27 Charitable purpose – Exemption u/s. 10(23C)(via) – A. Y. 2011-12 – Application for approval cannot be rejected on ground assessee charges fees for educational courses or it entered into arrangements with other institutions to set up satellite centers to give medical treatment or its treatment involved layered subsidisation programme – Rejection of application not justified

Venu Charitable Society vs. DGIT; 393 ITR 63 (Del):

The assessee was registered u/s. 12A of the Act,1961 and also
obtained approval u/s. 80G of the Act. It was also notified for exemption u/s.
35AC of the Act by the National Committee for Promotion of Social and Economic
Welfare. The assessee was notified u/s.10(23C)(via) of the Act for the A. Ys.
2005-06 to 2007-08. But it did not file application for renewal of exemption
for the A. Ys. 2008-09 to 2010-11. In the return of income filed for those
years, the assessee claimed exemption u/s. 11 of the Act in respect of income
earned and applied for charitable purposes, the Assessing Officer while
completing the assessment for the A. Ys. 2005-06 to 2009-10 held that the
activities of the society fell within the ambit of section 2(15) of the Act,
i.e. charitable purpose. The assessee thereafter applied through Form 56D for
grant of exemption u/s. 10(23C)(via) of the Act for the A. Ys. 2011-12 onwards.
The Department rejected the exemption application inter alia on the
ground that (a) the assessee did not exist solely for philanthropic purposes
but for purpose of profit; (b) it had entered into collaboration agreements
with other hospitals and trusts for running satellite hospitals with profit
motive; (c) it provided educational courses such as medical training
programmes, long term super speciality medical programmes in ophthalmology and
was earning profit from those activities; (d) the memorandum of the assessee
society contained objects other than health care; and lastly, that it had made
no application for renewal of exemption u/s. 10(23C)(via) for the A. Ys.
2007-08 to 2010-11.

The Delhi High Court allowed the writ petition filed by the
assessee challenging the order and held as under:

“i)   The objects of the assessee
society were solely for the purpose of education and medical care and not for
purposes of profit. Only if it was found that the assessee was carrying on its
activities for the purpose of profit, contrary to its objects, would the
prescribed authority be justified in rejecting the application for approval
u/s. 10(23C)(via) of the Act.

ii)   Merely because it
charges fees for educational courses or that it enters into arrangements with
other institutions to set up satellite centres, to give medical treatment, or
that its treatment involved a layered subsidisation programme, that would not
justify rejection of its application. Therefore, denial of exemption u/s. 10
23C)(via) was not justified and the order was to be quashed.