissioner of Income Tax regarding the application for registration under Section 12A(a) of the Income Tax Act, 1961. The Income Tax Department also provided post facto approval, indicating eligibility for exemption.

2. Judicial Precedents and Similar Relief Granted:
The petitioner referred to a previous decision where relief was granted to a trust running a hospital. The court acknowledged the use of nominal fees for charitable purposes and upheld the exemption. The petitioner also highlighted recognition as a charitable trust by the Income Tax Authority, supporting the claim for tax exemption.

3. Relevant Judicial Decisions:
References were made to past judgments like the one from the Madurai Bench regarding property tax imposition on educational institutions. The court emphasized the need for proper application of law and purpose-specific usage of the property to determine tax liability.

4. Court Directions and Remand:
The court set aside the impugned order demanding tax from the petitioner and remitted the case back to the respondents for fresh consideration. The Income Tax Department's post facto approval necessitated a reevaluation of the exemption claim under Section 12AA of the Income Tax Act, 1961, within a specified timeframe.

5. Final Decision and Order:
The Writ Petition was allowed by way of remand, directing the respondents to issue a fresh order based on the Income Tax Department's approval. The court granted a three-month period for the respondents to reevaluate the petitioner's eligibility for tax exemption as a charitable trust.

In conclusion, the judgment focused on the petitioner's claim for tax exemption under relevant provisions of the law, supported by documentary evidence and judicial precedents. The court's decision to remand the case for fresh consideration based on the Income Tax Department's approval reflects a balanced approach to resolving the dispute.