This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals), Hubli in appeal No. 98/CIT(A)/HBL/2012-13, dated 28/03/2016 for the Assessment Year 2010-11.

2. Shri Shrikrishna Kelkar, CA represented on behalf of the assessee and Shri Manjit Singh, Departmental Representative represented on behalf of the Revenue.

3. It was submitted by the Authorized Representative of the assessee that the assessee is a trust, which has registration under section 12A and is running hospital at Sirsi. It was the submission that the assessee had received substantial donations from M/s. Totagars Cooperative Sale Society Ltd. during the relevant assessment year. It was the submission that the assessee-hospital had provided concessional treatment to some of the members of M/s. Totagars ITA Nos. 158/PAN/2016 Cooperative Sale Society Ltd. to the extent of a discount of 25% on their bills. The quantum of discount was 11,38,279/-. It was the submission that the Assessing Officer had brought to tax the said amount of 11,38,279/- by invoking the provisions of section 12(2) read with sec. 13(1)(c)(ii) & 13(3)(b) of the Act.

4. It was the submission that the society and its Members, were separate and the contributions were from the society and was not from the individual members. For this proposition, he placed reliance on the decision of the Honble Kerala High Court in the case of Kunnathunad C.C. Coop. Society Vs. Regional Director, ESIC reported in (1989) IILLJ 27 Ker. It was further submission that none of the members of M/s.Totagars Cooperative Sale Society Ltd. had given any donations to the assessee trust, which exceeded more than 50,000/-. It was also the submission that during the relevant assessment year, the assessee has disclosed expenditure over income and consequently filed a NIL return. Without prejudice even assuming i.e. the said amount of 11,38,279/- was to be added to the assessees income only the excess of expenditure over income would get reduce and there could be no taxable income that would generate in the hands of the assessee. It was the submission that the additions as made by the Assessing Officer and as confirmed by the Commissioner of Income Tax (Appeals) may be deleted.

5. In reply, Departmental Representative submitted that the M/s.Totagars Cooperative Sale Society Ltd. had substantially contributed to the assessee trust. It was the submission that out of the total donations of 7,68,43,283/- received by the assessee trust, nearly 90%, amounting to 6,90,93,428/- was the contribution/ donation by M/s. Totagars Cooperative Sale Society Ltd. It was the submission that as it is a member of M/s. Totagars Cooperative Sale Society Ltd., which has received the benefit in the form of a discount of ITA Nos. 158/PAN/2016 25% of the bills, the provisions of section 13(1)(c)(ii) read with sec. 13(3)(b) applied. It was the submission that the order of the Commissioner of Income Tax (Appeals) was liable to be upheld.

6. I have considered the rival submissions. When interpreting the provisions of the Act relating to the exemptions, strict interpretation is called for. A perusal of the provisions of section 13(1)(c) provides that the benefit under section 11 or 12 is not to operate so as to exclude from the total income receipts, if any part of such income or any property of the trust or the institution is during the previous year used or applied directly or indirectly for the benefit of any person referred to in sub-section(3). Section 13(3)(c) as referred to by the Revenue talks of the persons being the author, founder or person is a HUF, a member of the family. Admittedly, M/s. Totagars Cooperative Sale Society Ltd. is not a HUF, therefore, it does apply to exclude the benefit. The benefit has not been given nor is it the case of the Revenue that the discount has been given to the author of the assessee trust or the founder. In fact, a perusal of the record to show that M/s. Totagars Cooperative Sale Society Ltd. has nearly 23299 Members. It is also not disputed by the Revenue that none of the members have in their individual capacity given any donation exceeding 50,000/- to the assessee trust. Neither it is the case of the Revenue that any of the members of the M/s. Totagars Cooperative Sale Society Ltd. were the persons, who had contributed 50,000/- or more to the trust received the benefit. It is also not the case of the Revenue that when applying for membership in M/s. Totagars Cooperative Sale Society Ltd., the members are given any entitlement of any discount, if they seek treatment from the assessee trust. Thus, it becomes clear that there is no violation of provisions of section 13(1)(c)(ii) nor the provisions of section 13(3)(c) would apply in assessees case. In these circumstances, the addition as made by the Assessing Officer and as ITA Nos. 158/PAN/2016 confirmed by the Commissioner of Income Tax (Appeals) stands deleted.

7. In the result, appeal of the assessee stands allowed. Order Pronounced in the Court at the close of the hearing on Wednesday, the 05 th day of October, 2016 at Goa. (GEORGE MATHAN) Judicial Member Dated : 05 th October, 2016. vr/- Copy to:

1. The Assessee. The Totgar Seva Samiti, Sripad Hegde Kadave Institute of Medical Sciences, Sirsi.

2. The Revenue. DCIT, Circle-1(1), Hubli.

3. The CIT (Exemptions), Bangalore.

4. The CIT(A), Hubli.

5. The D.R.

6. Guard file. By order Assistant Registrar I.T.A.T., Panaji.