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2022 (8) TMI 1083 - HC - Indian LawsExemption u/s 123(e) of the Coimbatore City Municipal Corporation Act, 1981 - eligibility to the petitioner as a charitable hospital - petitioner submitted that since the petitioner is running a Charitable Hospital as its object is only to do charity, the petitioner is entitled for exemption from payment of property tax under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981 - HELD THAT - District Collector of Coimbatore has issued a Certificate dated 12.01.1983 certifying that the petitioner was a Charitable Institution . It is not clear under what circumstances an application came to be filed on 06.12.1982 which prompted the Collector, Coimbatore to issue the aforesaid Certificate to the petitioner. A similar Certificate was once again obtained by the petitioner in the year 1986 from the office of the District Collector, Coimbatore on 17.07.1986. It appears that it was in pursuance to an application filed by the petitioner on 23.06.1986. Copies of these applications are not available for perusal - these Certificates were certainly issued to the petitioner after Coimbatore City Municipal Corporation Act, 1981 came into force and after the first respondent Commissioner of Municipal Corporation has issued a communication/ letter to the petitioner stating that the petitioner was not entitled to exemption from payment of property tax under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. It was perhaps obtained for securing the exemption under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. The records filed before the Court also do not indicate that the petitioner has obtained Section 12A Certificate from the Commissioner of Income Tax, under the provisions of the Income Tax Act, 1961. The petitioner has merely filed a copy of letter of the Income Tax Officer certifying that an application in the Form-10A was made by the petitioner before the Commissioner of Income Tax, Madras-1 on 17.04.1973. It was filed just at about the time when the petitioner was registered as a society under the Societies Registration Act, 1860, on 24.01.1973. There are no records to show that even the income tax department has allowed exemption under Section 11 of the Income Tax Act, 1961 to the petitioner. Merely because the petitioner is having certain out reach programmes which may be charitable in nature or that a section of patients are given free treatment would not automatically render the petitioner a charitable hospital. It would not mean that an exemption from payment of property tax can allowed to the petitioner. Under the Section 135 of the Companies Act, 2013 and the provisions of Companies Act, 1956, the companies enjoying the profits were/are required to contribute for public cause as Corporate Social Responsibility (CSR). The amount that has to be spent towards Corporate Social Responsibility is out of profits. However, that does not make such company as a Charitable Institution . If the amount are collected for treating the patients and a portion of the amount is used for doing charity, it would not mean that the hospital becomes a charitable hospital. This may be explained with an example. An individual may do a charity out of his earning by contributing the amount for charitable cause, but, such an individual cannot be labelled as a charitable person even though he may be doing charity. It means such a person is doing charity. At best of the act of the petitioner giving free treatment for few poor and needy patients while collecting fees for giving treatment to those patients who can afford is not sufficient to hold the petitioner Charitable Institution / Hospital. Few acts of benevolence and charity should not be construeed in such a manner to laber such a person as a Charitable Institution. We in agreement with the word of caution sounded by this Court in Sundaram Medical Foundation 2018 (3) TMI 1289 - MADRAS HIGH COURT that the authorities are bound to be cautious, while scrutinizing all material facts and circumstances, for taking a decision. Therefore hold the claim for exemption under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981 by the petitioner is misconceived. Therefore, there are no merits in this Writ Petition.
Issues Involved:
1. Exemption from property tax under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. 2. Definition and criteria for a "Charitable Hospital" under various laws. 3. Evaluation of the petitioner's claim based on previous case laws and statutory provisions. 4. The petitioner's operational model and its qualification as a charitable institution. Detailed Analysis: 1. Exemption from Property Tax under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981: The petitioner challenged the impugned order dated 13.12.2019, which rejected their request for exemption from property tax under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981. The court examined whether the petitioner’s hospital qualifies as a charitable institution eligible for such an exemption. 2. Definition and Criteria for a "Charitable Hospital": The court referred to various definitions and interpretations of "charity" and "charitable purposes" under different statutes including the Charitable Endowments Act, 1890, and the Income Tax Act, 1961. It was emphasized that charity generally means relief to the poor and involves generosity and helpfulness towards those in need. The court also considered historical definitions under English law and the Civil Procedure Code. 3. Evaluation Based on Previous Case Laws and Statutory Provisions: The court reviewed several precedents: - Sundaram Medical Foundation v. The Commissioner Corporation of Chennai: The court held that the institution must predominantly provide free medical services to the poor and needy to qualify as a charitable hospital. - Municipal Corporation of Delhi v. Children Book Trust: The Supreme Court emphasized that the institution must be supported by voluntary contributions and should not distribute profits as dividends. - Additional Commissioner of Income Tax, Gujarat v. Surat Art Silk Cloth Manufacturers Association: The activity must not be motivated by profit but should advance the charitable purpose. The court also referred to cases like Govindasamy Naidu Hospital and Society of Jesus v. Bangalore Mahanagar Palike, which discussed the criteria for determining whether an institution is charitable based on its operational model and financial practices. 4. Petitioner's Operational Model and Qualification as a Charitable Institution: The court scrutinized the petitioner's operational model and financial practices. It was noted that: - The petitioner’s hospital was collecting fees from patients, indicating a profit motive. - The hospital's Memorandum of Association allowed for the collection of charges, which contradicts the notion of a purely charitable institution. - The petitioner failed to provide sufficient evidence that it was providing free treatment to a significant portion of patients or that its surplus income was solely used for charitable purposes. The court concluded that the petitioner’s hospital did not meet the criteria for a charitable hospital as it engaged in activities for profit and did not predominantly provide free services to the needy. Consequently, the claim for exemption under Section 123(e) of the Coimbatore City Municipal Corporation Act, 1981, was found to be misconceived. Judgment: The writ petition was dismissed, and the petitioner was not granted the exemption from property tax. The court emphasized the need for strict scrutiny of claims for charitable status to prevent abuse of fiscal incentives meant for genuine charitable institutions.
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