Ita/295/2010 Of The Commissioner Of Income Tax Kottayam v. M/S.sahrudayas Hospital,Thathampally

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN FRIDAY, THE 29TH OCTOBER 2010 / 7TH KARTHIKA 1932 ITA.No. 295 of 2010() --------------------- ITA.510/2004 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: -------------------- THE COMMISSIONER OF INCOME TAX (CENTRAL) KOCHI. BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S): --------------- M/S.SAHRUDAYA HOSPITAL, THATHAMPALLY,ALAPPUZHA, PIN 688 013. THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 29/10/2010, ALONG WITH ITA NO. 307 OF 2010 ITA NO. 353 OF 2010 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -------------------------------------------- I.T.A. Nos. 295, 307 & 353 of 2010 -------------------------------------------- Dated this the 29th day of October, 2010 JUDGMENT Ramachandran Nair, J. The question raised in the connected appeals filed by the revenueagainst the very same assessee is whether the Tribunal was justified inholding that the respondent-assessee cannot be separately assessed forthe income from a hospital merely because it was not entitled toexemption under Section 10(23C)(via) of the I.T. Act. We have heardstanding counsel appearing for the appellants and have gone throughthe orders issued by all the authorities, including the Tribunal. 2. Respondent is a hospital owned and managed by a society byname Social Welfare Society located at Alappuzha which admittedly isgranted registration as a charitable institution under Section 12A of theAct. However, the assessee appears to have claimed separateexemption under Section 10(23C)(via) of the Act which requiresseparate approval by the prescribed authority. The assessments werecompleted demanding tax on the entire income for the reason that it is ITA 295, 307 & 353/2010 not granted approval as a hospital under Section 10(23C)(via) of theAct. Since the assessments got confirmed in appeals, assessee filedsecond appeals before the Tribunal. The Tribunal however noticed thatbeing a charitable institution, assessee need not apply for separateexemption under Section 10(23C)(via) for claiming exemption on theincome from the hospital. After going through the Tribunal's ordersand after hearing standing counsel, we notice that there is no disputeabout entitlement of the society which owns hospital for exemption byvirtue of the certificate issued to them under Section 12A of the Act.The scheme of exemption for charitable institutions covered bySection111 provides exemption only for the expenditure actuallyincurred for such purposes and if there is diversion of income or mis-application of funds for the purposes for which exemption is granted itwas open to the Department to decline exemption and demand tax. 3. Admittedly society is engaged in several charitable activities,including running of Old Age Home for the poor, Training Institute forMentally Challenged, and a hospital for rendering medical assistance tothe poor. Even if one of the branches of operations leads to gain or ITA 295, 307 & 353/2010 3. Admittedly society is engaged in several charitable activities,including running of Old Age Home for the poor, Training Institute forMentally Challenged, and a hospital for rendering medical assistance tothe poor. Even if one of the branches of operations leads to gain or ITA 295, 307 & 353/2010 profit, still the society is entitled to exemption, if the funds wereapplied for other charitable purposes. We do not know how differentinstitutions owned by the same assessee could be assessed separately.In fact, only a legal entity could be assessed and not an institution,business concern or establishment. In short, the claim of exemption orliability should have been considered at the hands of the person whoowns and manages the hospital, which is a society. In our view, thereis serious lapse on the part of the assessing officer in not having donethis. Secondly, it is seen that assessee itself contended before theassessing officer that hospital is run by the society which is a charitableinstitution. Inspite of the claim made by the assessee, the assessingofficer has not considered whether the institution, that is, the assessee,namely, society, runs the institution for the purposes for which it wasgranted exemption under Section 12A. On the other hand, even thereturn filed is not seen considered by the assessing officer in theassessment of the society. All what the Tribunal has held is thatseparate exemption need be claimed by the society for the hospitalwhen it is assessable for all other income which does not arise here ITA 295, 307 & 353/2010 because of Section 12A registration granted to the society. We are incomplete agreement with the finding of the Tribunal on this issue.However, if there is violation of the scheme of exemption grantedunder Section 12A it is always open to the department to bring to taxsuch of the income that could be assessed under the Act after issuingnotice to the assessee. Appeals are dismissed with these observations. (C.N.RAMACHANDRAN NAIR)Judge. (K. SURENDRA MOHAN) Judge. kk