Law: Income Tax Act, 1961

Section: 10(23C)

Section 10(23C) of the Income-tax Act, 1961 - Hospital/medical institutions - (Profit motive) - Assessment year 2009-10 - Whether existence of institution ostensibly for a philanthropic purpose and in reality for profit, would not qualify institution for a deduction under provisions of section 10(23C) - Held, yes - Assessee-trust was running a hospital - It filed application for grant of approval under section 10(23C) - Chief Commissioner rejected application holding that assessee was conducting its activities with profit motive - It was noted from annual accounts of earlier assessment years that there was a systematic generation of profits from activities of assessee, coupled with increase in assets and assessee had spent meagre amount on weaker section of society - Whether on facts application of assessee was rightly rejected - Held, yes [Paras 18 & 19] [In favour of revenue] FACTS â–  The assessee-trust was running a hospital and its main object was to provide healthcare facilities and establishing, constructing and maintaining charitable hospitals, dispensaries, convalescent homes, sanitoria and maternity homes, etc. â–  It filed application for grant of approval under section 10(23C). â–  The Chief Commissioner noticed substantial increase in development fund, cash/bank balances and fixed assets from books of account of assessee which in his opinion was indicative of fact that assessee-hospital earned substantial profits from its basic operations. â–  Accordingly, he rejected the assessee's application to grant approval under section 10(23C)(via) for assessment year 2009-10 inter alia on the ground that it did not fulfil primary requirement for granting exemption under section 10(23C)(via). â–  On writ: HELD â–  A plain reading of section 10(23C)(via) shows that the legislative emphasis is on a twin requirement. Firstly the purpose for which the trust is existing, which should be solely an existence for a philanthropic purpose and secondly it should not be for profit. This interpretation subserves the object of the provision. The clear language of the provision shows that the intention of the Legislature is to…