Denial of Exemption to unregistered Charitable Institutions: Supreme Court upholds Kerala HC judgment against Academy of Medical Sciences [Read Order]
In instances where no tax has been paid on the declared income, the assessee cannot claim exemption from the consequences outlined in Sections 201(1) and 40(a)(ia)
Denial of Exemption – unregistered Charitable Institutions-Supreme Court – Kerala HC judgment – Academy of Medical Sciences-TAXSCAN
Denial of Exemption – unregistered Charitable Institutions-Supreme Court – Kerala HC judgment – Academy of Medical Sciences-TAXSCAN
A two judge bench of the Supreme Court dismissed a Special Leave Petitions claiming exemption from taxes to unregistered charitable institutions. The court condoned the delay in implementation of the order.
The assessee, Academy of Medical Sciences had recorded lease rent in favor of Kerala State Co-operative Hospital Complex and Centre for Advanced Medical Services Ltd. No actual payment was executed. The liability in the relevant years, as well as the credit posted would not appear in the name of ‘special purpose vehicle’ but would appear in the name of the appellant themselves. This clearly does not conform to the concept of service which must, necessarily, be rendered to another person.
The assessee had argued before the Kerala High Court that the introduction of the proviso under Section 40(a)(ia) and Section 201(1) was with the intention of alleviating the hardship. The assessee argued that it had declared itself to be a charitable educational institution entitled to exemption under Section 12AA from the year 2011-2012.
Revenue contended before the Kerala High Court that the two pronged consequence, statutorily visits an assessee in default. Revenue argued that neither can the additions be deleted, nor the assessee absolved from the consequence of payment of TDS along with interest. Revenue further contended that the question of whether the provision is curative does not at all arise since the resident in the present case has not paid tax on the income and has filed a loss return, without any liability to pay tax.
The Kerala High Court had held that that the resident receiver, to whom the assessee paid or credited the lease rent, filed a return belatedly and did not pay any tax on the declared income. In such a scenario, where no tax has been paid on the declared income, the assessee cannot claim exemption from the consequences outlined in Sections 201(1) and 40(a)(ia), even if due to a loss return.
The bench comprising Justice B.V. Nagarthna and Augustine George Masih dismissed the Special Leave Petition and condoned the delay in submission.
Appellant was represented by T.M. Sreedharan. Revenue was represented by Ravindranatha Menon and Christopher Abraham.
To Read the full text of the Order CLICK HERE
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