Reimbursing doctor travel, operational surpluses,

Reimbursing doctor travel, operational surpluses, and unadjudicated regulatory issues do not negate a trust’s genuine charitable status under Section 12AB.

Issue

Whether a charitable society running a hospital loses its entitlement to registration under Section 12AB and approval under Section 80G due to doctor travel reimbursements abroad, alleged non-compliance with the state indigent patient scheme, charging market-based tariffs from paying patients, and generating operational surplus.

Facts

The assessee-society, established in 1954, runs a charitable hospital providing medical relief, education, and research, holding registrations under Section 12A and approval under Section 80G (migrated to Section 12AB and 80G in 2021).
The Commissioner (Exemption) rejected continuation and retrospectively cancelled the Section 12AB registration, holding that reimbursing doctors for attending medical conferences/training abroad violated Section 11(1)(c) as an application of income outside India.
The Commissioner also cancelled the registration on grounds that the assessee failed to prove compliance with the Indigent Patients Fund (IPF) Scheme under the Maharashtra Public Trusts Act, rendering its activities “not genuine.”
Additionally, the Commissioner concluded the institution operated with a commercial profit motive because it charged market-based tariffs from paying patients and generated operational surpluses.
Consequent to cancelling the Section 12AB registration, the Commissioner rejected the assessee’s application for renewal of approval under Section 80G.

Decision

Application of Income Outside India [Section 11(1)(c)]: Reimbursement for doctors attending bona fide professional conferences and advanced training abroad—directly connected to enhancing hospital services in India—does not constitute applying trust income outside India, making the rejection under Section 11(1)(c) unsustainable.
Jurisdiction on External Enactments (IPF Scheme): In the absence of a conclusive finding of a fundamental breach by the competent regulator under the Maharashtra Public Trusts Act, the Income Tax authority cannot independently adjudicate state regulatory disputes to treat activities as “not genuine” under Section 12AB.
Charitable Character & Operational Surplus [Section 2(15)]: Charging market-based tariffs to paying patients and generating operational surpluses do not negate charitable status under “medical relief,” provided surpluses are ploughed back into medical facilities, research, and charitable objects rather than personally appropriated.
Retrospective Cancellation (Section 12AB): Retrospective cancellation of registration is invalid without clear evidence that the trust abandoned its foundational charitable objects, ceased genuine activities, or diverted funds for personal benefit.
Renewal of Section 80G Approval: Since the Section 12AB cancellation is unsustainable, the consequential rejection of Section 80G approval—which relied solely on the lack of Section 12AB registration—cannot survive and must be set aside.

Key Takeaways

Bona Fide Professional Up-skilling: Funding or reimbursing medical staff for overseas training and scientific seminars that enhance domestic healthcare services is a valid application of income in India, not a violation of Section 11(1)(c).
Boundaries of Tax Authorities: Tax officers exercising jurisdiction under Section 12AB cannot usurp the role of state statutory regulators by declaring trust activities non-genuine based on unadjudicated compliance issues under local state trust laws.
Cross-Subsidization in Medical Relief: Running a modern tertiary healthcare facility on market-rate tariffs for paying patients to subsidize free/concessional treatment for indigent patients is consistent with a “charitable purpose” under Section 2(15), provided surpluses are retained for institutional growth and charitable ends.

IN THE ITAT MUMBAI BENCH ‘B’

National Health & Education Society

Commissioner of Income-tax (Exmp)^*

Amit Shukla, Judicial Member
and Prabhash Shankar, Accountant Member

IT Appeal Nos. 4200 and 4201 (Mum) of 2026

AUGUST 3, 2026

Percy Pardiwala, Sr. Adv., Mihir Nanivadekar, Ruturaj Gurjar and Rohan Dedshpande for the Appellant. Ganesh Sudhakar Bare, CIT DR for the Respondent.

ORDER

Amit Shukla, Judicial Member.- These two appeals have been preferred by the assessee, National Health & Education Society, against two separate orders, both dated 30.03.2026, passed by the learned Commissioner of Income Tax (Exemptions), Mumbai [hereinafter referred to as “the learned CIT(E.)”]. By the order impugned in ITA No. 4201/Mum/2026, the learned CIT(E.) rejected the assessee’s application seeking registration under section 12AB of the Income-tax Act, 1961 (“the Act”) and simultaneously proceeded to cancel, with retrospective effect, the registration already granted to the assessee under the substituted registration regime. Consequentially, by a separate order impugned in ITA No. 4200/Mum/2026, the learned CIT(E.) rejected the assessee’s application for approval under section 80G of the Act solely on the premise that the assessee was no longer entitled to registration under section 12AB. Since both the appeals arise out of common proceedings, involve identical factual background, overlapping issues of law and challenge findings recorded in the same course of proceedings, they were heard together and are, therefore, being disposed of by way of this consolidated order.

2. Although the controversy has arisen from orders passed under sections 12AB and 80G of the Act, the questions which fall for our adjudication travel considerably beyond the correctness of the individual findings recorded by the learned CIT(E.). The appeals raise issues of considerable importance touching upon the true scope and ambit of the jurisdiction exercisable by the Commissioner (Exemptions) while considering an application for registration under section 12AB; the legislative distinction maintained by Parliament between institutions engaged in “medical relief” and those pursuing the residuary object of “advancement of any other object of general public utility” under section 2(15); the extent to which alleged non-compliance with regulatory provisions under the Maharashtra Public Trusts Act, 1950 can legitimately influence proceedings under the Income-tax Act; whether reimbursement of expenditure incurred by doctors for participation in international academic programmes can be construed as application of income outside India within the meaning of section 11(1)(c); and, above all, whether the charging of fees from paying patients, generation of operational surplus and maintenance of sophisticated medical infrastructure are, by themselves, sufficient to divest a longstanding charitable hospital of its charitable character. These questions have recurring significance for charitable healthcare institutions across the country and, therefore, require examination within the broader statutory framework rather than in the narrow factual confines of the present case.

3. The assessee is a Society established in the year 1954, registered under the Societies Registration Act, 1860 on 13.04.1954, and thereafter registered as a Public Charitable Trust under the Bombay Public Trusts Act, 1950 (now the Maharashtra Public Trusts Act, 1950) on 11.07.1956. It is one of the oldest and most reputed charitable institutions in the field of healthcare in the country. In furtherance of the objects incorporated in its Memorandum of Association, the assessee established and has since been administering the P.D. Hinduja National Hospital and Medical Research Centre, which has, over several decades, evolved into a tertiary-care medical institution engaged not merely in rendering advanced medical treatment but also in medical education, clinical research, preventive healthcare, community outreach programmes and charitable medical assistance to economically weaker sections of society. The Memorandum of Association unequivocally records that the Society has been established solely for philanthropic purposes and not for purposes of profit, its principal objects being the provision of medical relief, promotion of medical education, advancement of scientific research in healthcare and allied charitable activities. It is not the case of the Revenue that these foundational objects have undergone any alteration since the inception of the Society.

