6 Ashwini Sahakari Rugnalaya vs. CCIT [(2021) 438 ITR 192 (SC)]
Exemption – Hospitals – Benefits in terms of section 10(23C)(via) of the Income-tax Act, 1961 are available to any hospital existing solely for philanthropic purposes and not for purposes of profit – Remuneration payable to member doctors with regard to IPD patient receipts, not being confined to the doctors performing the task – Benefit to the hospital rightly denied — Such benefit granted in earlier years cannot ipso facto entitle the assessee to the benefit in the subsequent years
By an order dated 31st March, 2005, the Chief Commissioner of Income-tax, Pune, rejected the application of the assessee-co-operative society for exemption u/s 10(23C)(via) for the assessment years 1999-2000 to 2002-2003.
The High Court dismissed the writ petition filed by the assessee challenging the aforesaid order.
According to the Supreme Court, the short question that arose for its consideration was whether the assessee was eligible for benefit u/s 10(23C)(via) for the said assessment years.
It noted that the benefits in terms of the aforesaid section are available to any hospital existing solely for philanthropic purposes and not for purposes of profit.
The Court further noted that this was the position which existed even earlier u/s 10(22A) prior to the amended provision under the Finance (No. 2) Act, 1998 with effect from 1st April, 1999. The only change made was requiring that it ‘may be approved by the prescribed authority’. According to the Court, the legislative intent of the same was to exclude some entities which were not entitled to it from availing of the benefit.
While dealing with one of the arguments of the assessee, that it had been granted benefit for ten years earlier, the Court observed that the same could not ipso facto entitle the assessee to the benefit in the relevant assessment years.
The Supreme Court observed that there was a dual reasoning permeating both the orders which sought to deny the exemption. Firstly, that remuneration had been paid from the earnings of the inpatient department (IPD) to the doctors who may not be working in that department and, secondly, that the rates being charged by the appellant were at par with other hospitals which run on commercial basis.
Insofar as the second aspect is concerned, the appellant sought to canvas before the Supreme Court that there was no basis for the same and even when information was sought in this behalf after the order was passed by the Commissioner through a letter dated 12th May, 2005, there was no response. In the counter affidavit, too, nothing has been set out in this behalf. According to the Court, if the aforesaid had been the only matter to be tested, it may have remitted the matter on account of failure to disclose the relevant information which formed the basis of that conclusion.
However, in the opinion of the Supreme Court it was not necessary for the twin reasons to exist in order to deny the benefit to the assessee. Each one of these reasons could have been sufficient.
According to the Court the most material aspect was the first one set out above and that, too, on the basis of what it perceived to be an admission of the assessee emerging from the pleadings in the writ petition filed before the High Court, the relevant paragraph Nos. 3(x) and (xi) of which were as under:
‘3(x) The scheme of the remuneration payable to the Doctors from OPD and IPD has been devised in a manner where all the Doctors are paid 50% of the receipts from the patients visiting for consultation in OPD (Out Patient Department), except consultants of minor branches where 70% of the receipts are paid to them. With regard to IPD patient receipts, the remuneration payable to member Doctors varies from 20% to 30% depending on the qualification (Super Specialists, Consultants – 30%, Non-surgical consultants having no personal nursing homes – 25%, all other doctors including surgeons and consultants having their personal nursing homes – 20%).
(xi) The 20% to 30% professional charges / remuneration payable to Doctors / Consultants as mentioned above is out of the net collection, which is worked out after deducting from the receipts of the IPD patients certain payments on account of Pathology / Radiology / OT charges, etc. However, the receipts on account of bedroom charges, injection charges, saline charges, oxygen charges, ECG charges, attendant charges, set charges are taken into account for arriving at the net collection figure and such shares (of 20% – 30% of net collection) have been paid to the consultants concerned (Physicians / Specialists / Surgeons). Thus, apart from the consultancy charges received in the OPD, the member doctors, some of whom are also Directors, have received shares from the collection made from the IPD patients by the hospital ranging from 20% to 30%.’
According to the Supreme Court, a reading of the aforesaid left no manner of doubt that while referring to the remuneration payable to member doctors with regard to IPD patient receipts, the same was not confined to the doctors performing the task.
The Supreme Court, thus, was of the view that the decision on facts made by the competent authority and as affirmed by the High Court could not be said to be perverse or having complete absence of rationality for it to interfere in the same.
However, the Supreme Court clarified that if the assessee desired to rectify the position, as emerging from the aforesaid, that would not preclude it from claiming exemptions for relevant subsequent years.
The civil appeal was dismissed accordingly.
