Failure to Comply with Direction of HC in Rejecting Application for Registration u/s 10(23C) of Income Tax Act by CIT(E): ITAT Directs De-novo Adjudication [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that Commissioner of Income Tax (Exemption) [CIT (E)] failed to comply with the direction of High Court (HC) in rejecting application for registration under Section 10(23C) of Income Tax Act,1961 and thus restored the mater to CIT(E) and directed for fresh adjudication.

The assessee Shushrusha Citizens’ Co–operative Hospital Ltd. is a co-operative society formed under the Maharashtra Co-operative Societies Act, 1960. The assessee was formed to give members of the society and citizens better medical facilities at reasonable charges and provide decent hospital facilities, dispensaries, and other up-to date scientific medical and surgical amenities.

The application for registration under Section 10(23C)(via) of Income Tax Act filed by the assessee, was rejected holding that the assessee does not satisfy the conditions laid down under Section 10(23C)(via) of Income Tax Act of existing solely for philanthropic purposes and not for the purposes of profit.

Aggrieved by the order the assessee filed a writ petition before the High court. The HC directed the Revenue to consider the following aspects;

• Whether the assessee is providing medical treatment or facilities at a nominal charge or free of any charge to a patient belonging to an economically weaker section visiting the hospital
• To look into the entire record for ascertaining the income received by the assessee from beds/rooms provided in the hospitals and how many non-members were given treatment at a concessional rate.
• As regards the 10% of the negotiated charges retained by the assessee from the payment made by the non-member patients admitted to the rooms, wherein the consultants or doctors are permitted to negotiate the procedure/surgery charges, the High Court held that if in a given year only a few such cases are entertained by the assessee, it will not militate against the character of the activities of the assessee.

Neither the assessee has filed details on record nor the Revenue had called upon the assessee to produce the details, thus the High Court restored the matter for fresh consideration of assessee’s application for registration under Section 10(23C)(via) of Income Tax Act.

The CIT (E) referred to the guidelines issued by the Charity Commissioner for charitable hospitals and rejected the assessee’s application under section 10(23C)(via) of Income Tax Act. Further aggrieved the assessee filed an appeal before the Tribunal.

The tribunal Bench comprising of Amarjit Singh, Accountant Member and Sandeep Singh Karhail, Judicial Member observed that the CIT (E) without examining all the aspects, as directed by the High Court, has reiterated its findings and rejected the application.

Since the directions of the High Court had not been complied with by the CIT(E),  the appellate tribunal bench deemed it appropriate to restore this issue to the file of the  CIT(E) for de novo adjudication as per the directions of the High Court, thus allowing the appeal of the assessee.

To Read the full text of the Order CLICK HERE

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