4. The charitable status of the assessee has remained recognised under the Income-tax Act for several decades. Registration under section 12A was originally granted on 20.11.1974 and continued uninterruptedly thereafter. The assessee also enjoyed approval under section 80G and recognition under section 10(23C), reflecting a consistent acceptance by the Revenue of the charitable nature of its objects and activities. Consequent upon the comprehensive amendments introduced by the Finance Act, 2020 replacing the earlier registration regime under sections 12A and 12AA with the substituted framework under section 12AB, all existing charitable institutions were required to migrate to the new statutory regime. In compliance with the amended provisions, the assessee applied for registration under the substituted framework and was granted registration and consequential approval under section 80G by orders dated 24.09.2021, valid for the prescribed period. Upon the expiry of the said validity, the assessee submitted fresh applications on 27.09.2025 seeking continuation of registration under section 12AB and renewal of approval under section 80G in accordance with law. Thus, the present proceedings do not concern a newly established institution seeking recognition for the first time, but relate to an institution whose charitable status had stood recognised by the Department itself over a long span of time and whose applications arose only because of the statutory transition introduced by Parliament.

5. Pursuant to the applications so filed, the learned CIT(E.) initiated proceedings by issuing notices calling upon the assessee to furnish complete particulars concerning its constitution, governing documents, charitable objects, audited financial statements, details of activities undertaken, application of income, hospital operations, compliance with statutory obligations and such other information as was considered necessary for examination of the applications. The assessee responded by filing detailed replies supported by extensive documentary evidence. Apart from furnishing the Memorandum of Association, trust registration certificates, audited accounts, annual reports and details of charitable programmes, the assessee submitted elaborate notes explaining the manner in which free and concessional treatment was extended to indigent and economically weaker patients, the functioning of the Indigent Patients Fund (IPF) Scheme, the constitution and functioning of its Medical Social Work Department, outreach programmes undertaken in rural and underprivileged areas, medical research activities, educational programmes, disaster relief initiatives and the overall charitable framework within which the hospital functioned. The replies also sought to explain that the financial model adopted by the hospital was one of crosssubsidisation, whereby treatment charges recovered from patients capable of paying enabled the institution to sustain highly specialised medical infrastructure while simultaneously providing substantial free and concessional medical treatment to patients who lacked financial means.

6. The proceedings thereafter continued through several rounds of correspondence extending over a considerable period. By subsequent notices, the learned CIT(E.) required the assessee to furnish additional information regarding bed occupancy, tariff structure, category-wise treatment charges, number of indigent and economically weaker patients treated over the preceding financial years, copies of reports submitted before the office of the Charity Commissioner under the Maharashtra Public Trusts Act, details of utilisation of the Indigent Patients Fund, reimbursement of expenditure incurred on foreign travel by doctors, details of academic conferences attended, particulars regarding implementation of the provisions of section 41AA of the Maharashtra Public Trusts Act and various other operational aspects of the hospital. The assessee, in response, filed comprehensive replies accompanied by voluminous supporting documentation including month-wise summaries of beneficiaries under the IPF Scheme, acknowledgements evidencing submission of statutory reports before the office of the Charity Commissioner, inspection reports of the Monitoring Committee constituted pursuant to the directions of the Hon’ble Bombay High Court, statistical statements regarding free and concessional treatment, details of discretionary charity extended beyond the statutory mandate, illustrative patient records, specimen bills, internal implementation guidelines and explanatory notes dealing with every issue raised during the proceedings. The assessee also specifically stated that the complete monthly reports furnished before the Charity Commissioner ran into several thousand pages and, therefore, only representative compilations and summaries were being filed before the learned CIT(E.), while simultaneously expressing its willingness to produce any particular report or original record as and when required for verification.

7. Notwithstanding the extensive material placed before him, the learned CIT(E.), by the impugned order dated 30.03.2026, rejected the assessee’s application under section 12AB principally on three broad grounds. Firstly, it was held that reimbursement of expenditure incurred by doctors for attending conferences, seminars and professional programmes abroad constituted application of trust income outside India in violation of section 11(1)(c) of the Act. Secondly, the learned CIT(E.) concluded that the assessee had failed to establish satisfactory compliance with the provisions governing the Indigent Patients Fund Scheme under section 41AA of the Maharashtra Public Trusts Act and that the activities of the institution, therefore, could not be regarded as genuine for the purposes of section 12AB. Thirdly, placing considerable reliance upon the tariff structure of the hospital, the charges recovered from paying patients, the operational surplus reflected in the financial statements and comparative financial indicators, the learned CIT(E.) formed the view that the hospital was substantially operating on commercial lines with a predominant profit motive inconsistent with its claim of charitable status. Proceeding on the aforesaid reasoning, the learned CIT(E.) not only rejected the application for registration under section 12AB but also cancelled the registration earlier granted with retrospective effect from 24.09.2021. Consequentially, by a separate order passed on the same date, the application seeking approval under section 80G was also rejected solely because registration under section 12AB had ceased to remain in force. Aggrieved by both the orders, the assessee is in further appeal before us.

8. Before we proceed to notice the rival submissions, we consider it appropriate to observe that substantially similar questions concerning the scope of enquiry under section 12AB in relation to a charitable hospital had earlier come up for consideration before this Tribunal in the case of Reliance Foundation Hospital Trust v. CIT (Exemptions) (Mumbai – Trib.)/ITA Nos.3798/Mum/2026 & 3799/Mum/2026. After an elaborate examination of the statutory framework governing sections 2(15), 11 and 12AB, the nature of institutions engaged in medical relief and the limits of the jurisdiction exercisable by the Commissioner (Exemptions), this Tribunal had enunciated certain governing principles applicable to charitable healthcare institutions. Since the controversy involved in the present appeals substantially overlaps with those legal principles, while independently appreciating the facts, evidence and statutory issues arising herein, we shall be guided by the legal framework explained in the aforesaid decision. At the same time, our conclusions in these appeals shall rest upon an independent evaluation of the record before us and the specific findings recorded in the impugned orders, which require separate examination on their own merits.

9. During the course of hearing, the learned Senior Counsel appearing on behalf of the assessee assailed the impugned orders both on facts and in law and submitted that the entire approach adopted by the learned CIT(E.) proceeds on an erroneous understanding of the statutory scheme governing section 12AB of the Act. At the very outset, it was submitted that the assessee is not a newly constituted institution seeking registration for the first time, but an institution whose charitable character has remained consistently recognised for more than five decades under the Income-tax Act as well as under the Maharashtra Public Trusts Act. The present proceedings, according to the learned counsel, arose merely because Parliament introduced a new registration mechanism under the Finance Act, 2020 requiring all existing charitable institutions to migrate to the substituted regime under section 12AB. It was thus contended that while examining an application for continuation of registration, the jurisdiction of the learned CIT(E.) remained confined to the statutory parameters prescribed under section 12AB, namely, the genuineness of the activities and the charitable nature of the objects, and could not be enlarged into a comprehensive assessment of the manner in which income had been applied or alleged violations which are otherwise required to be examined by the Assessing Officer during assessment proceedings. It was submitted that the impugned order virtually proceeds as if the learned CIT(E.) was exercising assessment jurisdiction under sections 11, 12 and 13 of the Act, scrutinising individual items of expenditure, drawing inferences from accounting entries and recording findings on issues wholly alien to the limited enquiry contemplated at the stage of registration. According to the learned counsel, this fundamental misconception vitiates the entire decision making process.

