Registration under section 12AA if Separate books of account not maintained for medical shop by assessee run by hospital

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Registration under section 12AA if Separate books of account not maintained for medical shop by assessee run by hospital

Short Overview : Merely because assessee-hospital was not maintaining separate books of account for the medical shop, it did not mean that the assessee was not entitled for obtaining registration under section 12AA, moresoever when the objects of the Society were not doubted, rather accepted.

Assessee contended that CIT(E) was unjustified in rejecting the registration application under section 12AA of the Society on the ground that he was not satisfied about genuineness of the charitable activities, only on one ground that separate books of account were not maintained for Pharmacy inside the hospital. Case of assessee was that it was conducting in-house consumption of medicines and treatment packages and for the urgent need of medicines to in-house patients. The objects of the Society were not doubted, rather accepted.

 it is held that  : Assessee society was also providing medical relief and facilities to every person, conducting blood donation, eye operation, tikakaran, family planning, mother child safety, and awareness to general public by way of awareness of medical camps. Therefore, to run the medical shop inside the hospital is fully charitable purpose and not for commercial purpose. The assessee was not maintaining separate books of account for the said medical shop did not mean that the assessee is not entitled for obtaining registration under section 12AA.

Decision: In assessee’s favour.

IN THE ITAT, RANCHI BENCH

S. S. GODARA, J.M. & A.L. SAINI, A.M

St. Barnabas Hospital v. CIT

ITA No. 269/Ran/18

5 April, 2019

Assessee by: M.K. Choudhury and Manav Poddar, Advocates, learned ARs

Respondent by: Chandan Mondal, JCIT, learned DR

ORDER

The captioned appeal filed by the assessee, pertaining to assessment year 2018-19, is directed against the order passed by the Commissioner (Exemption), Patna, in IT /Appeal/Memo No. CIT E/Pat/12AA/04(167)/2018- 19/358-62, dated 14-5-2018.

2. The grounds of appeal raised by the assssee are as follows :–

1. For that learned Commissioner (Exemptions), Patna was unjustified in rejecting the registration application under section 12AA of the Society on the ground that he was not satisfied about genuineness of the charitable activities, only on one ground that separate books of accounts were not maintained for Pharmacy inside the hospital, which was for in-house consumption of medicines and treatment packages and for the urgent need of medicines to in-house patients. The objects of the Society were not doubted, rather accepted.

1.1 For that learned Commissioner (Exemption) erred in not appreciating that at the time of granting of registration under section 12AA only its objects has to be seen and if found charitable, the registration has to be allowed. Assessee’s main objects of running a hospital was covered under section 2(15) of the Act as charitable purposes, being “medical relief”. Simply non-maintenance of separate books-of Pharmacy cannot be a ground for rejection of registration under section 12AA.

1.2 For that whatsoever, having come to know about separate maintenance of books of accounts, the appellant has already started maintaining separate books for the Pharmacy.

1.3 For that the rejection of registration under section 12AA without doubting the objects of the Society, is unjustified, arbitrary and without any valid reason.

2. For that other grounds, if any, will be argued/taken up at the time of hearing.

3. The brief facts qua the issue are that the applicant society filed application in form No. 10A of the Income Tax Rules, 1962 for grant of registration under section 12AA of the Income Tax Act, 1961 before the Commissioner (Exemption). The applicant was requested to attend the hearing on 17-1-2018 either in person or through an authorized representative with relevant documents for verification of the genuineness of the activities of the society. The DCIT(E) Circle-Ranchi, was asked to send inquiry report. In the report, the assessing officer has reported that the society is running a medical shop namely ‘Pharmacy’ inside the hospital premise for which no separate books are mentioned.

In view of such, the Commissioner (Exemption) has not satisfied about the genuineness of the charitable activities of the society and hence the application filed in form 10G for grant of Registration under section 12A of the Income Tax Act, 1961 was rejected by Commissioner (Exemption).

4. Aggrieved by such stand, as taken by the learned Commissioner (Exemption), Patna the assessee carried the matter in appeal before this Tribunal.

5. Learned Counsel for the assessee submitted before us that the said medical shop namely ‘Pharmacy’ is run by the assessee society inside the hospital premises for which no separate books are maintained. The medical shop is part & parcel of the trust and it is for the charitable purpose. Therefore, the assessee is entitled for obtaining registration under section 12AA of the Act.

6. On the other hand, the learned DR for the Revenue has reiterated the stand as taken by the learned Commissioner (Exemption), which we have already noted in earlier para of our order and the same is not being repeated for the sake of brevity.

7. We have heard both the parties and perused the material on record. We note that the society trust was maintaining Pharmacy medical shop inside the hospital, which was for in-house consumption of medicines and treatment packages and for the urgent need of medicines to in-house patients. We note that the objects of the society were not doubted by the learned Commissioner (Exemption). Therefore, we note that in order to obtain registration under section 12AA only objects of the assessee trust is to be examined. We further note that the assessee society’s main object of running a hospital, which is covered under section 2(15) of the Act as charitable purposes being ‘medical relief’. Therefore, simply non-maintenance of separate books cannot be a ground for rejection of registration under section 12AA of the Act. We note that the assessee society is also providing medical relief and facilities to every person, conducting blood donation, eye operation, tikakaran, family planning, mother child safety, AIDS, malaria, T.B, Kustorog and awareness to general public by way of awareness of medical camps. Therefore, to run the medical shop inside the hospital is fully charitable purpose and not for commercial purpose. We note that if the assessee is not maintaining separate books of account for the said medical shop does not mean that the assessee is not entitled for obtaining registration under section 12AA of the Act. We note that in order to grant registration the objects of the assessee society is to be examined. Therefore, the learned Commissioner (Exemption) should not deny the grant of registration under section 12AA merely because assessee is running medical shop inside the hospital. Therefore, we direct the learned Commissioner (Exemption) to grant the registration under section 12AA of the Act, in accordance with law.

8. In the result, the appeal filed by the assessee is allowed for statistical purpose.

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