‘Charitable institutions will be in need of charity without revenue’

HC recommends tax exemption for non-profit educational institutions too

Civic bodies cannot expect charitable institutions to not collect money even from the affluent to be eligible for property tax exemption. An institution bereft of revenue sources will itself be in need of charity and cannot be expected to do charity, the Madras High Court has said.

Justice Anita Sumanth made the observations while partly allowing a writ petition filed by Christian Medical College Vellore Association, a registered society that runs the Christian Medical College and Hospital in Vellore. It had challenged a property tax demand for its buildings.

The judge held, the petitioner society would be eligible for property tax exemption for its Community Health and Development Department (CHAD) building, which provides health care facilities to far-flung areas and that the Vellore Municipal Corporation was wrong in demanding tax for it.

However, she held that the society would not be eligible for tax exemption for its college building since a 1994 amendment to the municipal law had deleted the legal provision under which buildings used for educational purposes could also seek exemption. However, after recording the submission of the society that it charges an annual tuition fee only ₹3,000 per student for under graduation and ₹450 for post graduation , the judge recommended grant of tax exemption to service-oriented and non-profit educational institutions too.

“I would urge the powers that could address this issue appropriately to ensure that genuine and bona fide teaching institutions are provided with relief in this regard to enable them to deploy available funds for their core activities,” the judge wrote while disposing of the case.

The society moved the court against a demand raised by Vellore Corporation officials on November 9, 2020. It was asked to pay a huge amount of money towards property tax for the CHAD building as well as the college building for the assessment years, beginning from 2011-12 to 2020-2021.

Though the Corporation had claimed that the society collects exorbitant charges from the patients, and could not be categorised as a charitable institution, the judge said the civic body had not disputed the society’s claim that the poor were being offered medical services free of cost.

“It would be impossible to sustain charity by way of free medical services if there were no revenue streams which, in this case, are provided by those who can pay. Thus, the mere fact that some patients are being charged a fee must not, in my view, stand in the way of the petitioner’s status as a charitable institution,” the judge observed.

Economic status

The judge also took note of the society’s submission that 40% of the out-patients and 10% of the in-patients from the weaker sections of society were treated free of cost in the hospital.

The judge was also told that the hospital charges its patients depending upon their economic status.

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