10. Elaborating the above submission, the learned Senior Counsel invited our attention to the statutory distinction maintained by Parliament between the grant or continuation of registration under section 12AB and the computation of exemption under sections 11 and 13. It was submitted that registration under section 12AB primarily concerns itself with the identity of the institution, the charitable nature of its objects and the genuineness of its activities, whereas questions relating to application of income, allowability of exemption, violation of section 13, accumulation of income or denial of exemption on account of particular expenditure fall squarely within the jurisdiction of the Assessing Officer while framing the assessment for a particular assessment year. The learned counsel submitted that the impugned order repeatedly enters into issues concerning allowability of expenditure, utilisation of funds and alleged violations under section 11(1)(c), none of which, according to him, could legitimately furnish a ground either for refusing registration or for retrospectively cancelling a registration already granted unless the statutory conditions specifically prescribed under section 12AB stood demonstrably attracted. It was thus argued that the learned CIT(E.) travelled beyond the legislative contours of his jurisdiction and virtually substituted assessment proceedings by registration proceedings, an approach which finds no support either from the language of the statute or from the settled principles governing registration of charitable institutions.

11. The principal challenge was directed against the finding recorded by the learned CIT(E.) regarding alleged violation of section 11(1)(c) of the Act. The learned Senior Counsel submitted that the entire foundation of the impugned finding rests upon reimbursement of expenditure incurred by certain doctors for attending international medical conferences, specialised training programmes, workshops and academic seminars organised abroad by globally recognised medical institutions and professional bodies. It was argued that these conferences were attended by doctors exclusively in their professional capacity with the objective of acquiring advanced medical knowledge, learning emerging treatment protocols, familiarising themselves with new surgical techniques and participating in continuing medical education programmes, all of which directly contributed to enhancement of patient care within the hospital. According to the learned counsel, no charitable activity of the Society was undertaken outside India; no medical relief was rendered abroad; no branch or establishment of the Society existed outside the country; nor was any part of the charitable objects sought to be implemented beyond India. The expenditure represented nothing more than reimbursement of professional academic expenses incurred by doctors whose enhanced expertise ultimately benefited patients receiving treatment in India. It was therefore submitted that section 11(1)(c), which contemplates application of income for charitable purposes outside India, has no application whatsoever to such expenditure, and the learned CIT(E.) committed a serious error in equating professional training of doctors with charitable activities carried on outside India. The learned counsel further submitted that the impugned order neither disputes the purpose of the conferences nor questions the bona fides of the expenditure and yet proceeds to invoke section 11(1)(c) merely because the conferences happened to be held outside India, an approach which, according to him, completely overlooks the legislative intent underlying the provision.

12. The learned Senior Counsel thereafter assailed the findings recorded with respect to the provisions of section 41AA of the Maharashtra Public Trusts Act and the implementation of the Indigent Patients Fund Scheme. It was submitted that the learned CIT(E.) has proceeded on the erroneous assumption that the assessee had failed to furnish details relating to treatment provided to indigent and economically weaker patients, whereas the record itself demonstrates that extensive documentation was placed before the authority, including month-wise summaries of beneficiaries, acknowledgements evidencing submission of statutory reports before the office of the Charity Commissioner, reports of the Monitoring Committee constituted pursuant to the directions of the Hon’ble Bombay High Court, statistical statements regarding utilisation of the Indigent Patients Fund, details of free and concessional treatment, specimen patient records and explanatory notes regarding the methodology adopted by the hospital for implementation of the Scheme. It was emphasised that the complete reports submitted before the Charity Commissioner extended into several thousand pages and, therefore, representative compilations together with official acknowledgements had been furnished before the learned CIT(E.), accompanied by an express offer to produce any original record or report as and when required. According to the learned counsel, not a single communication issued during the proceedings called upon the assessee to produce any specific report which remained uncomplied with. It was therefore contended that the observation that the assessee had failed to furnish the relevant material is demonstrably inconsistent with the record and has been recorded without appreciating the voluminous documentary evidence already available before the authority.

13. Developing the submission further, it was contended that even otherwise the learned CIT(E.) assumed unto himself a jurisdiction which the statute never contemplated. The implementation of section 41AA of the Maharashtra Public Trusts Act, the functioning of the Indigent Patients Fund Scheme and the monitoring of compliance thereunder are matters statutorily entrusted to the authorities functioning under the Maharashtra Public Trusts Act and the Monitoring Committee constituted pursuant to judicial directions. The learned Senior Counsel submitted that throughout the relevant period the assessee had regularly submitted the prescribed reports before the competent authorities, inspections had been carried out by the Monitoring Committee from time to time and no competent statutory authority had recorded any conclusive finding holding that the assessee had ceased to comply with its obligations under the said enactment so as to warrant withdrawal of its charitable character. In the absence of any such determination by the authority entrusted with enforcement of the Maharashtra Public Trusts Act, it was submitted that the learned CIT(E.) could not independently adjudicate alleged violations of that enactment and treat the same as conclusive proof that the activities of the institution had ceased to be genuine. The learned counsel submitted that proceedings under the Income-tax Act and regulatory proceedings under the Maharashtra Public Trusts Act operate in distinct statutory fields, and one authority cannot assume the jurisdiction specifically vested in another unless the Income-tax Act expressly so provides.

14. The learned Senior Counsel then adverted to the finding that the hospital was being run on commercial lines. It was submitted that the learned CIT(E.) has largely rested his conclusion upon the tariffs charged from paying patients, the revenue generated from various specialised medical services and the operational surplus reflected in the financial statements, while completely overlooking the peculiar financial structure within which modern tertiary healthcare institutions necessarily function. According to the learned counsel, the hospital provides highly specialised medical treatment requiring substantial investment in advanced diagnostic equipment, transplant facilities, robotic surgical systems, intensive care units, laboratories, research infrastructure, medical education programmes and highly qualified professional manpower. Such institutions inevitably incur significant capital as well as recurring expenditure, and recovery of realistic charges from patients capable of bearing such expenditure is the very mechanism through which the institution is able to sustain sophisticated healthcare infrastructure while simultaneously extending free and concessional treatment to indigent and economically weaker patients. It was argued that the financial model adopted by the assessee is one of cross-subsidisation and not profit maximisation. Every surplus generated by the institution, according to the learned counsel, stands reinvested in furtherance of its charitable objects by expanding medical facilities, acquiring new technology, upgrading infrastructure, supporting research, strengthening educational programmes and enlarging charitable outreach. It was, therefore, submitted that neither the charging of higher tariffs nor the generation of operational surplus constitutes the statutory test for determining charitable character, particularly in the case of institutions engaged in medical relief, which Parliament has consciously treated as an independent category of charitable purpose under section 2(15).

