Jeevan Rekha Trust Vs CIT (Exemption) (ITAT Ranchi)
CORE ISSUE : Whether a trust earning income by outsourcing its hospital building to a private entity and receiving consideration as a percentage of hospital turnover, with substantial recurring surplus and minimal charitable outgo, is entitled to recognition under Section 80G of the Income-tax Act, 1961.
BACKGROUND :- The assessee trust had acquired a building for the purpose of running a hospital. However, being unable to operate the hospital on its own, the trust outsourced the hospital operations to Blue Sapphire Healthcare Private Limited, a private company. Under the arrangement, the assessee received 3% of the total hospital turnover as consideration.
In addition, the trust operated two medical shops within the hospital premises, which, according to the assessee, were running at a loss. The assessee claimed that it was engaged in charitable activities and sought recognition under Section 80G for the relevant assessment years.
The CIT (Exemption), Patna, by orders dated 30.11.2024, refused to grant such recognition, leading to the present appeals before the ITAT.
ARGUMENTS OF THE ASSESSEE : The assessee contended that:
(i) The hospital was originally intended to be run by the trust for charitable purposes.
(ii) Due to operational difficulties, hospital activities were outsourced, which should not defeat the charitable character of the trust.
(iii) Generic medicines were being sold through medical shops, and the trust was not earning profits from such activity.
(iv) The consideration received from the private operator was incidental and the trust continued to pursue charitable objects.
Accordingly, it was argued that denial of Section 80G recognition was unjustified.
ARGUMENTS OF THE REVENUE- The Department opposed the appeals by pointing out that:
(i) The trust owned a building in which a Super Speciality Hospital was being run by a private entity on a commercial basis.
(ii) The assessee was receiving substantial income linked directly to hospital turnover, indicating a revenue-sharing commercial arrangement.
(iii) TDS was deducted under Section 194JB, evidencing that the receipts were treated as fees for professional or technical services.
(iv) The surplus generated year after year was significant, whereas the actual relief to patients was comparatively minimal.
(v) The assessee had failed to demonstrate genuine charitable activities or application of income in accordance with its stated objects.
