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TMI Blog2021 (11) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... e above provisions appearing in to different sections from the Act. Therefore, we agree with the relevant argument propounded by the Ld Counsel for the assessee. Running of a pharmacy is a necessary requirement for running of a hospital. It is impossibility from medical point of view that the hospital can run without pharmacy shop in the premises of the hospital. Considering the same in BAUN FOUNDATION TRUST [ 2012 (4) TMI 172 - BOMBAY HIGH COURT] has held that maintenance of a pharmacy shop is ancillary to the dominant object of running of a hospital and thus, it is an integral part of the hospital. Actually the pharmacy shop is being maintained by the hospital itself and not by any private contractor. Drawing the medicine from such pharmacy shop by the Doctors in respect of the patients is also evident from the records, commonly maintained in their medical reports. It is not the case of the revenue that the profits earned on pharmacy was not spent for the objects of trust. Pharmacy is an integral part of the hospital business or not. Considering the above, we are of the opinion, the conditions of maintenance of books of account in respect of the business activity of trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. f) Whether in the facts and circumstances of the case, CIT(A) while deleting the addition u/s.11(4A) of the Act, is right in relying on the decision of the Supreme Court in the case of M/s. Aditanar Educational Institute Etc. Vs. Addl.CIT,224 ITR 310, wherein the facts relied upon are distinguishable and not applicable to the facts of the assessee's case. g) Any other ground to be raised at the time of hearing the appeal. 3. The assessee has filed Cross-objections in support of the order of the CIT(A) and raised the following grounds:- The order of the CIT under the facts and circumstances of the case is in accordance with the provision of sec 11 of IT Act, 1961. 2. On the facts and circumstances of the case CIT(A) is right in directing the AO to delete the addition u/s 11(4A) of the IT Act, 1961 made an account of income from pharmacy unit and allowed exemption. 3. On the facts and circumstances of the case, the CIT(A) is right in appreciating that the separate books of account not required to be maintained for the pharmacy unit. 4. CIT(A) is right in appreciating the fact that the activities carried out by the assesse with regard to pharmacy unit are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is eligible for exemption as per the provisions contained in sections 11, 12 and 13 of the Act. 9. For the Assessment year 2013-14, the assessee had filed the return of income, admitting gross receipts of Rs.35,67,77,831/- and total income as NIL after claiming specific deductions. 10. The trust has been established with the object of promoting relief to the poor, education, medical relief, and the advancement of any other object of general public utility as defined u/s 2(15) of the Act. The trust has accordingly established schools, nursing institutes at various centers and a hospital by name Chinmaya Mission Hospital with a pharmacy attached to the hospital. The trust has its centers at Bangalore, Mysore, Mandya, Mangalore, Shimoga, Kolar, Sagar, Tiptur amongst others to carry on its charitable activity. The Trust has been receiving interest on deposits from Bank and others and also income from schools, nursing institute and hospital with pharmacy attached thereto which are the properties of the Trust and the Income from Pharmacy unit considered separately. 11. The assessee is also running a hospital under the name 'Chinmaya Mission Hospital' as a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table activity. 15. The CIT(A) placed reliance on the judgment of Hon ble Supreme Court in the case of Aditanar Educational Institute Etc. Vs. Addl.CIT, 224 ITR 310 wherein,the addition is deleted by observing as under:- while construing the provision of section 10(22) that the decisive or acid test is whether on an overall view of the matter the object is to make a profit. If after meeting the expenditure any surplus results incidentally from the activity lawfully carried on by the institution, it will not cease to be one existing solely for the statutorily stipulated purpose so long as the object is not to make a profit . Again, it is a well settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is running a hospital. A hospital must of necessity have a section or department where medicines can be dispensed and it is not uncommon for a medical hospital which exists even for philanthropic purposes to have a chemist shop where pharmaceutical products are sold. This is a facility which is intended to be used predominantly by patien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dical or aftercareinstitutions. The affirmations of the AO for brining to tax the surplus income from pharmacy by invoking provisions of section 11(4A) of the Act areas under: 1. No separate books of account are not maintained except purchase and sale account in respect of pharmacy unit. 2. On perusal of purchase and sale of medicine and after determining surplus amount, it is concluded by the AO that assessee is running pharmacy unit as business entity rather than charitable trust. 22. Thus, while carrying on the above activities, the assessee has also carried on the business of pharmacy and income from that business was used for charitable purposes viz., providing medical relief to the poor public etc., and the assessee has claimed exemption u/s 11 of the Act for the income earned from the business of pharmacy. 23. The case of the Revenue is that the pharmacy shop constitutes an independent business that requires maintenance of the books of account separately in addition to the books of account maintained for the purpose of business of the hospital run by the assessee. When, such separate books of accounts are not maintained for pharmacy, there is a violation of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al part of the hospital business, as mentioned above, we find that the High Court of Bombay in the case of Baun Foundation Trust Vs. CCIT (73 DTR 45), which was delivered in the context of the provisions of section 10(23C) of the Act and find relevant to extract the relevant para which is as follows:- 4. In Aditanar Education Institute Etc. v. Additional Commissioner of Income Tax (1997) 224 ITR 310 (SC), the Supreme Court has observed, while construing the provisions of Section 10(22) that the decisive or acid test is whether on an overall view of the matter the object is to make a profit. If after meeting the expenditure any surplus results incidentally from the activity lawfully carried on by the institution, it will not cease to be one existing solely for the statutorily stipulated purpose so long as the object is not to make a profit. Again, it is a wel1 settled position in law that the dominant nature of the purpose for which the trust exists has to be considered. The Chief Commissioner has not doubted the genuineness of the trust or the fact that it is conducting a hospital. Even if the figures which are taken into account by the Chief Commissioner are to be had regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivate contractor. Drawing the medicine from such pharmacy shop by the Doctors in respect of the patients is also evident from the records, commonly maintained in their medical reports. It is not the case of the revenue that the profits earned on pharmacy was not spent for the objects of trust. Therefore, we find, that the cited judgments (supra) are applicable squarely to the facts of the case so far as the argument relating to if the pharmacy is an integral part of the hospital business or not. Considering the above, we are of the opinion, the conditions of maintenance of books of account in respect of the business activity of trading of medicines, which is an integral part of the hospital activities, is not the requirement of the law on the facts of this case. Thus, we affirm the assessee s contention that the pharmacy shop is an integral part of the hospital business and the same is not hit adversely by the conditions specified in the provisions of section 11(4A) of the Act. Therefore, so long as the transactions of such pharmacy which ancillary/ incidental for the business of a hospital and objects of the trust, the conditions relating to maintenance of separate books of accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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