15. Summing up his submissions, the learned Senior Counsel contended that the impugned order proceeds upon an erroneous legal premise, selective appreciation of facts and complete disregard of the voluminous evidence placed on record. It was argued that there is no allegation that the objects of the Society have undergone any change; no finding that its activities are fictitious or ingenuine; no allegation that any part of the income has been diverted for the personal benefit of trustees or specified persons; nor any material to suggest that the institution has abandoned the charitable purpose for which it was established more than seven decades ago. The rejection of registration, according to the learned counsel, rests principally upon disputed interpretations of section 11(1)(c), alleged non-compliance under another enactment, and financial indicators which, in law, are incapable of displacing the charitable character of an institution engaged in medical relief. It was further submitted that the retrospective cancellation of registration from 24.09.2021, without issuance of any independent show-cause notice proposing such action or affording an effective opportunity of meeting the proposed grounds of cancellation, is wholly contrary to the statutory framework as well as the settled principles of natural justice. It was, therefore, prayed that both the impugned orders be set aside, the registration under section 12AB be restored and the consequential approval under section 80G be directed to be granted in accordance with law.

16. Per contra, the learned Departmental Representative strongly supported the impugned orders and submitted that the learned CIT(E.) has passed a detailed and well-reasoned order after granting adequate opportunity to the assessee and after examining voluminous material produced during the course of proceedings. It was contended that the power conferred under section 12AB is not an empty or mechanical formality but casts a statutory obligation upon the Commissioner (Exemptions) to satisfy himself not only regarding the charitable objects of the institution but also regarding the genuineness of its activities. According to the learned Departmental Representative, once the material placed before the authority indicates that the institution is not functioning in accordance with its professed charitable objects or is carrying on its activities in a manner inconsistent with the statutory scheme governing charitable institutions, the learned CIT(E.) is fully justified in refusing continuation of registration. It was submitted that the findings recorded in the impugned order are based upon an appreciation of the material available on record and cannot be characterised either as arbitrary or as travelling beyond the jurisdiction conferred by section 12AB.

17. The learned Departmental Representative submitted that the learned CIT(E.) has not proceeded merely on isolated instances but has examined the functioning of the hospital in its entirety. Referring to the financial statements and various operational details, it was argued that the tariff structure adopted by the hospital, the charges recovered from patients for specialised treatment, diagnostic services and surgeries, together with the substantial surplus generated year after year, clearly indicate that the institution is being managed substantially on commercial principles. According to the learned Departmental Representative, although generation of surplus by itself may not always be decisive, the cumulative effect of the financial indicators examined by the learned CIT(E.), read along with the manner in which the hospital was being operated, justified the conclusion that the institution had moved away from its professed charitable character. It was further submitted that the learned CIT(E.) was justified in examining whether the actual activities carried on by the assessee corresponded with the charitable objects stated in its constitutional documents, for the purpose of registration under section 12AB necessarily requires an examination of the real nature of activities and not merely the objects recorded on paper.

18. With regard to reimbursement of expenditure incurred on foreign travel by doctors, the learned Departmental Representative relied upon the reasoning contained in the impugned order and submitted that the expenditure represented application of the funds of the trust outside India and, therefore, attracted the provisions of section 11(1)(c) of the Act. Likewise, with regard to compliance under the Indigent Patients Fund Scheme and section 41AA of the Maharashtra Public Trusts Act, it was contended that the learned CIT(E.) had examined the material produced during the proceedings and recorded factual findings regarding deficiencies noticed therein. According to the Revenue, the Tribunal, while exercising appellate jurisdiction, ought not to lightly interfere with such findings of fact unless demonstrated to be wholly unsupported by the record. It was, therefore, submitted that the impugned orders call for no interference and deserve to be upheld.

19. We have given our thoughtful consideration to the rival submissions, carefully perused the impugned orders passed by the learned CIT(E.), examined the voluminous documentary material placed before us, including the paper books and written submissions filed on behalf of the assessee, and have also considered the statutory provisions governing registration of charitable institutions under the Act. We have further examined the legal position emerging from the relevant judicial precedents dealing with the scope of enquiry under section 12AB and the principles governing institutions engaged in charitable medical relief. Having regard to the nature of the controversy, we are of the considered opinion that the issues arising in the present appeals cannot be resolved merely by examining the individual findings recorded in the impugned orders in isolation. Before adverting to the correctness of those findings, it becomes necessary to first appreciate the legislative framework within which section 12AB operates, the object sought to be achieved by the registration provisions, the distinction consciously maintained by Parliament between registration proceedings and assessment proceedings, and the separate treatment accorded by the statute to institutions engaged in medical relief. Unless these foundational aspects are properly understood, the individual issues arising in the present appeals may not be appreciated in their correct statutory perspective.

20. Before embarking upon the examination of the individual findings recorded by the learned CIT(E.), we may also observe that substantially similar questions concerning the scope of enquiry under section 12AB in the case of a charitable hospital had earlier arisen before this Tribunal in the case of Reliance Foundation Hospital Trust. In that decision, after an elaborate consideration of the statutory framework governing sections 2(15), 11 and 12AB of the Act, this Tribunal explained the principles regulating the grant and continuation of registration to institutions engaged in medical relief and delineated the limits of the jurisdiction exercisable by the Commissioner (Exemptions). Since the legal issues arising in the present appeals substantially overlap with the principles examined therein, we shall remain guided by those principles. At the same time, the present appeals are being decided independently on the basis of the material placed before us, the specific findings recorded in the impugned orders and the submissions advanced by the parties. We, therefore, proceed to examine the controversy afresh within the framework of the statutory provisions and the evidence available on record, without treating the earlier decision as a substitute for the independent adjudication which the facts of the present case require.

21. The scheme of registration of charitable institutions under the Income-tax Act has undergone a gradual but significant legislative evolution. While the earlier provisions contained in sections 12A and 12AA primarily contemplated examination of the charitable objects of the institution and the genuineness of its activities before grant of registration, the substituted provisions introduced through section 12AB seek to provide a structured mechanism for grant, renewal and cancellation of registration at periodic intervals. Notwithstanding these procedural changes, the underlying legislative philosophy has remained substantially unaltered. Registration under section 12AB is intended to recognise the legal character of an institution as one established for charitable purposes so that it may thereafter claim exemption in accordance with sections 11 and 12, subject to fulfilment of the statutory conditions applicable during each assessment year. In other words, registration is not synonymous with exemption. It merely confers eligibility to claim exemption, while the actual admissibility of exemption continues to depend upon examination of the income of the trust in the relevant assessment year by the Assessing Officer in accordance with the provisions contained in sections 11, 12 and 13 of the Act.

