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NEW DELHI: Income tax exemptions worth hundreds of crores have been given to hospitals claiming to be charitable institutes, but they may be doing little or no charity, according to a recent report of the Comptroller and Auditor General. CAG has asked for measurable parameters to assess the extent of charitable activities by hospital trusts availing tax exemptions as the public exchequer could be losing crores without any public benefit.

While various sections of the Income Tax (I-T) Act allow hospitals, nursing homes and medical research institutes to avail of relief and incentives, many institutions that charge patients claim and get exemption by virtue of the fact that they are registered as trusts, the report pointed out.

The fact that the I-T Act has no performance-specific definition of what is “charitable” is part of the problem, says a CAG report . Many charitable trusts receiving significant amounts in gross receipts were not being selected for scrutiny by the I-T department, according to CAG.

The report examined cases completed from 2012-13 to 2015-16.

Even when measurable parameters exist for assessing the extent of charitable activities, the I-T department is unable to deny exemption, said the CAG report. For instance, the Bombay Public Trusts (BPT) Act, which governs charitable trusts in Maharashtra, required trusts to fulfil certain conditions — including setting aside 10% of beds for free treatment of the poor and 10% for treatment at concessional rates and putting 2% of total billing into an indigent patient fund to treat the poor. The CAG audit of 10 trust hospitals registered under this act found that a majority did not fulfil these conditions.

Since the I-T Act does not identify non-compliance with the BPT Act as grounds for denying exemption and has no measurable parameters of its own, these hospitals continue to get exemption worth crores despite flouting the conditions.

The audit found that these 10 hospitals alone had “availed non-justified exemption” that amounted to Rs 77 crore.

The audit cited the example of a charitable trust in Kolkata that was “functioning as an intermediary of a corporate hospital”.

In another case, a trust was collecting fees for a threeyear postgraduate course in a Mumbai hospital. The course itself had been declared illegal by the Medical Council of India . Despite these violations, the I-T department could not deny exemption “for carrying out unauthorised business in the garb of charity”.

Section 80G of the I-T Act, which provides exemption to donations that charitable trusts receive, stipulates that receipts issued to the donor should bear a reference number and date of the order. However, the audit found that section 80G certificates were available in just 10% of 87 cases in the standalone hospital category. For instance, a Pune-based trust involved in education and the medical sector received a corpus donation of Rs 19.4 crore in 2012-13, of which Rs 16 crore was shown to be received from one company that has an authorised and paid up share capital of just Rs 5 lakh. The financial statements of this donor were not available. Despite a preponderance of such violations of the conditions of section 80G, no action was found to have been taken, noted the report.

