100 bed Requirement for Hospital’s Claim u/s 35AD(8): ITAT allows Deduction after Accepting Medical Director’s Certificate [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Chennai Bench, has upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] allowing a substantial deduction claimed by a hospital under Section 35AD of the Income Tax Act, 1961, after accepting credible documentary evidence establishing that the facility was a 100-bed hospital.

The Assessing Officer (AO) disallowed the assessee’s deduction of ₹13.02 crore under Section 35AD for Assessment Year 2014-15 on the ground that the hospital did not meet the statutory requirement of maintaining 100 beds as mandated under Section 35AD(8).

The AO relied upon a survey conducted under Section 133A, which suggested that Guru Hospital, owned by the assessee Kalpana, was operating only 60 beds, as also reflected in a Pollution Control Board certificate.

The assessee, a proprietor of Guru Hospital contested the disallowance, producing before the appellate authority a series of documents to show that Hospital was indeed a 100-bed facility from inception.

These included a corrected certificate issued by the Joint Director and Director of Medical and Rural Health Services, Madurai, rectifying the earlier erroneous certification of 57 beds to reflect 100 beds, inauguration invitations, contemporaneous newspaper advertisements, insurance certifications, and loan sanction documents dating back to 2011 that consistently described the hospital as a 100-bed establishment.

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Even government databases and later records under the Tamil Nadu Clinical Establishments Rules acknowledged the bed strength. Accepting this body of evidence, the CIT(A) concluded that the assessee had fulfilled the statutory condition and deleted the disallowance.

On appeal, the Revenue argued that reliance on later documents such as the COVID-19 portal and certificates under the 2018 Clinical Establishments Rules was misplaced, and stressed that the Pollution Control Board’s approval during the relevant year permitted only 18 beds. It was further contended that certain purchase bills of hospital beds appeared unverifiable.

However, the Tribunal, comprising Aby T. Varkey (Judicial Member) and Jagadish (Accountant Member), rejected the Revenue’s objections, holding that the evidence clearly established the hospital’s 100-bed status.

The Tribunal observed that the corrected certification by the Medical Director and other contemporaneous records outweighed the Revenue’s reliance on a single Pollution Control Board certificate.

Accordingly, the ITAT upheld the order of the CIT(A) and confirmed that the assessee was entitled to the deduction under Section 35AD. The appeal filed by the Revenue was dismissed.

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