Tuesday, November 19, 2013

A blood bank isn’t analogous to a hospital or medical institution; not entitled to section 11 exemption

Assessee engaged in running a blood bank cannot be said to be engaged in providing medical facilities so as to be entitled to exemption under section 11


1) The assessee, a company registered under section 12AA, had entered into transaction of sale of blood components (FFP) with its associated concern and during the year it had supplied FFP to said concern;

2) The Assessing Officer found that the assessee had supplied FFP to patients at higher price and had also charged service charges from patients which were not charged to the said concern;

3) The Assessing Officer was, thus, held that since the assessee had provided concessional benefit to its associated concern it was not eligible for deduction under section 11;

4) The CIT (A) upheld the order of Assessing Officer. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) As per section 13(6) a trust running an educational institution or a medical institution or a hospital shall not lose the benefit of exemption of any income other than the value of benefits of educational or medical facilities provided to the specified persons, solely on the ground that such benefits have been provided to specified persons;

2) This section covers, (i) only those trusts running an educational institution or a medical institution or a hospital, (ii) the benefit extends only in respect of educational or medical facilities and not any other facility;

3) In the instant case, it was an undisputed fact that assessee has entered into transactions with the related concerns;

4) Yet assessee couldn’t be said to be a hospital or medical institution as it was not engaged in dispensing medical facility though it was engaged in running a blood bank. Thus, assessee wasn’t entitled to relief under section 11 - Advance Transfusion Medicine Research Foundation v. ADIT (Exemption) [2013] 38 taxmann.com 360 (Ahmedabad - Trib.)