No exemption u/s 10(23C) if fees charged by hospital is at par with other hospitals running on commercial basis: SC

Case details: Ashwini Sahakari Rugnalaya v. CCIT - [2021] 130 taxmann.com 366 (SC)

Judiciary and Counsel Details

• • Sanjay Kishan Kaul and M. M. SUNDRESH, JJ.
  • S.K. Bagaria, Tarun Gulati, Sr. Advs. P.S. Sudheer, AOR Kumar Ajit Singh and Ms. Shruti Jose, Advs. for the Appellant. 
  • Arijit Prasad, Sr. Adv. Raj Bahadur Yadav, AOR Rupesh Kumar, Ms. Purnima Bhat, Sughosh Subramanyam and Ms. Alka Agarwal, Advs. for the Respondent.

Facts of the case

The question which arose for consideration before the Supreme Court was whether the claim of the assessee for benefit under section 10(23C)(via) of the Income-tax Act, 1961 is allowable. The benefits in terms of the section are available to any hospital existing solely for philanthropic purposes and not for purposes of profit.

The Chief Commissioner of Income Tax has denied the exemption under section 10(23C)(via) to assessee. The denial of the exemption had been upheld by the High Court as well.

There was dual reasoning permeating both the orders, which sought to deny the exemption. Firstly, that remuneration has been paid from the earnings of the IPD to the doctors who may not be working in that department and, secondly, that the rates being charged by the appellant are at par with other hospitals which run on a commercial basis.

Supreme Court Held

The Supreme Court upheld the order passed by High Court along with the reasoning given. The Court further held that a reading of the order passed by the High Court leaves no manner of doubt that while referring to the remuneration payable to member doctors with regard to IPD patients receipts, the same is not confined to the doctors performing the task.

The consultancy charges received in OPD, the member doctors, some of whom are also Directors, have received shares from the collection made from the IPD patients by the Hospital ranging from 20% to 30%.