22. This distinction assumes considerable significance because the Act consciously distributes different statutory functions amongst different authorities. The Commissioner (Exemptions), while exercising jurisdiction under section 12AB, is principally concerned with examining whether the institution has been established for charitable purposes, whether its stated objects continue to remain charitable, and whether the activities actually carried on are genuine and in furtherance of those objects. The enquiry at this stage is essentially institutional in character. On the other hand, questions relating to computation of income, application of income, accumulation, allowability of expenditure, violation of section 13, denial of exemption in respect of particular receipts or expenditure, or the taxability of specific items of income, fall within the province of assessment proceedings undertaken by the Assessing Officer. The statutory scheme thus maintains a clear distinction between the recognition of the charitable character of the institution and the determination of the tax consequences flowing from its activities during a particular assessment year. It is this legislative distinction which must constantly guide the exercise of jurisdiction under section 12AB. Whether, in the facts of the present case, the learned CIT(E.) remained within these statutory limits while passing the impugned orders is the principal question that now falls for our consideration.

23. At this stage, it would be apposite to first examine the statutory architecture governing charitable institutions under the Act. Section 2(15) defines the expression “charitable purpose” by specifically recognising relief of the poor, education, yoga, medical relief, preservation of environment, preservation of monuments or places or objects of artistic or historic interest and, lastly, the advancement of any other object of general public utility. A careful reading of the provision demonstrates that Parliament has consciously classified charitable purposes into distinct and independent categories. Significantly, medical relief constitutes a separate and self-contained head of charity and does not derive its legitimacy from the residuary category of advancement of any other object of general public utility. This legislative distinction is neither accidental nor merely semantic. It reflects a conscious recognition by Parliament that institutions engaged in rendering healthcare perform an essential public function which, by its very nature, differs from institutions pursuing other public causes under the residuary category. Consequently, while all charitable institutions are governed by the common statutory framework of sections 11 and 12, the legislative parameters applicable to institutions engaged in medical relief cannot be conflated with those governing institutions falling under the residuary limb of section 2(15). This distinction assumes considerable significance while examining the reasoning adopted by the learned CIT(E.) in the present case.

24. Equally significant is the legislative evolution of the provisos appended to section 2(15). Parliament, while introducing restrictions in relation to institutions pursuing the object of “advancement of any other object of general public utility”, consciously enacted monetary thresholds and commercial activity tests applicable only to that category of charitable institutions. Those restrictions were introduced because experience showed that certain organisations claiming to pursue public utility were substantially engaged in commercial activities under the guise of charity. However, despite repeated legislative amendments to section 2(15), Parliament has consistently refrained from extending those restrictions to institutions engaged in medical relief, education or relief of the poor. This legislative choice cannot be ignored while interpreting section 12AB. Had Parliament intended that every hospital charging substantial fees or generating operational surplus should automatically lose its charitable character, nothing prevented it from expressly incorporating similar restrictions in respect of institutions engaged in medical relief. The absence of any such restriction is itself indicative of the legislative intent that the commerciality tests applicable to the residuary category cannot be mechanically imported into institutions whose dominant purpose is rendering medical relief. Therefore, while examining the functioning of a charitable hospital, the enquiry cannot begin with the tariffs charged or the surplus generated; it must begin with the statutory purpose for which the institution exists and the genuineness of the activities undertaken in furtherance of that purpose.

25. This distinction also explains why the jurisdiction conferred under section 12AB is necessarily limited in its scope. The Commissioner (Exemptions) is undoubtedly required to satisfy himself that the institution continues to exist for charitable purposes and that its activities are genuine. However, the expression “genuineness of activities” cannot be understood in isolation divorced from the statutory context. The enquiry contemplated under section 12AB is directed towards verifying whether the institution is actually carrying on the activities which it professes to undertake and whether such activities are in furtherance of its stated charitable objects. It is not intended to convert registration proceedings into a detailed scrutiny of individual items of expenditure, accounting entries, financial ratios or disputed questions concerning the allowability of exemption in a particular assessment year. Those matters remain within the exclusive province of assessment proceedings, where the Assessing Officer is statutorily empowered to examine the application of income, compliance with sections 11, 12 and 13, accumulation of income, allowability of expenditure and other year-specific issues. If the jurisdiction under section 12AB were expanded to encompass every conceivable question relating to assessment, the distinction deliberately maintained by Parliament between registration and assessment would become wholly redundant. Such an interpretation would not only blur the legislative scheme but would also result in parallel adjudication of issues by two different authorities exercising distinct statutory powers.

26. The expression “genuine activities”, occurring in section 12AB, therefore, cannot be equated with the correctness of every administrative or financial decision taken by the management of a charitable institution. Genuineness refers to the authenticity and bona fides of the activities actually carried on. An institution may commit procedural lapses, may become subject to regulatory scrutiny under another enactment or may even be denied exemption in a particular assessment year on account of violation of specific statutory provisions; yet none of these circumstances, by themselves, necessarily establish that the institution has ceased to exist for its professed charitable objects or that its activities have become ingenuine. The enquiry under section 12AB is institutional rather than transactional. It is directed towards determining whether the institution remains what it professes to be. Unless the material on record demonstrates that the charitable objects have been abandoned, the activities have become sham or fictitious, or the institution is merely using the facade of charity to pursue non-charitable purposes, the drastic consequence of refusing or cancelling registration would ordinarily not arise. This distinction becomes particularly relevant in the present case where the impugned order proceeds substantially upon alleged violations relating to individual items of expenditure and regulatory compliance rather than upon any finding that the assessee has ceased to carry on the activity of providing medical relief.

27. Another important aspect which deserves emphasis is that the Income-tax Act itself contemplates separate statutory consequences for different kinds of defaults. Questions concerning application of income outside India, violation of section 13, benefit to specified persons, accumulation of income beyond permissible limits, investment of funds in prohibited modes or other infringements of the exemption provisions are specifically dealt with within the statutory scheme governing assessment of income. The Act prescribes distinct consequences for such defaults, including denial of exemption to the extent contemplated by law. It does not follow that every alleged violation of those provisions necessarily results in extinction of the charitable character of the institution itself. Registration under section 12AB operates at a different conceptual level. It recognises the identity of the institution as a charitable entity. The computation of taxable income and the consequences of any statutory violation are matters which continue to be examined independently during assessment. Therefore, while exercising jurisdiction under section 12AB, the Commissioner (Exemptions) must carefully distinguish between issues affecting the continued charitable identity of the institution and issues affecting the availability of exemption in a particular assessment year. Failure to maintain this distinction would result in conflating two distinct statutory mechanisms, something which the scheme of the Act clearly does not envisage.

28. It is in the backdrop of the aforesaid statutory framework that the findings recorded by the learned CIT(E.) require examination. As noticed earlier, the impugned orders substantially proceed on four broad premises, namely, that reimbursement of foreign academic expenditure incurred by doctors amounted to application of income outside India in violation of section 11(1)(c); that the assessee had failed to establish compliance with the provisions governing the Indigent Patients Fund Scheme under the Maharashtra Public Trusts Act; that the hospital, by reason of its tariff structure and operational surplus, had assumed the character of a commercial enterprise; and that these factors justified not only refusal of registration under section 12AB but also retrospective cancellation of the registration already granted. Whether these conclusions can be sustained either on the statutory scheme of the Act or on the evidence available on record is the question to which we shall now advert. From this stage onwards, we propose to examine each of the findings recorded by the learned CIT(E.) independently, both on facts and in law, so that the correctness of the impugned orders may be tested within the precise parameters contemplated by the statute.

