2022 (7) TMI 282 - AT - Income Tax

Exemption u/s 11 - whether or not the appellant trust had violated the provisions of section 13(1)(c) ? - whether benefits were availed by the specified persons without any other compensations or rent paid by such specified persons is inadequate? - appellant society is also registered under the Bombay Public Trust Act, 1950 and is also registered u/s 12A - HELD THAT - Admittedly, Dr. G. S. Kulkarni and his two sons (hereinafter referred as specified persons) used the operation rooms owned by the appellant trust for his private practice without paying any rent or fees for such use. Dr. G. S. Kulkarni and his two sons had occupied the accommodation that owned by the appellant trust for the residential purposes on payment of Rs.5,000/- per month for each bungalow. As admitted fact that Dr. G. S. Kulkarni had allowed 50% of the building owned by him for use of the appellant trust to pursue its charitable objects. Dr. G. S. Kulkarni and his two sons were rendering the voluntarily professional services to the appellant trust without charging any fees. The submissions made on behalf of the appellant trust that the buildings owned by the specified persons is used by the appellant without payment of any rent remains uncontroverted by the Department. Therefore, it cannot be said that the specified persons had availed the benefit from the appellant trust without paying any compensations to the appellant trust. Furthermore, it is the submission of the appellant trust that the specified persons had been rendering the voluntarily professional services to the appellant trust also remains uncontroverted. Question that arises for consideration before us is, can it be said, that the appellant availed the operation rooms owned by the appellant trust are used by the assessee without any compensations, the answer is No , as the appellant trust could have saved the cost of running the trust on rent, salaries as there is no rent or fees or any other claim by the specified persons of the trust for utilization of the premises as well rendering the voluntarily profession services. Whether the specified persons had paid adequate consideration paid for occupation of bungalows owned by the appellant trust? - The submission made on behalf of the appellant trust that the specified persons had been rendering voluntarily professional services to the appellant trust and are available for the patients around the clock remains uncontroverted. Therefore, the residential premises are made available for the specified persons only with view to ensure to the availability of the specified persons for the patients around the clock cannot be said to be without adequate consideration. In the circumstances, the provisions of section 13(1)(c) has no application to the facts of the present case. Accordingly, the grounds of appeal filed by the assessee are allowed.

Issues Involved:
1. Violation of Section 13 by providing residential accommodation at nominal rent.
2. Use of hospital equipment by trustees without charges.
3. Estimation of benefits to trustees in violation of Section 13.
4. Consideration of benefits provided by trustees to the trust.
5. Justification of concessional accommodation for trustees.
6. Financial benefits conferred on the trust by trustees.

Detailed Analysis:

Issue 1: Violation of Section 13 by providing residential accommodation at nominal rent
The CIT(A) held that the appellant trust violated Section 13 by giving residential accommodation to Dr. G. S. Kulkarni and his sons at a nominal rent of Rs.5,000 per month. The trust argued that the accommodation was provided because the doctors rendered voluntary services and were required to be available around the clock. The Tribunal found that the rent paid by the trustees was adequate considering the voluntary services rendered, and thus, there was no violation of Section 13(1)(c).

Issue 2: Use of hospital equipment by trustees without charges
The CIT(A) determined that the trust violated Section 13 by allowing the Kulkarni family to use hospital equipment free of cost. The trust contended that the equipment use was justified as the doctors provided free services to the trust. The Tribunal agreed with the trust, noting that the voluntary professional services provided by the doctors to the trust compensated for the use of the equipment, thus no violation of Section 13(1)(c) occurred.

Issue 3: Estimation of benefits to trustees in violation of Section 13
The CIT(A) estimated the benefits conferred to the trustees as Rs.8,16,000 for residential accommodation and Rs.1,95,899 for the use of hospital equipment. The Tribunal found that these estimations were not justified as the benefits provided by the trustees to the trust in terms of free services and use of their building were not considered. Thus, the Tribunal held that there was no violation of Section 13(1)(c).

Issue 4: Consideration of benefits provided by trustees to the trust
The CIT(A) did not consider the financial benefits conferred on the trust by the trustees, such as the use of Dr. Kulkarni's building without rent and the voluntary services rendered by the doctors. The Tribunal emphasized that these benefits should be taken into account, which negated the alleged violations of Section 13(1)(c).

Issue 5: Justification of concessional accommodation for trustees
The trust argued that providing concessional accommodation was justified as the doctors needed to be available for emergencies. The Tribunal accepted this justification, noting that the arrangement was in the interest of the trust and did not constitute a violation of Section 13(1)(c).

Issue 6: Financial benefits conferred on the trust by trustees
The Tribunal highlighted that the trust benefited significantly from the voluntary services of the doctors and the use of Dr. Kulkarni's building. These contributions were substantial and should be considered when evaluating compliance with Section 13(1)(c). The Tribunal concluded that the trust did not violate Section 13(1)(c) as the benefits provided by the trustees outweighed the alleged benefits received.

Conclusion:
The Tribunal allowed the appeal of the assessee, concluding that the trust did not violate Section 13(1)(c) of the Act. The benefits provided by the trustees, including voluntary services and use of personal property, were adequate compensation for the alleged benefits received. The grounds of appeal filed by the assessee were allowed, and the order of the CIT(A) was overturned.

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