Case Law Details
A plain reading of Section 10(23C) makes it clear that the legislature has categorised for deduction income of those institutions which ‘exist solely’ for philanthropic purpose with a further stipulation that they would exist ‘not for the purpose of profit’. In other words, the institution should not exist for a commercial purpose. The first proviso to this subsection requires an assessee to make an application in a prescribed form to the prescribed authority for the purpose of grant of exemption or continuance thereof. The second proviso provides that the prescribed authority before granting an approval may call for such documents, including audited annual accounts or information and as it may think necessary in order to satisfy itself about the genuineness of activities of such a trust or fund and may make such inquiries as may deem necessary in that behalf. It is the further requirement of the provision that an assessee should apply its income solely and exclusively for the objects for which it is established. Rule 2CA of the Income Tax Rules lay down the guidelines for grant of approval.
A plain reading of the above provision 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 show that the intention of the legislature is to benefit those institutions which cater to variety of illness and suffering as a service to the society and solely for philanthropic purpose and not for the purpose of profit. An existence of the institution ostensibly for a philanthropic purpose and in reality for profit, would not qualify an institution for a deduction under this provision. This would not mean that such an institution cannot incidentally have a reasonable surplus which it utilizes for philanthropic purposes.
In the light of the above legal requirement, we now proceed to examine the facts of the present case so as to determine as to whether respondent no.1 was right in rejecting the petitioner’s application seeking an approval under section 10 (23C) (via). In doing so, we examine whether the impugned decision suffers from any arbitrariness and/or an illegality. From the material on record as placed before respondent no.1 it was reflected that the petitioner was earning surplus revenue from its activities and that the assets were increasing. The fact that surplus was generated is not disputed by the petitioner. This surplus revenue was utilized for acquisition of assets which in the opinion of respondent no.1 was capable of generating more income. In the Assessment years 200607, 200708, 200809 and 200910, the percentage of transfer of gross surplus to the development fund was at 19.12 % 28.37 % 73.17 % and 12.12 % respectively. Accompanied with this, there was a huge increase in fixed assets from Rs.63,75,577/ in A.Y.200607 to Rs.8,02,75,706/ in Assessment year 200910 which was approximately an increase of Rs.7.50 crores within four years. Petitioner’s cash and bank balances also increased from Rs.1,42,420/ to Rs.1,74,15,757/ during the same period which was an increase of about Rs.1.30 crores. The petitioner had purchased land admeasuring 8,350 sq.meters for an amount of Rs.363.63 lacs. All these figures are borne out by the details as submitted by the petitioner before respondent no.1. The reasoning as given by respondent no.1 that all these figures go to show that there was a systematic generation of profits from the activities of the petitioner coupled with the increase in assets which would generate more income / profits cannot be said to be without any basis, arbitrary or perverse. Hence, it was not improper for the respondent no.1 to draw a reasonable inference that the petitioner is not existing solely for philanthropic purpose and for profits, in ouropinion cannot be faulted.
We have also perused the statement of expenditure incurred by the petitioner showing the concessional treatment claimed to be offered by it. The figures of concessional treatment clearly indicate that the petitioner has spent meagre amount on the weaker section of the society which negatives the contention of the petitioner that the petitioner is existing solely for philanthropic purpose and not for profit.
A perusal of the statement of the hospital charges and fees furnished by the petitioner for Financial year 2006-07, 2007-08 and 2008-09 shows the very negligible percentage of poor/needy patients receiving treatment in the hospital of the petitioner. What is more glaring are the details in the two columns namely ‘Gross Concessional Amount Receivable’ and ‘The amount Received from Poor patients.’ These figures in no manner would inspire any confidence or make a prudent person believe that the petitioner is in fact existing for philanthropic purposes. We say so, for the reason, that it is Court inconceivable that poor patients would be in a position to pay large amounts as indicated by the petitioner in details given in these financial statements.
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