DENIAL OF EXEMPTION U/S 10(23C)
[2021] 130 TAXMANN.COM 366 (SC)
SUPREME COURT OF INDIA
ASHWINI SAHAKARI RUGNALAYA
V.
CHIEF COMMISSIONER OF INCOME-TAX

LEGENDS USED
AY Assessment Year
CIT Commissioner of Income Tax
HC High Court
IPD In-Patient Department
IT Income Tax
OPD Out-Patient Department
SC Supreme Court

PRESENTATION SCHEMA
Facts & Issues of the Case Observations of Honourable SC
Conclusion

FACTS OF THE CASE

GENERAL FACTS
• The Appellant Ashwini Sahakari Rugnalaya - hospital located at Maharashtra, was denied benefits u/s
10(23C)(via) of IT Act for the AY 1999-2000 to 2002-2003.
• The benefits under Sec 10(23C)(via) of the IT Act are granted to any hospital existing solely for
philanthropic purposes and not for profit purposes.
• However, the benefits were denied on the grounds that remuneration were paid to member doctors
for tasks not performed by them and the rates charged by the hospital were similar to those hospitals
operating for commercial purposes.

ISSUE
Whether denial of exemption u/s 10(23C)(via) to the appellant through an order passed by the chief CIT
and affirmation of the same by the HC is justifiable.

OBSERVATIONS OF
HONOURABLE SC

DUAL REASONS
The CIT denied
exemption based on
dual reasons
Earnings of IPD are paid as
remuneration to OPD
doctors.
Rates charged by the
hospital is at par with
hospitals running for
commercial purpose.

RATES CHARGED
• The appellant had stated that there were no basis for the claims that
rates charged by the hospital were similar to rates charged by commercial
hospitals.
• Further, Appellant did not respond when information was sought in this
regards.
• Had this reason been the only reason for denial of exemption i.e that
rates charged by the hospital were similar to rates charged by commercial
hospitals, then the case could have been settled on account of non-
disclosure of relevant information which form the basis of conclusion.
Observations of the
Honorable SC

REMUNERATION TO OPD DOCTORS
Receipts of IPD
20% – 30% of net collection of IPD, are paid as
remuneration to member doctors depending on their
qualification.
This Net collection include receipts on account of
Bed/Room charges, Injection charges, Oxygen charges,
ECG charges, Attendant charges, Set charges.
Receipts of OPD
50% of receipts of OPD are paid to OPD and IPD doctors
Except where consultants of minor branches were paid
70% of receipts
Honourable SC observed that the material aspect in denying exemption is based on the scheme devised in paying
remunerations to Doctors from OPD and IPD.
Thus, apart from the consultancy charges/remuneration received in OPD, the member doctors, have
received shares from the gross collection made from the IPD patients by the Hospital ranging from 20%
to 30%.

DECISION OF THE SC

CONCLUSION
Honourable SC concluded that it leaves no doubt that the remuneration payable to member doctors w.r.t
IPD patient receipts, are not confined to the doctors performing the task.
Therefore, decision on facts made by the competent authority and as affirmed by the HC cannot be said to be
perverse or irrational. Hence, denial of exemption under section 10(23C)(via) is justified.

WAY FORWARD
The exemption under section 10(23C) has been provided with a specific intent to promote charitable and
other noble activities. If such an exemption is used for the benefit of members of the entity, it is likely that
such exemption would be denied.

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