29. We shall first examine the finding of the learned CIT(E.) that reimbursement of expenditure incurred by certain doctors for attending conferences, workshops, training programmes and academic seminars outside India constituted application of the income of the trust for charitable purposes outside India so as to attract the provisions of section 11(1)(c) of the Act. In our considered opinion, the entire reasoning adopted in the impugned order proceeds upon a fundamental misconception regarding both the scope of section 11(1)(c) and the nature of the expenditure incurred by the assessee. Section 11(1)(c) is attracted where income derived from property held under trust is applied to charitable purposes outside India, except in the circumstances specifically recognised by the statute. The legislative focus, therefore, is upon the place where the charitable purpose itself is carried out and not merely the geographical location where a particular expenditure happens to be incurred. There is an obvious distinction between carrying on charitable activities outside India and incurring expenditure outside India in furtherance of charitable activities ultimately performed within India. The two expressions cannot be treated as synonymous. If such a broad construction were to be accepted, every payment made abroad for acquisition of medical equipment, procurement of scientific literature, subscription to international medical journals, participation in specialised training programmes or engagement of foreign experts would automatically become application of income outside India, a consequence which neither flows from the language of the statute nor accords with its legislative object.

30. The material placed before us demonstrates that the expenditure in question relates to reimbursement of expenses incurred by doctors for participation in internationally recognised medical conferences, continuing medical education programmes, specialised workshops, research symposiums and advanced training courses conducted by reputed medical institutions and professional bodies abroad. The learned CIT(E.) has nowhere disputed that these programmes were directly connected with the medical specialities in which the concerned doctors were practising, nor has he recorded any finding that the expenditure was personal in nature or unconnected with the functioning of the hospital. Equally, there is no allegation that the Society established any branch, medical centre, charitable institution or healthcare programme outside India or that any patient received medical relief abroad under the charitable objects of the assessee. The undisputed position emerging from the record is that the doctors attended these programmes for professional advancement and thereafter resumed their duties in the assessee hospital in India, where the enhanced knowledge, specialised skills and updated treatment protocols acquired through such academic participation became available for the benefit of patients receiving treatment in the hospital. The charitable activity thus remained entirely rooted within India; only one of the means adopted for strengthening that activity happened to involve expenditure incurred abroad.

31. Modern medical science evolves at an extraordinary pace. New surgical techniques, treatment protocols, transplant methodologies, oncology therapies, robotic procedures, precision medicine, artificial intelligence-assisted diagnostics and critical care systems undergo continuous development through global scientific collaboration. Institutions engaged in tertiary healthcare cannot remain insulated from these developments if they are to discharge their charitable obligations effectively. Continuing medical education is no longer a matter of institutional prestige; it has become an indispensable component of responsible medical practice. Attendance at international conferences, specialised workshops and scientific symposia enables medical professionals to interact with global experts, evaluate emerging technologies, participate in evidence-based discussions and familiarise themselves with internationally accepted standards of patient care. The knowledge and expertise so acquired are thereafter disseminated within the institution through clinical practice, departmental discussions, academic sessions and implementation of improved treatment protocols. To regard such expenditure as constituting charitable activity outside India would, in our considered opinion, be to confuse the means adopted for improving medical services with the place where the charitable purpose is actually fulfilled. The former may involve expenditure beyond the territorial boundaries of India; the latter continues to be realised through the treatment of patients within India.

32. We also find considerable force in the submission advanced on behalf of the assessee that the learned CIT(E.) has not examined the true character of the expenditure before invoking section 11(1)(c). The impugned order does not record any finding that the foreign visits were undertaken for private purposes, that the conferences lacked professional relevance, that the expenditure was excessive or colourable, or that the reimbursement resulted in any private benefit to the doctors divorced from the charitable activities of the institution. In the absence of such findings, the mere fact that the conferences were organised outside India cannot by itself convert the expenditure into application of income for charitable purposes outside India. The statutory provision cannot be interpreted by isolating the place where payment was made while ignoring the object which the expenditure was intended to achieve. A purposive interpretation consistent with the legislative scheme necessarily requires examination of the ultimate charitable activity to which the expenditure relates. Tested on that touchstone, the expenditure under consideration was directed towards strengthening the quality of medical treatment rendered by the assessee hospital in India and cannot legitimately be characterised as application of income outside India merely because the academic programme attended by the doctors was held in another country.

33. There is yet another aspect which, in our opinion, deserves notice. Even assuming for the sake of argument that the learned CIT(E.) entertained a different interpretation of section 11(1)(c), such a question essentially concerns the allowability of exemption in relation to a particular item of expenditure. The Income-tax Act itself provides a complete mechanism for examining such issues during assessment proceedings, where the Assessing Officer is empowered to determine whether any particular expenditure satisfies the statutory conditions for exemption and to deny the benefit to the extent permissible under law. Such a question, by its very nature, pertains to the computation of exempt income for a particular assessment year. It does not automatically determine whether the institution itself has ceased to exist for charitable purposes or whether its activities have become ingenuine. The learned CIT(E.), in the present case, has elevated a debatable issue concerning interpretation of section 11(1)(c) into a ground for refusing continuation of registration and retrospectively cancelling the registration already granted. In our considered opinion, such an approach is inconsistent with the statutory distinction between registration proceedings under section 12AB and assessment proceedings under sections 11 to 13 of the Act, a distinction which we have already discussed in the preceding paragraphs.

34. We are, therefore, unable to sustain the first and principal finding recorded by the learned CIT(E.). On the facts emerging from the record, reimbursement of expenditure incurred by doctors for attending bona fide professional conferences, scientific seminars, advanced training programmes and continuing medical education abroad, where such participation is directly connected with enhancement of medical services rendered by the charitable hospital in India, cannot be construed as application of the income of the trust for charitable purposes outside India within the meaning of section 11(1)(c). The charitable purpose continued to be the rendering of medical relief within India; the foreign expenditure merely represented one of the instrumental means adopted for improving the quality of that charitable activity. Consequently, the reliance placed by the learned CIT(E.) upon section 11(1)(c) for denying registration under section 12AB cannot be sustained. Having held so, we now proceed to examine the second and equally important basis on which the impugned orders rest, namely, the alleged noncompliance with the provisions governing the Indigent Patients Fund Scheme and section 41AA of the Maharashtra Public Trusts Act.

