Fernandez Foundation Vs CIT (ITAT Hyderabad)
Conclusion: Assessee hospital was not entitled for registration under section 12A as it was charging on the basis of commercial rates from the patients and it had failed to demonstrate that the charges / fee charged by it were on a reasonable markup on the cost.
Held: Assessee-hospital applied for registration under Section 12AA of the Income Tax Act. However, CIT (E) rejected the application filed by assessee on the grounds that the assessee was involved in activities that were in the nature of trade and provides services at market rates. CIT(E) also stated that assessee had violated Section 13 of the Income Tax Act of 1961 by paying large sums to directors and other interested parties.CIT(E) recorded that the amount charged by the assessee was far more than the amount charged by other diagnostic enters or hospitals for similar tests, diagnoses, or treatments. Assessee submitted that the activities conducted by assessee were charitable in nature, and CIT(E) had wrongly rejected the assessee’s application for grant of registration under Section 12AA.It was held that CIT(E) was correct in holding that the assessee was charging on the basis of commercial rates from the patients, either outdoor/indoor and the assessee had failed to demonstrate that the charges / fee charged by it were on a reasonable markup on the cost. Accordingly, the order of ld. CIT(E) was upheld.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
The appeals of the assessee arise from the order of Commissioner of Income Tax (Exemptions), Hyderabad dt.30.08.2019 and dt.15.05.2020 involving proceedings under section 12 AA(1)(b)(ii), 80G(5)(vi) and 10(23C)(vi) of Income Tax Act, 1961 (in short, “the Act”), respectively.
2. The grounds raised by the assessee in ITA No.1884/Hyd/2019 read as under :“
