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TMI Blog2024 (11) TMI 151X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The issue is squarely covered and already decided in assessee s own case by the order of the co-ordinate bench of ITAT [ 2016 (6) TMI 1486 - ITAT MUMBAI] and the order of the Hon ble jurisdictional High Court in assessee s own case [ 2022 (6) TMI 1515 - BOMBAY HIGH COURT] - Further, the medical store is an integral part of the assessee s activities. Deduction @15% on the gross receipts u/s 11(1)(a) - as stated that the assessee has actual deficit 1.85 crore as per claim of expenses but pursuing provision U/s 11(1)(a) of the Act claimed compulsory set apart amount of Rs. 28.35 crore and consequently claimed deficit amount to Rs. 30.20 crore is not justified - HELD THAT:-We note that the claim of set apart on gross receipt is duly covered by the order of the Hon ble Apex Court in Programme for community Organisation [ 2000 (11) TMI 4 - SUPREME COURT] which respectfully followed in the impugned appeal order. We further note that the @15% of income on gross receipt of trust is to be set apart and not on the surplus or deficit. The section 11(1)(a) has not imposed any condition for claiming set apart on surplus or deposit. The view taken by the ld. CIT(A) is justified and we do not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the Appellant that the jurisdictional conditions containing u/s 147 and 151 of Act are not fulfilled before issuing the notice u/s 148 of the Act. 2. The Learned Commissioner of Income-tax (Appeals) erred in not appreciating that the reassessment proceedings were initiated beyond 4 years from the end of the Assessment Year and there was no failure on the part of the appellant in disclosing the faces that were necessary for completion of the assessment u/s 143(3) of Act, and hence the reassessment proceedings were void-ab-initio 3. The Learned Commissioner of Income-tax (Appeals) erred in not appreciating that no new facts or tangible material have come to the knowledge of the assessing officer reopening of the assessment. 4. The Appellant craves leave to add to, alter, amend and/or delete in all the foregoing grounds of appeal. ITA No.2677.Mum/2024 - Appeal by Revenue A.Y. 2013-14 1. Whether on the facts and in the circumstances of the case, the Ld.CIT(A) is correct in not treating surplus of Rs.4,79,04,067/- arising out of pharmacy store in the assessee hospital, to be business income u/s 11(4A) of the Income Tax Act, 961? 2. Whether on the facts and in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction claimed U/s 11 of the Act was denied. Further, the ld.AO rejected the benefit under section 11(1)(a) for A.Y. 2013-14 where there was no surplus available during the year for accumulation. The ld.AO further added back the provision for employees compensated absence amount of Rs. 12,09,120/-, on account of provision for post-retirement medical benefits amount to Rs. 3,27,69,040/- and the addition of fund related to Indigent Weaker Section Fund (I WS Patient Fund) amount to Rs. 3,53,43,430/- when the said amount was not utilized during the impugned financial year. All the grievances were moved towards ld. CIT(A) for adjudication. The ld. CIT(A) after considering the submission of the assessee allowed the appeal of the assessee and rejected the addition made in impugned assessment order. Being aggrieved on the appeal order, the revenue filed an appeal before us on merit and the assessee filed cross objection by challenging the legal ground before us. ITA No.2462/Mum/2024, A.Y. 2006-07- Ground- 1 2 4. The ld.DR vehemently argued and fully relied on the impugned assessment order. The paragraph 5. ii. of impugned assessment order is reproduced below for ready reference: - 5. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready reference, paragraphs 5.2 to 5.4 are extracted below: - 5.2 The AO held that the assessee has not maintained separate books of accounts for the pharmacy store which is a cardinal requirement u/s 11(4A) of the IT Act for the income from incidental business to be claimed as exempt. Running pharmacy store is business incidental to the appellant s activity. The section 11(4A) specifically state that the separate books of account have to be maintained for the business incidental to the main activity. However, the appellant has failed to maintain the separate books of account and hence the income derived from this incidental business activity cannot be considered as exempt income. Therefore, the surplus income from the pharmacy store as Rs.1,60,49150 is treated as business income and accordingly exemption on this is denied. 5.3 During the appeal proceedings, the appellant has contended that this issue is already decided in favour of the appellant by the ITAT Mumbai for AY 2010-11. I have gone through the submission of the appellant. I find that the Hon ble Mumbai ITAT J-Bench in the appellant s case for AY 2010-11(ITA NO.6583/M/2014) has decided this issue as under: - Ground Nos.