Case Law Details
Parkar Medical Foundation Vs ACIT (ITAT Pune)
Conclusion: Professional fee paid to the trustees, who were qualified doctors were allowable as deduction as it could not be held to be for the direct or indirect benefit of trustees.
Held:
Assessee was running hospital for charitable purpose. AO noted that the trust deed had only two trustees. Since it was not possible for assessee to start the hospital activity because of lack of funds, trustee allowed the carrying on of hospital activity in the hospital building owned by them and also allowed the entire medical infrastructure including available medical equipment and facilities to be used by assessee-trust. Trustees were the Chief Medical Officer and Administrator of trust and also providing medical services to patients coming to hospital, in lieu thereof, professional fees were paid to him. The said professional fees were based on case to case basis directly relating to the fees collected from the patients. AO denied the deduction of total remuneration received by trustees which was paid in the year under consideration. Under section 13(1)(c) the test to be applied was whether any part of income was directly or indirectly utilized for the benefit of any person, such amounts were not to be allowed as deduction. In the present case, both trustees were professionally qualified doctors, who besides looking after the administration and running of hospital, were also providing services to the hospital. The payment to them was also linked to the fees collected from the patients. In such circumstances, where the payment was made for rendering professional services to assessee trust, it could not be held to be for the direct or indirect benefit of trustees. There was no merit in invoking provisions of section 13(1)(c) in the present set of facts. Accordingly, professional fees paid to two trustees was to be allowed as deduction.
FULL TEXT OF THE ITAT JUDGEMENT
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