LALIET KUMAR, JUDICIAL MEMBER
AND R.K. PANDA, ACCOUNTANT MEMBER

• Where the company owning the hospital was converted from private limited company to section 8 company and the hospital continued to charge the patients at market rates even after such conversion and treatment at concessional rate provided by the hospital to patients accounted for less than 1% of revenue, the CIT(E) was justified in denying registration/approval u/ss 12AA, 10(23C)(vi) & 80G(5)(vi) to the section 8 company.

• In the present case, neither the activities nor the management nor the place of services nor the charges for treatment had changed in any manner by conversion and only the name of the assessee had changed albeit the assessee is claiming registration / approval under the Act. Earlier the assessee was known as “Fernandez Hospital Private Limited” and presently, it is known as “Fernandez Foundation”. The assessee can do charity by either bringing down its profit by providing services at reasonable rate or by utilizing the surplus for helping medical aid / facilities to the poor / needy persons at free of cost. Nothing of this nature, if at all done by the assessee, has been brought on record by the assessee.

The assessee had only provided the treatment to 65 indoor patients for an amount of Rs.84,48,709/- and 5,569 outdoor patients for Rs.39,65,102/- on concessional rates and the said amount is a meagre amount when compared to its total revenue collection of the assessee i.e., Rs.141.90 crore for the period under consideration. By that standard alone the activities of the assessee cannot be said to be charitable activities.

In a recent decision, the Hon’ble Supreme Court mandates that all private hospitals that had acquired land at cheaper rates must reserve 10% of their in-patient department capacity and 25% OPD for free treatment of poor patients. Though the said decision was rendered in the context of cheap allotment of land but nonetheless, some percentage of free treatment or treatment at concessional rate should be provided by the assessee so as to be considered charitable activity. However, in the instant case, the free treatment / concessional rate was less than 1% of the revenue of the assessee.

• Ld.CIT(E) was correct in holding that the assessee is charging on the basis of commercial rates from the patients, either outdoor/indoor and the assessee has failed to demonstrate that the charges / fee charged by it were on a reasonable markup on the cost. Considering the totality of the facts and circumstances of the case, there is no error in the decision of ld.CIT(E). Accordingly, the orders of ld.CIT(E) is upheld and the appeals of the assessee are dismissed.

All rights reserved.