Case Note & Summary
The petitioner, Central India Institute of Medical Sciences, a society registered under the Societies Registration Act and a public charitable trust under the Maharashtra Public Charitable Trust Act, 1950, filed a writ petition challenging the order dated 23.12.2013 passed by respondent no.1 (Union of India through Ministry of Finance) rejecting its application for approval under Section 35(1)(ii) of the Income Tax Act, 1961. The petitioner was established in 1984 and carries on research activities along with hospital activities funded by donations. It is recognized under Section 80G of the Income Tax Act, and donors can claim deductions. The rejection was based on the ground that the petitioner is mainly involved in running a hospital and does not impart education or award Ph.D. degrees, thus not qualifying as an 'other institution' under the section. This was the second round of litigation; earlier, an order dated 22.10.2010 passed by the Director (ITAII) was quashed by this Court in Writ Petition No. 5956/2010 on 17.11.2011 on the ground that the Director lacked power to consider the application. The court heard arguments from both sides. The petitioner argued that it provides research facilities to postgraduate students and is engaged in scientific research, which falls within the scope of Section 35(1)(ii). The respondents contended that the institute's primary activity is running a hospital, not research or education. The court analyzed the provision and held that the rejection was based on an erroneous interpretation; the section does not require the institution to impart education or award degrees. The court allowed the petition, set aside the impugned order, and directed the respondents to reconsider the application afresh in light of the observations.
Headnote
A) Income Tax - Approval under Section 35(1)(ii) - 'Other Institution' - The petitioner, a society and public charitable trust running a hospital and research activities, challenged the rejection of its application for approval under Section 35(1)(ii) of the Income Tax Act, 1961. The court considered whether the institute qualifies as an 'other institution' engaged in scientific research. Held that the rejection was based on a narrow view that the institute does not impart education or award degrees, but the section does not require such activities; research activities alone may suffice. (Paras 1-5)
Issue of Consideration
Whether the petitioner, a medical research institute running a hospital, qualifies as an 'other institution' under Section 35(1)(ii) of the Income Tax Act, 1961, for approval to claim deductions on donations.
Final Decision
The court allowed the writ petition, set aside the impugned order dated 23.12.2013, and directed the respondents to reconsider the application afresh in light of the observations made in the judgment.
Law Points
- Section 35(1)(ii) of Income Tax Act
- 1961
- approval for scientific research institution
- meaning of 'other institution'
- educational activities
- research activities
- hospital activities
- Central Government's power
- Director (ITAII) lack of power
Case Details
2015 LawText (BOM) (11) 36
Writ Petition No. 1307 of 2014
B.P. Dharmadhikari, P.N. Deshmukh
A.M. Gordey (Senior Advocate) with N.S. Bhattad for Petitioner, Rohit Deo (A.S.G.I.) for Respondent No.1, Anand Parchure for Respondent No.2
Central India Institute of Medical Sciences
Union of India, Ministry of Finance, Department of Revenue (CBDT) & The Chief Commissioner of Income Tax, Vidarbha Region
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Nature of Litigation
Writ petition challenging rejection of application for approval under Section 35(1)(ii) of Income Tax Act, 1961.
Remedy Sought
Petitioner sought quashing of order dated 23.12.2013 rejecting its application for approval under Section 35(1)(ii) and direction to grant approval.
Filing Reason
Rejection of application for approval under Section 35(1)(ii) on the ground that petitioner is mainly involved in running hospital and not imparting education or awarding degrees.
Previous Decisions
Earlier order dated 22.10.2010 passed by Director (ITAII) was quashed by this Court in Writ Petition No. 5956/2010 on 17.11.2011 on the ground that Director lacked power.
Issues
Whether the petitioner qualifies as an 'other institution' under Section 35(1)(ii) of the Income Tax Act, 1961, for approval to claim deductions on donations.
Whether the rejection of the application was valid in law.
Submissions/Arguments
Petitioner argued that it is engaged in research activities and provides research facilities to postgraduate students, thus qualifies under Section 35(1)(ii).
Respondents contended that the petitioner's primary activity is running a hospital, not research or education, and it does not award degrees.
Ratio Decidendi
The rejection of approval under Section 35(1)(ii) was based on an erroneous interpretation that the institution must impart education or award degrees; the section only requires the institution to be engaged in scientific research, and the petitioner's research activities may suffice.
Judgment Excerpts
Petitioner, a Society registered under the provisions of Societies Registration Act, and a Public Charitable Trust, registered under the provisions of Maharashtra Public Charitable Trust Act, 1950, has questioned the rejection by respondents of its prayer to grant it approval under Section 35[1][ii] of the Income Tax Act, 1961.
Rejection in impugned order is after holding that the petitioner – organization is mainly involved in running hospital and no education is imparted by it.
Procedural History
The petitioner initially applied for approval under Section 35(1)(ii). The Director (ITAII) rejected the application by order dated 22.10.2010. The petitioner challenged that order in Writ Petition No. 5956/2010, which was allowed on 17.11.2011, quashing the order on the ground that the Director lacked power. Thereafter, the application was considered by the Central Government, which rejected it by order dated 23.12.2013, leading to the present writ petition.
Acts & Sections
- Income Tax Act, 1961: 35(1)(ii), 80G
- Societies Registration Act:
- Maharashtra Public Charitable Trust Act, 1950:
