The High Court of Madras held that tax holiday can be granted to a person who declares a truthful return. It cannot and should not be granted to the person who claims that he purchased medical equipment in the guise of treating poor persons and it is subsequently found that the entire transaction is bogus.
The petitioner, S. Gurushankar is the Chairman of the Meenakshi Mission Hospital and Research Centre, Madurai. He had stated in the affidavit that the then Finance Minister, Government of India, in the budget speech announced that a new sub Section (11C) is proposed to be inserted under Section 80-1B to grant five years’ tax holiday to encourage hospitals to be set up anywhere in India, except certain specified urban areas and to be particularly set up in Tier-2 and Tier-3 towns to serve the rural people. It was stated that the window will be open from April 1, 2008, to March 31, 2013, and during that period, the hospital must commence operation. The petitioner claims that he had set up a hospital in Nilgiri Therku Thottam Village, Thanjavur Taluk, and District, to help the rural people.
The Assessing Officer had examined the returns of the petitioner wherein it was found that the tax holiday was claimed by the petitioner on the grounds that he purchased medical equipment in the guise of treating poor persons for a sum of Rs.2,32,79,760/- and it is subsequently found that the entire transaction is bogus. Consequently, the AO disallowed the tax holiday and invoked Section 115JC of the Income Tax Act.
The single-judge bench of Justice C. V. Karthikeyan held that tax holiday can be granted to a person who declares a truthful return. It cannot and should not be granted to the person who claims that he purchased medical equipment in the guise of treating poor persons and it is subsequently found that the entire transaction is bogus.
“Naturally, when commercial trade is indulged in the guise of serving the poor and needy and seeking tax holiday, this court can never come to the rescue of the petitioner,” the court noted.
“If the assessment order is examined further, it also reveals that during the demonetization period, the petitioner had deposited a total sum of Rs.7,54,77,619/- in cash, and when the assessee was asked to explain the source, he stated that he was running Meenakshi Mission Hospital at Thanjavur, for which, the tax holiday is now being sought. The hospital has been the source for a huge cash holding of Rs. 7,54,77,619/-. It is a wonder that the petitioner actually seeks tax holiday,” the court said while dismissing the writ petition.
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