35. We shall now examine the second limb of the reasoning adopted by the learned CIT(E.), namely, the alleged noncompliance by the assessee with the provisions of section 41AA of the Maharashtra Public Trusts Act, 1950 and the Indigent Patients Fund (IPF) Scheme framed pursuant thereto. In the impugned order, considerable emphasis has been placed upon the alleged failure of the assessee to furnish complete particulars relating to indigent and economically weaker section patients, the utilisation of the Indigent Patients Fund and the implementation of the obligations cast upon charitable hospitals under the Maharashtra Public Trusts Act. Proceeding on this premise, the learned CIT(E.) has concluded that the activities of the assessee could not be regarded as genuine for the purposes of section 12AB. Having carefully examined the reasoning adopted in the impugned order and the voluminous material placed before us, we are unable to persuade ourselves to concur with the aforesaid conclusion. In our considered opinion, the learned CIT(E.) has not only proceeded on an incorrect appreciation of the factual record but has also entered into an area which is primarily regulated by another statutory enactment administered by a separate regulatory mechanism.

36. At the outset, it requires to be noticed that section 41AA of the Maharashtra Public Trusts Act and the regulatory framework governing the Indigent Patients Fund Scheme constitute a self-contained code for ensuring that charitable hospitals receiving concessions from the State discharge their corresponding obligations towards indigent and economically weaker patients. The implementation of the Scheme, submission of prescribed returns, maintenance of records, verification of compliance, inspection of hospitals and adjudication of disputes relating to the implementation of the Scheme are matters entrusted to the authorities functioning under the Maharashtra Public Trusts Act and the institutional mechanism evolved pursuant to the directions issued by the Hon’ble Bombay High Court. The Income-tax Act neither incorporates the provisions of section 41AA into section 12AB nor authorises the Commissioner (Exemptions) to assume the role of the statutory regulator under the Maharashtra Public Trusts Act. Undoubtedly, if there exists a conclusive determination by the competent authority under the governing statute establishing that a charitable institution has fundamentally departed from its statutory obligations so as to affect the genuineness of its charitable activities, such material may constitute a relevant circumstance while examining the institution under the Income-tax Act. However, that is materially different from the Commissioner (Exemptions) himself undertaking an independent adjudication of disputed questions arising under another enactment and recording findings as though he were exercising the jurisdiction specifically vested in the authorities constituted under that statute. Such an approach, in our considered opinion, travels beyond the statutory contours of section 12AB.

37. Even on facts, we find that the foundation on which the impugned finding rests does not withstand scrutiny. The record placed before us unmistakably demonstrates that the assessee had furnished before the learned CIT(E.) detailed material relating to the implementation of the Indigent Patients Fund Scheme. The documents included summaries of indigent and economically weaker patients treated during the relevant years, statements regarding free and concessional treatment extended by the hospital, acknowledgements evidencing submission of the prescribed monthly reports before the office of the Charity Commissioner, reports of the Monitoring Committee, statistical data relating to utilisation of the Indigent Patients Fund, specimen patient records and explanatory notes describing the methodology adopted by the hospital while identifying beneficiaries under the Scheme. The assessee had also categorically explained that the complete monthly reports filed before the Charity Commissioner extended into several thousand pages and that, for reasons of practicality, representative compilations together with official acknowledgements had been furnished before the learned CIT(E.), while simultaneously offering to produce any original report or record which the authority desired to verify. Significantly, there is nothing on record to indicate that the learned CIT(E.), after receipt of the said explanation, required production of any specific report which was thereafter withheld by the assessee. In these circumstances, the observation that the assessee had failed to furnish the relevant records does not appear to be borne out by the material available before us.

38. What is equally significant is that the impugned order proceeds substantially on the assumption that the assessee had not satisfactorily demonstrated compliance with the obligations under the IPF Scheme, but there is hardly any discussion of the documentary evidence actually produced during the proceedings. A quasi-judicial authority undoubtedly possesses the jurisdiction to appreciate the evidence placed before it and, if found insufficient, to record reasons for not accepting the same. However, where voluminous documentary material has been filed in response to repeated notices, the order is expected to disclose due consideration of such material before adverse conclusions are reached. The impugned order, however, largely records the ultimate conclusion without undertaking a corresponding evaluation of the evidence which formed part of the record. A finding that the assessee failed to furnish details cannot be sustained where the record itself reveals repeated compliance with notices and production of substantial documentary evidence, unless the authority identifies with reasonable precision what particular information remained deficient despite the opportunities granted. In the absence of such analysis, the conclusion ceases to have the necessary factual foundation expected of a quasi-judicial determination.

39. Another important circumstance which merits notice is that the material placed before the learned CIT(E.) was not confined merely to the minimum statutory obligations cast under the Indigent Patients Fund Scheme. The assessee had specifically explained that, apart from complying with the requirements of the Scheme, it had also extended substantial discretionary charity through its Medical Social Work Department by providing free or concessional treatment to numerous patients on the basis of socio-economic assessment, even in situations not strictly covered by the statutory framework of the IPF Scheme. The details furnished before us indicate that the charitable expenditure incurred by the assessee under these independent programmes substantially exceeded the minimum obligations arising under the Scheme. This aspect assumes considerable importance because it demonstrates that the charitable activities of the institution were not restricted merely to technical compliance with statutory requirements but extended well beyond them. Unfortunately, while the impugned order devotes considerable attention to perceived deficiencies in compliance with the IPF Scheme, there is hardly any discussion regarding the additional charitable activities admittedly undertaken by the assessee from its own resources. Such an approach, in our opinion, presents only one side of the factual picture and does not reflect a holistic appreciation of the charitable activities actually carried on by the institution.

40. We are also unable to overlook another significant feature emerging from the record. The implementation of the IPF Scheme is not left to the subjective satisfaction of individual authorities but is periodically monitored through the statutory and institutional mechanism established under the Maharashtra Public Trusts Act, including inspections and reports of the Monitoring Committee constituted pursuant to the directions of the Hon’ble Bombay High Court. The assessee has placed before us copies of acknowledgements, inspection reports and other contemporaneous material demonstrating that it remained subject to this regulatory oversight throughout the relevant period. The impugned order does not record any finding that the competent authorities administering the Maharashtra Public Trusts Act had, after due adjudication, declared the assessee to be in fundamental breach of its obligations so as to disentitle it from functioning as a charitable hospital. In the absence of any such determination by the statutory regulator, it would not be appropriate for the Commissioner (Exemptions), while exercising jurisdiction under section 12AB, to independently arrive at a contrary conclusion on disputed issues arising under another enactment, particularly when the Income-tax Act itself does not confer such adjudicatory authority. The genuineness of charitable activities under section 12AB must necessarily be examined on the basis of the statutory parameters prescribed by the Income-tax Act and the evidence legitimately available for that purpose, and not by substituting the Commissioner (Exemptions) for the regulatory authority constituted under a different legislative framework.

