Income of Maternity Hospital Exemption under Section 1023C(iiiae) of Income Tax Act
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Chapter-III of Income Tax Act, 1961 deals with Income which do not form part of total income. The Section 10 to section 13B of Chapter-III contains different provisions which make income covered by these sections as exempt.
Section 1023C(iiiae) makes the income of a hospital etc exempt which fulfill the conditions prescribed in the section. The conditions prescribed are:
On the question whether a maternity hospital is qualified for exemption under section 1023C(iiiae), recently, in Nehru Prasutika Aspatal Samiti vs CIT, Hon'ble High Court of Allahabad has delivered a judgement on the question of law as under:
1. The entity can be a hospital or any other institution
2. The hospital or institution should be for the reception and treatment of persons persons suffering from illness or mental defectiveness or for the reception and treatment of persons during convalescence or of persons requiring medical attention or rehabilitation
3. The hospital or the institution should be existing solely for philanthropic purposes and not for purposes of profit, and
4. Aggregate annual receipts of such hospital or institution do not exceed the amount of annual receipts as may be prescribed (Presently Rs. 1 Crore, See Rule 2BC >>)
"Whether upon the facts and circumstances of the case, the Hon'ble Tribunal was justified in holding that the appellant's maternity hospital facilitating the deliveries is a natural process of God and cannot said to be any illness to be treated in appellant's hospital as envisaged under section 10(23C) (iiiae) of the Act."
The Hon'ble High Court did not accept the view of the tribunal that patients visit hospitals of this nature only with a view to relieve themselves of the discomfort of pain during labor. The Court acknowledged that there is a considerable reduction of maternal mortality due to availability of modern and expert medical care available in a Maternity Hospital.
The excerpts of the judgment are as under:
"The sub clause thereafter specifically refers to reception and treatment of persons during convalescence; or of persons requiring medical attention or rehabilitation. The expression 'medical attention' cannot be read to be confined to medical treatment of persons who are only suffering from an illness or a mental disability......The Tribunal regards child birth as an act of God and a natural process and has proceeded to refer to the fact that in the olden days, deliveries were performed by midwives at homes. According to the Tribunal it is only because of the anxiety of people in modern times to be relieved of discomfort or pain during labor, that patients choose hospitals. This, in our view, is not a correct assessment either of modern science or of statutory interpretation. It is a matter of common experience that a hospital providing for maternity care has to deal with emergencies and on occasion, such hospitals have to provide emergent care which is often necessary to save the lives of the mother and the child.....We, therefore, do not accept the view of the Tribunal that patients visit hospitals of this nature only with a view to relieve themselves of the discomfort of pain during labor. As modern science, technology and knowledge have advanced, there is a considerable reduction of maternal mortality due to availability of expert medical care."
Accordingly the Hon'ble Court held the substantial question of law in favour of the assessee
Download the copy of the judgement >>.
It is however notable that the Hon'ble Court concluded that the hospital or institution to fall within the sub clause must exist solely for philanthropic purposes and not for the purpose of profit and the aggregate annual receipts of the hospital or institution must not exceed the amount as may be prescribed.
