Maternity is a natural process and could not be termed as illness or disease

The AO noted in the assessment order that the assessee society is running maternity hospital and all services pertaining to maternity only. Maternity is a natural process and could not be termed as illness or disease. Giving birth and at that time hospital providing services for delivery could not be said to be providing any treatment for illness or mental defectiveness.

Further in absence of any details or evidences available on record, we do not find it to be a fit case for interference and the ld. CIT(A) was therefore justified in holding that the ingredients of above section are not fulfilled in the case of assessee. The ld. counsel for the assessee pointed out from the paper book, the application of income and details of deliveries and operations conducted in this regard, which is not sufficient to grant relief under the above provisions to the assessee. It is worthwhile pointing out that the child birth is the natural process of God and it is certainly the God’s grace which is extended to sustain us through it. It is the act of God who designs a child conceived in the womb to be born into this world. In olden days deliveries of children were perfectly conducted by midwives at home, but in the modern age, it is only because the anxiety of people that they would not be able to manage the discomfort or pains during labor, they choose to take better facilities in the hospitals in presence of Doctors for this purpose. Thus, it may be said that the assessee’s maternity hospital in the instant case would have been facilitating the deliveries, i.e., a natural process  of God. It, therefore, can in no way be said to be any illness to be treated in the assessee’s hospital as envisaged u/s. 10(23C)(iiiae). Therefore, the ingredients of section 10(23C)(iiiae) being not fulfilled, the ld. CIT(A) has rightly disallowed the claim of assessee.

INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA

BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND

SHRI A.L. GEHLOT, ACCOUNTANT MEMBER

ITA No. 218/Agra/2013 – Asstt. Year : 2009-10

D.C.I.T. Vs. Nehru Prasutika Asptal Samiti

C.O. No. 18/Agra/2013

(in ITA No. 218/Agra/2013) – Asst. Year : 2009-10

Date of pronouncement of order : 14.08.2013

ORDER

Per Bhavnesh Saini, J.M.:

The departmental appeal and the cross objection by the assessee are directed against the order of ld. CIT(A), Ghaziabad dated 15.03.2013 for the assessment year 2009-10.

2. We have heard the ld. representatives of both the parties, perused the findings of the authorities below and considered the material available on record. 2 ITA No. 218 & C.O. No. 18/Agra/2013

Departmental Appeal :

3. The Revenue challenged the order of the ld. CIT(A) in holding that investment of surplus fund in FDRs to earn interest income on idle funds is directly incidental activity. Hence, such interest income of Rs. 11,32,800/- is eligible for exemption u/s. 11 of the IT Act. It is also stated that earning of interest on surplus funds cannot be treated as either educational or charitable activities.

4. The assessee filed return of income at nil income accompanied by auditors report. The assessee society is running a maternity hospital at Aligarh. All services pertaining to maternity, i.e., consultation, delivery and related operations etc. are provided to the patients at nominal charges. The assessee society is registered u/s. 12AA of the IT Act. The AO asked the assessee as to why interest income from FDR be not taxed. The AO found that as per submissions, the interest income as per FDR exceeds 15% of receipts allowed to be treated as charitable activity and balance was to be disallowed. The interest income was found to be taxable income. The assessee challenged the addition before the ld. CIT(A) and also claimed that its income is exempt u/s. 10(23C)(iiiae) of the Income-tax Act. It was submitted that the assessee is a charitable trust running a maternity hospital and large number of deliveries and related operations are conducted in the hospital. Therefore, the assessee is entitled for exemption u/s. 11 as well as u/s. 10(23C)(iiiae) of the IT Act and the receipts do not exceed Rs.1 crore. The investment made in the FDRs with the bank is permissible mode u/s. 11(5) of the IT Act. The AO disallowed 15% of the income. Therefore, remaining should have been considered as the income applied to the charitable objects. The assessee relied upon the decision of Delhi High Court in the case of DIT(Exemption) vs. Dalmiya Shiksha Pratishthan, 305 ITR 327, in which it was held that merely because the assessee earns interest as a result of its investment would not mean that the assessee ceased to exist solely for educational purposes. The assessee also relied upon the decision of ITAT, Delhi Bench in the case of ITO vs. Jesuit Conference of India, 47 SOT 29, in which it was held –

