DCIT (Exemption) vs. National Health & Education Society (Mumbai)
Members: Joginder Singh (J.M.) and Manoj Kumar Aggarwal (A.M.)
I.T.A. No.1958/Mum/2016
Assessment Year: 2012-13. Date of Order: 10th January, 2018
Counsels for Revenue / Assessee: H. N. Singh / S. C. Tiwari and Rituja Pawar
FACTS
The assessee trust is registered u/s. 12A with DIT (Exemptions) and also registered with Charity Commissioner, Bombay. During the assessment proceedings, the AO noted that the trust was running a pharmacy shop in the hospital and achieved turnover of Rs.42.83 crore with net surplus of Rs.16.73 crore. The turnover of the shop constituted about 12.82% of total hospital collections. The income from the shop, in the opinion of the AO, constituted business income in terms of section 11(4A). The assessee defended the same on the ground that the drugs were supplied only to in-patients upon consultant’s prescription and the charges of the drugs formed part of final patients’ bills. However, the AO noted that the Trust Deed did not bar the hospital from selling medicines to outsiders and the activity of pharmacy shop was systematic business activity. The AO further noted that the trust was not maintaining separate books of accounts for the shop. Finally, the net surplus of Rs.16.73 crore earned from the shop was assessed as business income against which exemption under section 11 was denied.
Aggrieved, the assessee contested the same successfully before the CIT(A), where the CIT(A), relying upon the order of its predecessor in AYs 2010-11 & 2011-12, allowed the appeal of the assessee on the premises that operation of the pharmacy shop was intrinsic to the activities of the assessee and not incidental, and did not constitute business and therefore, the provisions of section 11(4A) were not applicable.
In appeal filed before the Tribunal, the revenue contested the findings of the CIT(A) on the ground that the assessee had not maintained separate books of accounts for pharmacy shop and therefore, failed to fulfill the conditions envisaged by section 11(4A).
HELD
The Tribunal noted that the issue had already been decided in assessee’s favour by first appellate authority for AY 2010-11 & 2011-12. Also, it was noted that the Mumbai Tribunal, in the assessee’s own case vide ITA No.87/Mum/2015 order dated 17/08/2016 for AY 2010-11, after considering the judgement of the Bombay High Court in Baun Foundation Trust vs. CCIT [2012 73 DTR 45 (Bom)] and Mumbai Tribunal in Hiranandani Foundation vs. ADIT [ITA Nos. 560-563/Mum/2016 order dated 27/05/2016] had upheld the stand of the CIT(A). Since the revenue was unable to bring any contrary facts on record and distinguish the facts of earlier years with that of the impugned assessment year, the Tribunal dismissed the revenue’s appeal.