INCOME TAX ACT, 1961

Section 11

Charitable trust - Exemption under section 11 - Assessee a hospital also running a medical store -

Assessee-society running a hospial, medical shop and diagnostic centre, claimed exedmption under section 11. AO disallowed assessee's claim on the ground that assessee was running a pharmacy in the hospital and running a pharmacy in the hospital was an independent business activity and therefore, the profit earned in such running of a pharmacy ought to be separately assessed. Held: AO ought to have appreciated concept of a running of hospital as well. He should not consider running of medical stores in isolation, but the should have appreciated that medical shop was an essential part for running of a hospital. Assessee had been maintaining separate books of account as per section 11(4A) and profit from medical store was incidental to the main object and not as separate business activity at the end of assessee. AO had compared rate of hospitals who were provided subsidies from Government SGL Hospital, however, rates of such hospital could not be compared with rates of assessee, who had to take care of day-to-day operational expenses, and future expansion in the area of investigative tools, viz., X-ray machines, CT-scan, etc. These equipments require higher lay out of the capital, and therefore, in order to remain in competition with the hospitals, and to provide best facility to the patients, and to provide medical help, the assessee has to upgrade its investigative tools. Therefore, AO was not justified in denying claim of assessee.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

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