“Assessee trust would not lose exemption under s. 11 merely because of investing surplus money in mutual fund units and entering frequent transactions related to purchase/switchover from one such mutual fund scheme to another as the same is not a business activity; even otherwise, there was due compliance of the provisions of s. 11(4A) by the assessee.”

The ld. CIT(A) found the claim of the assessee to be correct because the interest earned on surplus / corpus fund was directly incidental to the main activities of the trust and the assessee’s claim is allowable by the above decision. The AO was therefore, directed to allow deduction u/s. 11 of the IT Act.

5. On consideration of the rival submissions, we are of the view that the departmental appeal has no merit and is liable to be dismissed. The decision in the case of Dalmiya Shiksha Pratishthan (supra) and ITO vs. Jesuit Conference of India (supra) squarely apply to the facts and circumstances of the case. The assessee has invested its funds in FDRs on which the assessee earned interest, which is applied towards the objects of the assessee society. The funds invested in FDR have been shown in the balance sheet and is the property of the assessee- society. Merely because the assessee earns interest on its surplus / corpus funds would not lead to the fact that the assessee exists for profit purpose. The claim of the assessee has been correctly allowed by the ld. CIT(A). The departmental appeal has no merit and is accordingly dismissed.

Cross Objection:

6. The assessee in the cross objection made a claim of deduction u/s. 10(23C)(iiiae) of the IT Act. The ld. CIT(A) held that the assessee is a general hospital pertaining to maternity while the hospital / Institution as envisaged in section 10(23C)(iiiae) is in respect of mental disease or illness or rehabilitation existing solely for philanthropic purposes. The assessee has, however, not satisfied these conditions. Therefore, the claim of assessee was denied. Section 10(23C)(iiiae) of the IT Act reads as under :

“Any hospital or other institution for the reception and treatment of persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation, existing solely for philanthropic purposes and not for purposes of profit, if the aggregate annual receipts of such hospital or institution do not exceed the amount of annual receipts as may be prescribed.”

7. The AO noted in the assessment order that the assessee society is running maternity hospital and all services pertaining to maternity only. Maternity is a natural process and could not be termed as illness or disease. Giving birth and at that time hospital providing services for delivery could not be said to be providing any treatment for illness or mental defectiveness. Further in absence of any details or evidences available on record, we do not find it to be a fit case for interference and the ld. CIT(A) was therefore justified in holding that the ingredients of above section are not fulfilled in the case of assessee. The ld. counsel for the assessee pointed out from the paper book, the application of income and details of deliveries and operations conducted in this regard, which is not sufficient to grant relief under the above provisions to the assessee. It is worthwhile pointing out that the child birth is the natural process of God and it is certainly the God’s grace which is extended to sustain us through it. It is the act of God who designs a child conceived in the womb to be born into this world. In olden days deliveries of children were perfectly conducted by midwives at home, but in the modern age, it is only because the anxiety of people that they would not be able to manage the discomfort or pains during labor, they choose to take better facilities in the hospitals in presence of Doctors for this purpose. Thus, it may be said that the assessee’s maternity hospital in the instant case would have been facilitating the deliveries, i.e., a natural process  of God. It, therefore, can in no way be said to be any illness to be treated in the assessee’s hospital as envisaged u/s. 10(23C)(iiiae). Therefore, the ingredients of section 10(23C)(iiiae) being not fulfilled, the ld. CIT(A) has rightly disallowed the claim of assessee. As a result, the cross objection of the assessee has no merit and is accordingly dismissed.

8. In the result, the departmental appeal as well as the cross objection of the assessee are dismissed.

Order pronounced in the open court.