Hospital charging commercial rates “Not entitled” for registration as “Charitable Organisation” : ITAT

The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) while adjudicating on an appeal filed by Fernandez hospital stated that the Fernandez hospital was not qualified for registration as a charitable organization under Section 12AA of the Income Tax Act as it was charging its patients commercial rates rather than subsidized rates for treatment.  The two-member bench of Lalit Kumar (Judicial Member) and R.K. Panda (Accountant Member) stated that the Fernandez hospital was imposing commercial rates to patients either outdoor or indoor and the Fernandez hospital was unable to show that the fees levied by them were reasonable or subsidized rates.  The ITAT bench added that Supreme court had stated that if the of the institution seems to be profiting from its activities than that institution was not qualified for approval under section 10(23C) of the Income Tax Act. Earlier , Fernandez hospital Pvt Ltd  had transformed the private limited company into a non-profit company and altered the name to “Fernandez Hospital”. Later, Fernandez Hospital has applied for registration under Section 12AA of the Income Tax Act. But the Commissioner of Income Tax(Exemption) has rejected the application stating that Fernandez hospital was engaged in the activities that have the type of trade and furnishes the services within the market rates. Commissioner of Income Tax(Exemption) had recorded that the amount Fernandez hospital has charged as fees from patient was exceeding the fees charged by other diagnostic centres or hospitals for identical tests, diagnoses, or treatments. The Commissioner of Income Tax(Exemption) rejected the registration of Fernandez Hospital on the ground that the hospital was not performing charity and hence could not be registered under Section 12AA. To substantiate the Commissioner of Income Tax(Exemption) stated that the Fernandez hospital has made a gain of Rs 23.54 cr on the total revenue from the functioning of Rs 141.90 cr.