1/6 itxa-1305-12.doc IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION rt INCOME TAX APPEAL NO.1305 OF 2012 ou WITH INCOME TAX APPEAL NO.22 OF 2013 Commissioner of Income Tax-1 ...Appellant v/s. C Lilavati Kirtilal Mehta Medical Trust ...Respondent Mr.P.C.Chhotaray for Appellant. Mr.Percy Pardiwala, Sr.Advocate with Mr.Kunal Vajani and h Mr.H.Vaswani i/b M/s.Wadia Gandhy & Co. for Respondent. ... ig CORAM : S.C.DHARMADHIKARI & A.A. SAYED, JJ. DATED : 20 NOVEMBER 2014 H P.C. These two Appeals by Revenue raise identical y question. They challenge order of Tribunal for relevant ba Assessment Years. Assessee before us is Trust running super specialty hospital styled as Lilawati Hospital in Mumbai. om Surprisingly in statement of facts in these memo of Appeals, Revenue refers to object of Trust and which is to offer medical reliefs and spread medical science, to establish and B maintain and support hospital health centre, dispensaries with or without medical schools and nursing institutions or any of them for treatment of patients suffering from diseases or accident etc. Uday Kambli 1/6 ::: Uploaded on - 26/11/2014 ::: Downloaded on - 25/11/2015 11:46:36 ::: 2/6 itxa-1305-12.doc 2. return of income was filed and Assessee declared rt income as Nil. return was processed and scrutinized. ou There was exemption under section 11 of Income Tax Act, 1961 claimed by Assessee. However, Assessing Officer arrived at conclusion that application of Assessee seeking C approval for exemption under section 10(23)(c)(iv) of Act for Assessment Years 2005-06, 2006-07 and 2007-08 had been h rejected by Chief Commissioner of Income Tax by his order ig dated 29 August 2008. Accordingly Assessing Officer examined claim of exemption under section 11 of IT Act. He observed H that 85% of income from property derived from Trust should be applied for charitable purposes so as to claim this y exemption. Assessee's claim was that gross receipts of ba hospital from patients represent its income and all running expenses represented application of income. If these expenses om were more than 85% of income, entire income would be entitled to exemption. B 3. Calculations were provided, but Assessing Officer proceeded to reject this claim and observed that gross receipts from patients cannot constitute income and Assessee Uday Kambli 2/6 ::: Uploaded on - 26/11/2014 ::: Downloaded on - 25/11/2015 11:46:36 ::: 3/6 itxa-1305-12.doc was running business venture. Receipts were amounts collected rt from paitents for services rendered by hospital and ou expenses are incurred for earning their income. From same figures, which have been provided by Assessee, Assessing Officer concluded that net income of Rs.30,07,85,165/- should C have been base and 85% of same ought to be spent for charitable purposes and that has not been done. h 4. ig In regard to other question, as well, Assessing Officer denied reliefs. H 5. matter was carried before Commissioner of Income Tax and in order of Commissioner of Income Tax, he y referred to earlier proceedings between parties. However, and ba pertinently Commissioner referred to order of Income Tax Appellate Tribunal and delivered in case of very om Assessee, being ITA No.1843/Mum/2008 decided on 22 July 2009. Commissioner held that against this order and which was in B favour of Assessee, Revenue's Appeal was dismissed by this Court being Income Tax Appeal No.2990 of 2009 and decided by this Court on February 9, 2010. Uday Kambli 3/6 ::: Uploaded on - 26/11/2014 ::: Downloaded on - 25/11/2015 11:46:36 ::: 4/6 itxa-1305-12.doc 6. Commissioner found that receipts of Rs.162.53 rt crores and as against which expenditure amount spent is Rs.138.82 ou including capital expenditure on purchase of equipments of Rs.6,94,43,011/-, percentage of profit is 14.6%, which is lower than 15% permitted to be accumulated as per Act, whereas 85% of C Trust income had been applied and towards object of Trust. Therefore, Tribunal as also this Court's order cannot be brushed h aside and relief should be granted. ig 7. It is this conclusion of Commissioner which is H upheld by Tribunal in impugned order. In relation to that Tribunal's attention having been invited to its own order for y Assessment Year 2004-05, rejection of Appeal against ba same by this Court. It concluded that situation and position is in no way different as was noted in earlier order of Tribunal and om pertaining to same Assessee. details of income and expenditure for Assessment Year 2006-07 as given by B Assessee and reproduced in para 3 of Tribunal's order shows that 85% thereof is applied and for purposes of charitable activities. It is, in these circumstances, that Tribunal concluded that Revenue's Appeal will have to be dismissed. Uday Kambli 4/6 ::: Uploaded on - 26/11/2014 ::: Downloaded on - 25/11/2015 11:46:36 ::: 5/6 itxa-1305-12.doc 8. Commissioner's finding was, thus, upheld. In rt regard to other claim and which is for purpose of claiming ou depreciation, Tribunal has merely referred to facts and in para 5.1 invited attention of concerned officials to judgment of High Court of Gujarat in case of CIT v/s. Seth C Manilal Ranchhorddas Vishram Bhawan Trust reported in Volume 198 ITR 598. It is in such circumstances that issue was h remitted back to Assessing Officer for necessary verification. ig We do not find that such order of Tribunal can raise any substantial question of law. repeated exercise by Revenue H and attempt of Mr.Chotaray to get over these binding orders does not impress us at all. y 9. It has been consistently observed and equally in some ba other cases of charitable and philanthropic activities and institutions carrying on same that income which has been spent for om acquisition of assets would not mean that thereafter depreciation on these assets in subsequent years cannot be taken B into account. Our attention has rightly been invited to order passed by Division Bench, to which one of (S.C.Dharmadhikari, J.) was party in Income Tax Appeal No.797 of 2012 decided on 26 September 2014. Uday Kambli 5/6 ::: Uploaded on - 26/11/2014 ::: Downloaded on - 25/11/2015 11:46:36 ::: 6/6 itxa-1305-12.doc 10. We are, therefore, of view that even second rt question and which is projected as substantial question of law ou cannot be termed as such. It is not that Tribunal followed course and unknown to law. Tribunal was justified in allowing depreciation on capital assets as deduction in computing C income. That was in consonance with view taken and consistently by this Court. That apart, if this is understanding of h Revenue, we can say nothing more. If reasons in para 5.1 of ig impugned order are taken into consideration, what Tribunal has done is to merely sent issue back to Assessing Officer and H while doing so it has invited Assessing Officer's attention to position in law. However, if this is taken to be conclusive opinion y and binding, then that is in consonance with view taken by this ba Court. om 11. As result of above discussion, we do not find any merits in both these Appeals. They are dismissed. B (A.A. SAYED, J.) (S.C.DHARMADHIKARI,J.) Uday Kambli 6/6 ::: Uploaded on - 26/11/2014 ::: Downloaded on - 25/11/2015 11:46:36 ::: Commissioner of Income Tax-1 v. Lilavati Kirtilal Mehta Medical Trust