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court (supra) observed that where the running of a chemist shop was not the dominant object or purpose of the trust and where the surplus, which was earned from the operation of a chemist shop in the hospital, was utilized for the purpose of hospital and the establishment of a chemist shop in the hospital is incidental or ancillary to the dominant purpose of the trust/hospital, then, under such circumstances, exemption on this ground cannot be denied to a charitable trust under the provisions of section 10(23C)(via) of the Income Tax Act. The Ld. A.R. has further invited our attention to a recent decision of the co-ordinate bench of the Tribunal in the case of Hiranandani Foundation vs. ACIT (E), Mumbai wherein the Tribunal has discussed the identical issue. The AO in the said case (supra) had made additions invoking provision of sub section (4A) of section 11 and observing that the assessee hospital had failed to maintain the separate books of accounts for the business of pharmacy. The Tribunal, after considering the relevant submissions of both the parties, observed from the language used in section 11(4A) and section 10(23C) that since the pharmacy business run by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of pharmacy was the necessary requirement in running the hospital and for providing timely medical aid to the patient, thus, the activity was not only incidental but was part of the objects of the assessee trust and thus was not hit by the provision of section 11(4A) of the IT Act. This decision of the Hon ble Tribunal has been affirmed by the Hon ble Bombay High Court. Thus, this issue is covered by the above two decisions in the appellants own cases. Respectfully, following the decision of Hon ble Mumbai ITAT and Hon ble Bombay High Court, the addition made by the AO of Rs.1,60,49,150/- is hereby deleted. Accordingly, appeal on ground no 2, 3 and 4 is ALLOWED. The Ld.AR further stated that the surplus of the pharmacy store amount to Rs.1,60,49,150/- is added back with the total income by rejecting deduction under section 11 is contrary to the order passed by the co-ordinate bench of the ITAT. Further mentioned that the ld. CIT(A) made typographical mistake in the ITA number. In the order it is mentioned ITA NO. 6583/M/2014 instead of ITA No. 6853/M/2014.So, the surplus is an integral part of the activities of the trust; so, the rejection of exemption U/s 11 is not justified. ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble S.C as mentioned above, the appeal on this ground is ALLOWED. The Ld.AR stated that in Explanation 5 to section 11(1)(a) of the Act. Here, for ready reference is mentioned below: - Explanation 5. For the purposes of this sub-section, it is hereby clarified that the calculation of income required to be applied or accumulated during the previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding the previous year. It is clearly stated that claim of set apart @15% of gross income is statutory claim and he respectfully followed the order of the Hon ble Supreme Court. ITA No.2677/Mum/2024, AY-2013-14- Grounds 3 4: 8. The ld. AR stated before the bench In relation to provision for Indigent Weaker Section Patient Fund, the provision for medical benefit of retirement employees and provision for employees compensated absence have no contribution in taxation, should they be decided against the assessee. The ld. AR invited our attention in impugned assessment order paragraph-7 which is reproduced as below. 7. Subject to the above remarks the total income of the assessee is computed as under '' Rs. Rs. I INCOMEF ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the Hon ble Apex Court in Programme for community Organisation (supra) which respectfully followed in the impugned appeal order. We further note that the @15% of income on gross receipt of trust is to be set apart and not on the surplus or deficit. The section 11(1)(a) has not imposed any condition for claiming set apart on surplus or deposit. The view taken by the ld. CIT(A) is justified and we do not find any reason to interfere in this issue. Since the decision rendered by ld. CIT(A) is in accordance with the above cited decisions, we do not find any infirmity in the appeal orders passed on these issues. Accordingly, we uphold the impugned appeal orders. 10 Accordingly, appeals of revenue in ground nos. 1 2 of ITA No. 2462/Mum/2024 and ground no. 5 of ITA No. 2677/Mum/2024 are dismissed. 11. In relation to provision for Indigent Indigent Weaker Section Patient Fund, the provision for medical benefit of retirement employees and provision for employees compensated absence, as we appreciate the matter on record as raised in ground nos-3 4 for AY 2013-14 are in favour of the assessee as per impugned appeal order and the ld. AR indicated that if the issues are hold against ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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