By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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Section 2(15) — Quantum of profit is no test in itself for determining the charitable nature of a society and that too after finding the facts that the profits were applied for charitable purpose only.
Facts: (1) The assessee was a society registered u/s.12A, established with the main object of carrying out research and to run the hospital and care centres with special emphasis on cancer detection and cure and general public welfare.
(2) The assessee had filed NIL return, claiming exemption u/s.11.
(3) The Assessing Officer denied the benefits u/s. 11 and u/s.12 on two grounds, namely:
(a) Hospital charges were on higher side and were comparable to hospitals run on commercial basis, and
(b) The alleged subsidised treatment was only given to doctors, relatives/friends of the doctors and employees of the hospital.
(4) On appeal, the assessee proved the facts to the satisfaction of the CIT(A) that its charges were in line with those hospitals who were claiming benefits of sections 11 and 12 and also that the patients have come from farflung areas and that the second ground was altogether baseless. Consequently the CIT(A) set aside the order passed by the AO. Thereupon the Revenue went into second appeal.
Held:
(1) Profitability is not the sole criterion to assess the charitable nature of a society. Charitable activity can also result in profits and that does not conclude that the activity carried on was not charitable in nature.
(2) Further, profits accruing to the society were utilised for charitable purpose only, which was also affirmed by the AO.
(3) Thus, the appeal of the Revenue was dismissed.
