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TMI Blog1976 (5) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... to supervise the working of the Trust and to give guidance to the working trustee. Besides, it was stipulated that "they shall do all that is needed to implement the purpose of the Trust" The working Trustee was to look after the day to day working of the Trust to keep accounts, to get them audited by Chartered Accountant, to make payments of the staff and to supervise the working of the staff and to operate the Bank accounts etc. And to "do all that is needed to implement the purpose of the Trust." 2. The account of the Trust was closed for the first time for the calendar year 1969. Thereafter, the accounts were closed each year on 31st of December. The following is the position of gross receipts and the net income of the Trust during the calendar years 1969 to 1972: The loss as per account was of Rs. 967. This was arrived at after debiting reserve for replacement of Rs. 6,000 and deferred revenue expenditure of Rs. 891. These two amounts are not in the nature of normal expenses debited to profit loss account. They have been, therefore, added back for the purpose of arriving at the profit made by the trust. Year Gross receipts Net income P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative took the stand that the Trust was not a charitable one and was, therefore, not entitled to any exemption under s.11. According to him, the Trust was not engaged for the relief of the poor or education or medical relief. Merely providing facilities for X-Ray and Pathological tests, according to him, did not amount to providing "medical relief". In order to come under the category of "medical relief" there must be treatment of the patients. The assessee admittedly did not treat any patient. It merely X-rayed the patients and did the pathological tests. This activity by itself would not amount to medical relief. At the most, it could be said that the trust was engaged in "the advancement of any other object of general public utility" but to claim exemption under s.11 for that purpose the trust should not be doing any business for, by definition, it would involve carrying on an activity for profit. The restriction in the Trust deed against the making of profit was, according to the Departmental Representative, a mere eye-wash for, in point of fact, it was patent from the trading results of the various years that the trust has been invariably making profits. It was not a mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have carefully examined the facts of this case and the rival contentions. In order to resolve the controversy, whether the trust is entitled to the exemption under sub-s.(22A) of s.10, we must look at the language of that section. It reads as follows:- " s.10 : In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included: (22A) : Any income of a hospital or other institution for the reception or treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during the convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit." A bare reading of the aforesaid sub-section makes it clear that an institution, in order to become entitled to the exemption visualised by the aforesaid sub-section should fulfil the following conditions :- (i) It should be a hospital, (ii) Existing solely for philanthropic purposes and not for purposes of profit; or, (iii) It should be any other institution (a) for the reception and treatment of persons suffering from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or medical or surgical care of the patient. It merely X-rays the patients or carries out the various Pathological tests as prescribed by the Doctor. Thus, in our opinion, does not amount to "treating" the patients. These tests may be necessary for the treatment of the patients, but they, in themselves, do not constitute "treatment" of the patients. Moreover, the word "hospital" connotes a complex organisation attending to the prevention, diagnosis and treatment of the various illness, and also provides facility for training new workers in the special professional and technical fields. Admittedly, in the present case, no such facility is available. The trust is, therefore, not a hospital. 11. The trust also does not respond to the description given to the word "institution" as used in s.10(22A). As we have noted above, there is no arrangement, in the Trust s Clinic, of treatment of persons suffering from illness, nor does it admittedly look after the treatment of persons during their convalescence. The learned Chartered Accountant had stressed that it was an institution for the treatment of persons "requiring medical attention". We are, however, not pursuaded to accept this view, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits, which rose from 9per cent of its gross receipts in the first year of its business to 27 per cent in the third year of its business. This could not have been a mere accident. May be, in the first year the assessee trust was not able to adjust its fees, and so, according to it, there might have been a nominal profit but the same cannot be said when year after year the trust not only makes profit but increases its ratio of profit over the gross receipt to the level of 9per cent to 27 per cent. This is certainly making profit out of the business and such conduct cannot be described as constituting philanthropic activities or not aimed at earning profit. In fact, we note that the trust fund increased from Rs.34,000 at its inception to 12,207.34 as on 31st Dec., 1974 i.e., within a period of about 6 years. This accretion to capital base cannot be result of philanthropic activities. This is positively a business phenomenon and the result of earning considerable profits in a systematic manner, year after year. We, therefore, are at one with the learned AAC in holding that the trust is not entitled to the exemption stipulated by sub-s. (22A) of s.10. 13. The learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has been applied for such purposes in India. 16. s. 2(15) defines what is a "charitable purpose". Its stipulates : "charitable purposes" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit". According to the assessee, it is engaged in "medical relief". According to the Department, on the other hand, the taking out of X-Ray plates and carrying out pathology tests do not amount to "medical relief" for the patient gets no medical relief by these Acts. Detailed arguments on this point have been noted by us above in paras 4 and 5 supra. 17. In our opinion, the term "medical relief" as used in s.2(15) is much wider...... for the relief of the patients. The term "medical relief" as used in s.2(15) is, in our opinion, much wider than the terminology used in sub-s.(22A) of s.10, and it would include running of a pathology laboratory and an X-ray Clinic, for both the aforesaid activities are intended for the relief of the patients. 18. The next point to be considered is whether the adjectival phrase "not involving the carrying on an activity for profit" qual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and the Calcutta High Court, and so reject the contention of the learned Departmental Representative that the words "not involving the carrying on of any activity for profit" qualify the earlier three purposes also, namely, the relief of the poor, education and the medical relief. In our opinion, an Institution which is engaged in rendering medical relief can undertake an activity for profit, for the advancement of the object of medical relief and, despite such activity for profit, the exemption provided by s.11 of the Income-tax Act, 1961, would be available to it, provided that it fulfils the other condition stipulated in the said section, namely, applying the said income for charitable purposes. On the facts of the present case, we are of the opinion, that the trust in question was entitled to the exemption under s.11 of the Income-tax Act, 1961, provided it could be shown that it had applied the requisite percentage of its income on charitable purposes in India. 20. The argument of the ITO that a part of the assessee s income becomes taxable under s.11(4) of the Income-tax Act, 1961, is, in our opinion, misplaced. s.11(4) reads as follows; "For the purposes of this sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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