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TMI Blog2017 (1) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... of law were framed in these appeals, which pertain to assessment years 1993-94, 1994-95 and 1995-96: ".....Whether the Income Tax Appellate Tribunal on the basis of material on record was correct and justified in law in holding that the assessee institution which is duly registered under the Indian Societies Act, was not entitled in law to the claim of the exemption of its income, uls 10(22A) of the Income Tax Act, 1961 in view of the fact that Dr. P .N. Behl who is the Managing Trustee and also founder Director in the Trust was participating in the profits of the income of the Trust and the same disentitle the institution to claim aforesaid exemption?" 3. The appellant/ assessee is a society; prior to its constitution, the institution w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning of the institution, and rather the patients/ clients from whom the assessee benefited had brought in much larger amounts of which only a percentage was given to Dr. Behl. By way of comparison, amounts paid to certain other consultants/ doctors, was also shown, to say that they received a much higher proportions of such fees given to the hospital. 5. The assessee had appealed unsuccessfully to the Commissioner of Income Tax (Appeals) [CIT(A)] and later to the Income Tax Appellate Tribunal (Tribunal). In the circumstances, a reference was made to this Court being ITR No. 46/1998. However, that reference was returned unanswered, and was dismissed for non-prosecution. 6. Following his reasoning, the AO sought to bring to tax the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absolute terms the amounts may have been more. 9. The learned counsel submitted that the Tribunal fundamentally misconstrued the law in reading into section 10(22A) as it were the provisions of Section 13(1) and 13(3) of the Act. It was stated that section 13(1) of the Act specifically states that the benefit of section 11 or section 12 would not operate, if certain prohibited categories of expenditure were incurred. Most specifically section 13(3) refers to income received by the author or the founder of the institution or the society. It was stated that section 10(22A) has no co-relation with section 13(1) or section 13(3) and in overlooking this aspect the Tribunal fell into error. It was, secondly, urged that having regard to the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit. " 12. The Tribunal in this case was influenced by the text of Section 13 which contains conditions imposed upon income which is otherwise excluded by virtue of Section 11 or Section 12 from taxation. Section 13, to the extent it is relevant, reads as follows: "......13. (1) Nothing contained in section 11 (or section 12) shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public. (b) in the case of a tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of sub-section (1) and sub-section (2) are the following, namely:- (a) the author of the trust or the founder of the institution; (b) any person who had made a substantial contribution to the trust or institution, [that is to say, any person whose total contribution up to the end of the relevant previous year exceeds {fifty} thousand rupees]; (c) whether such author, founder or person is a Hindu undivided family, a member of the family; [(cc) any trustee of the trust or manager (by whatever name called) of the institution;] (d) any relative of any such author, founder, person, [member, trustee or manager] as aforesaid; (e) any concern in which any of the persons referred to in clause (a), (b), (c) [(cc)] and (d) has a substantial in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come that may otherwise be eligible to exemption, into these amounts which are per se entitled to be treated as not forming part of the total income. 15. In this Court's opinion this fundamental error led the Tribunal to hold that since Dr. Behl received significant amounts, the entire charitable basis of the assessee stood undermined by reason of Section 13 of the Act. This error persisted for the three assessment years in question. Having regard to the specific nature of the income which till 31.03.1999 could not be included as part of the total income, which the Parliament later subsumed through sections 10(23C) and 12A of the Act (subject to conditions) by deleting section 10(22A), in the present case there was no question of confusion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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