Once remuneration paid to doctors are at par with commercial hospitals, no eligibility for exemption u/s 10(23C)(via)of I-T Act survives: Apex Court

Read Order: Ashwini Sahakari Rugnalaya & Res. Centre vs. Chief Commissioner of Income tax

Pankaj Bajpai

New Delhi, September 22, 2021: The Supreme Court has recently held the assessee organization not eligible for exemption u/s 10(23C)(via) of Income Tax Act, 1961 since it distributed the IPD earnings to doctors at the rates charged at par with other hospitals run on commercial basis.

The Division Bench of Justice Sanjay Kishan Kaul & Justice M.M. Sundresh took note of the assessee’s pleadings before the Bombay High Court and held 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.

Going by the background of the case, the assessee institute had preferred the present appeal claiming benefit of exemption u/s 10(23C)(via) of the Income Tax Act, which was denied by the CIT(A) as well as upheld by the High Court on the ground that remuneration had been paid by assessee 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 assessee were at par with other hospitals which run on commercial basis.

Although the counsel for the appellant had sought to canvas that only doctors performing the task in the IPD are paid. However, that would run contrary to the own pleading of the appellant which made it clear that the receipts from IPD are distributed across the board for doctors, noted the Division Bench.

The Top Court further observed that the benefits in terms of the Section 10(23C)(via) are available to any hospital existing solely for philanthropic purposes and not for purposes of profit which is same as the erstwhile provisions of Section 10(22A) and the only change is due to the words “may be approved by the prescribed authority” which appears to have been inserted to disallow the ineligible entities from availing the benefit.

Finally, the Apex Court concluded that simply because the assessee was granted benefit for earlier ten years, they would not be ipso facto entitled to the benefit in years under consideration.

Thus, the decision on facts made by the competent authority and as affirmed by the High Court cannot be said to be perverse or having complete absence of rationality to interfere in the same, said the Bench.