M/s Yash Society vs. CCIT (Bombay High Court)

(i) A plain reading of s. 10(23C)(via) shows that the legislative emphasis is on a twin requirement . Firstly the purpose for which the trust is existing, which should be solely an existence for a philanthropic purpose and secondly it should not be for profit. This interpretation sub-serves the object of the provision. The clear language of the provision show that the intention of the legislature is to benefit those institutions which cater to variety of illness and suffering as a service to the society and solely for philanthropic purpose and not for the purpose of profit. An existence of the institution ostensibly for a philanthropic purpose and in reality for profit, would not qualify an institution for a deduction under this provision. This would not mean that such an institution cannot incidentally have a reasonable surplus which it utilizes for philanthropic purposes;

(ii) On facts, it was reflected that the petitioner was earning surplus revenue from its activities and that the assets were increasing. The fact that surplus was generated is not disputed by the petitioner. This surplus revenue was utilized for acquisition of assets which in the opinion of the CCIT was capable of generating more income. In AY 2006-07, 2007-08, 2008-09 and 2009-10, the percentage of transfer of gross surplus to the development fund was at 19.12%, 28.37%, 73.17% and 12.12% respectively. Accompanied with this, there was a huge increase in fixed assets from Rs.63,75,577 in AY 2006-07 to Rs.8,02,75,706 in AY 2009-10 which was approximately an increase of Rs.7.50 crores within four years. Petitioner’s cash and bank balances also increased from Rs.1,42,420 to Rs.1,74,15,757 during the same period which was an increase of about Rs.1.30 crores. The petitioner had purchased land admeasuring 8,350 sq.meters for an amount of Rs.363.63 lacs. The reasoning as given by the CCIT that all these figures go to show that there was a systematic generation of profits from the activities of the petitioner coupled with the increase in assets which would generate more income / profits cannot be said to be without any basis, arbitrary or perverse. Hence, it was not improper for the CCIT to draw a reasonable inference that the petitioner is not existing solely for philanthropic purpose and for profits, in our opinion cannot be faulted;

(iii) The statement of expenditure incurred by the petitioner showing the concessional treatment claimed to be offered by it clearly indicates that the petitioner has spent meager amount on the weaker section of the society which negatives the contention of the petitioner that the petitioner is existing solely for philanthropic purpose and not for profit;

(iv) A perusal of the statement of the hospital charges and fees furnished by the petitioner shows the very negligible percentage of poor/needy patients receiving treatment in the hospital of the petitioner. What is more glaring are the details in the two columns namely ‘Gross Concessional Amount Receivable’ and ‘The amount Received from Poor patients.’ These figures in no manner would inspire any confidence or make a prudent person believe that the petitioner is in fact existing for philanthropic purposes. We say so, for the reason, that it is inconceivable that poor patients would be in a position to pay large amounts as indicated by the petitioner in details given in these financial statements. The CCIT has rightly come to a conclusion that the concessional treatment as given by the petitioner for the above assessment years being meagre 3.56 %, 6.45% and 4.45% respectively, definitely does not speak of the existence of the petitioner for philanthropic purposes;

(v) One more factor which needs to be noted is in regard to the resolution passed by the petitioner which does not specify the purpose of acquisition of the land but only authorises the acquisition of the land at a particular price. The alarming figures of large surplus as generated by the petitioner and the utilization of those surplus for acquisition of assets would speak against the petitioner existing solely for philanthropic purpose and not for profit. This would disentitle the petitioner to the benefit of section 10 (23) (via). If the petitioner was to solely exist for philanthropic purposes and was to conduct the hospital to achieve that object by providing treatment to the weaker sections of the society, it could not have been possible for the petitioner to achieve such a huge surplus and the consequent enabling of the petitioner to utilize such surplus funds to generate assets.

(vi) The contention on behalf of the petitioner that looking to the manner in which the exemption was allowed in the past, the CCIT ought to have granted its application under section 10 (23C)(via) of the Act is completely misconceived and contrary to the requirement of the statutory provision. It was the legal duty of the CCIT to consider independently the application of the petitioner for the assessment year in question on the basis of the material as submitted by the petitioner and applying the requirements of the provisions of sub-clause 23C (via) of section 10 decide the same independently. Any deduction and/or exemption as granted to the petitioner for earlier assessment years cannot be claimed to be of any consequence by the petitioner so as claim this deduction as a matter of right for AY 2009-10 and thereafter.

(S. H. Medical Centre Hospital vs. State of Kerala (2014) 11 SCC 381 (2) & Aditanar Educational Institution (1997) 3 SCC 346 (3) followed; Breach Candy Hospital Trust vs Chief Commissioner of Income Tax (2010) 322 ITR 246 (Bom), Tolani Education Society vs Deputy Director of Income Tax (Exemption) 351 ITR 184 (Bom) & Rukmarani Education Foundation vs Chief Commissioner of Income Tax (2013) 260 ITR (Bom) 167 distinguished.)