The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the activity of pharmacy is incidental to the purpose of running the hospital for the purpose of cliaming income tax exemption under the provisions of the Income Tax Act, 1961.
The revenue appealed against the order of the CIT(A) in treating the running of a pharmacy as an activity incidental to the attainment of the objectives of the assessee society which was running a hospital in terms of Section 11(4A) of the Income Tax Act,1961.
The Assessing Officer (AO) treated the conduct of the assessee in running a pharmacy on a commercial basis and concluded that the assessee society running a pharmacy was not an activity incidental to the attainment of the objectives of the society and sought to bring to tax the surplus earned by pharmacy alone on a commercial basis.
The assessee, Karuna Medical Society a charitable trust duly registered u/s.12A of the Income Tax Act and entitled to exemption u/s.11 of the Act. The main objective of the assessee trust was education and medical relief to the public at large.
The Tribunal viewed that the decision in the case of Baun Foundation Trust applies to the assessee wherein it was “held that the activity of Chemist / Pharmacy was held to be incidental or ancillary to the dominant object or purpose for running a hospital.”
Shri M Balaganesh, accountant member & Shri Rahul Chaudhary, the judicial member didn’t find any infirmity in the order of the CIT(A) granting relief to the assessee and the appeal by the Revenue was dismissed.
The assessee was represented by Ms Aarti Vissanji & Shri Kashyap Vapari and the revenue was represented by Shri Vivek Anand Ojha.
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