Private hospital turned into foundation not exempt from tax if it continues to function same way

Case Details: Fernandez Foundation v. CIT - [2022] 145 taxmann.com 442 (Hyderabad-Trib.)

Judiciary and Counsel Details

• • Laliet Kumar, Judicial Member & R.K. Panda, Accountant Member
  • S. Ravi, Adv. for the Appellant.
  • Rajendra Kumar CIT-DR, for the Respondent.

Facts of the Case

Assessee was a private limited company and converted into a section 8 company during the relevant year. The assessee filed return of income and claimed exemption under section 10.

The CIT(E) denied the exemption to the assessee on the ground that it was involved in activities that are in the nature of trade and provides services at market rates. Aggreived-assessee filed the instant appeal before the Tribunal.

ITAT Held

The Tribunal held that earlier the assessee was known as “Fernandez Hospital Private Limited” and after conversion, it is known as “Fernandez Foundation”. There was no change in the activities of the assessee, its management, place of services, or the charges for the treatment of patients.

A mere change of the name of the assessee will not make it eligible for claiming an exemption if the assessee continued to charge the patients at market rates even after such conversion.

The assessee could have indulged in any kind of charitable activity like reducing the profit element while rendering services or by utilizing the profit incurred for helping the needy persons free of cost. No such activity was conducted by the assessee during the period.

Moreover, the assessee had provided free treatment or concessional treatment to the patients which were less than 1% of the revenue. Thus, the CIT(E) was justified in denying registration/approval under sections 12AA, 10(23C)(vi) & 80G(5)(vi) to the section 8 company.