41. Having examined the jurisdictional aspect, we may now consider whether the factual conclusions recorded by the learned CIT(E.) regarding the implementation of the Indigent Patients Fund Scheme are borne out from the record. In our considered opinion, the answer has to be in the negative. The learned CIT(E.) has repeatedly observed that the assessee failed to furnish complete particulars relating to indigent patients, economically weaker section patients and compliance with the statutory scheme. However, a careful examination of the material placed before us reveals that the assessee had, in response to successive notices, furnished comprehensive details including year-wise and month-wise summaries of beneficiaries, statistical statements, acknowledgements evidencing filing of prescribed reports before the office of the Charity Commissioner, inspection reports of the Monitoring Committee, illustrative patient records, explanatory notes and detailed submissions explaining the manner in which the Scheme was implemented. The assessee had also categorically stated that the complete monthly reports, running into several thousand pages, had already been filed before the competent authority under the Maharashtra Public Trusts Act and that, for practical reasons, representative compilations together with official acknowledgements were being furnished before the learned CIT(E.), while simultaneously expressing its readiness to produce any original report or underlying record whenever called upon to do so. The record does not disclose that any such specific requisition remained uncomplied with. In these circumstances, the broad observation that the assessee had failed to furnish the relevant material does not appear to be supported by the record itself.

42. The obligation of a quasi-judicial authority is not merely to call for information but also to objectively evaluate the information once it is placed on record. The impugned order, however, proceeds largely on the assumption that relevant particulars were unavailable without undertaking a corresponding examination of the extensive documentary evidence admittedly produced during the proceedings. We do not find any discussion identifying the particular reports which were allegedly deficient, the specific records which remained unavailable despite repeated opportunities or the precise information whose absence prevented the learned CIT(E.) from arriving at an informed conclusion. A finding of non-compliance cannot rest upon a generalised observation when the record itself demonstrates repeated production of documents in response to successive notices. If the authority remained dissatisfied with any particular aspect of the material furnished, the principles of fair adjudication required him to indicate with reasonable specificity the deficiencies noticed and to afford an effective opportunity to explain or remove them. In the absence of such an exercise, the conclusion that the assessee failed to furnish the necessary particulars loses much of its factual foundation.

43. There is another equally important aspect which appears to have escaped consideration. The material placed before the learned CIT(E.) indicates that the charitable activities undertaken by the assessee were not confined to the minimum statutory obligations contemplated under the Indigent Patients Fund Scheme. The assessee had specifically explained, supported by documentary material, that apart from reserving beds and extending treatment in accordance with the statutory framework, it had also evolved an independent mechanism through its Medical Social Work Department for identifying financially distressed patients requiring medical assistance. Based upon socio-economic evaluation, free or substantially concessional treatment was extended in deserving cases even where such assistance was not strictly mandated under the statutory scheme. The expenditure incurred under these independent charitable initiatives, according to the material placed before us, substantially exceeded the minimum obligations arising under the IPF Scheme. This factual aspect assumes considerable significance because it demonstrates that the charitable commitment of the institution was not confined to formal statutory compliance but extended beyond it through voluntary application of its own resources. Unfortunately, while the impugned order examines the alleged deficiencies in statutory compliance in considerable detail, it does not undertake any meaningful evaluation of this broader charitable activity, which formed an integral part of the assessee’s case throughout the proceedings.

44. We also find considerable substance in the submission that the learned CIT(E.) has, to some extent, conflated two distinct issues, namely, the quantum of charges recovered from paying patients and the discharge of obligations towards indigent patients. These two aspects operate in different spheres. The tariff structure adopted by a hospital may be relevant while examining its financial model, but it does not, by itself, determine whether the statutory obligations towards indigent and economically weaker patients have been fulfilled. Conversely, compliance with the Indigent Patients Fund Scheme has to be evaluated on the basis of the criteria prescribed under the governing regulatory framework and the evidence relating to implementation of that Scheme. The fact that a hospital charges market-based tariffs from patients capable of bearing the cost of advanced medical treatment cannot automatically lead to the inference that it has neglected its obligations towards the economically weaker sections. The two issues require separate examination on distinct factual parameters. In the impugned order, however, these considerations appear to have merged into one another, resulting in the conclusion that because the hospital generated substantial revenue from paying patients, its compliance with the charitable obligations under the IPF Scheme became doubtful. In our respectful opinion, such an inference does not logically follow unless supported by independent evidence demonstrating actual failure to discharge those obligations.

45. We are, therefore, of the considered opinion that the second principal foundation of the impugned order cannot be sustained in the manner in which it has been recorded. This conclusion, however, should not be understood as an expression of opinion on every aspect of the implementation of the Maharashtra Public Trusts Act or the Indigent Patients Fund Scheme, for those matters continue to remain within the jurisdiction of the authorities entrusted with administration of that enactment. Our conclusion is confined to the limited question arising under section 12AB of the Income-tax Act, namely, whether the material relied upon by the learned CIT(E.) legitimately justified the inference that the activities of the assessee had ceased to be genuine or that its charitable character stood extinguished. On the material presently available before us, we are unable to arrive at such a conclusion. The evidence on record, viewed in its entirety, does not establish abandonment of the charitable objects, cessation of medical relief activities or conduct inconsistent with the institutional character of the assessee as a charitable healthcare organisation. We, therefore, proceed to examine the third and perhaps the most substantial basis of the impugned order, namely, whether the charging of substantial fees from paying patients and the generation of operational surplus are, in law, sufficient to conclude that a charitable hospital has assumed the character of a commercial enterprise.

46. We shall now examine the third and the principal foundation upon which the impugned order rests, namely, the conclusion that the assessee hospital is being run substantially on commercial lines and has, therefore, ceased to retain its charitable character. A substantial part of the reasoning of the learned CIT(E.) proceeds upon the premise that the hospital charges considerable fees from paying patients, provides premium medical facilities, generates substantial annual receipts and consistently reports operational surplus. From these financial indicators, the learned CIT(E.) has drawn the inference that the institution is functioning predominantly as a commercial enterprise rather than as a charitable institution engaged in medical relief. In our considered opinion, this approach proceeds on an incorrect understanding of both the statutory scheme and the practical realities governing the functioning of a modern tertiary-care charitable hospital. The Income-tax Act nowhere prescribes that a charitable hospital must provide treatment only at concessional rates, nor does it mandate that it should operate on a “no surplus” basis. Equally, there is no statutory prescription requiring every patient to receive treatment free of cost. The enquiry contemplated by the Act is altogether different. The real question is whether the institution exists predominantly for carrying out the charitable purpose of medical relief and whether the income generated by it continues to be deployed towards advancement of that charitable object. The enquiry is not directed towards determining whether the hospital could have charged lower tariffs or whether it should have adopted a different financial model.

47. It is necessary to appreciate that the economics of a modern tertiary healthcare institution bear little resemblance to those of an ordinary commercial establishment. A hospital of the stature and scale of the assessee is required to maintain sophisticated diagnostic laboratories, intensive care units, transplant facilities, robotic surgical systems, advanced imaging technologies, specialised operation theatres, infection control mechanisms, blood banks, research laboratories, teaching facilities and highly trained multidisciplinary medical teams. These are not optional luxuries but indispensable components of contemporary tertiary healthcare. The acquisition, maintenance and periodic upgradation of such infrastructure involve enormous recurring expenditure. Likewise, recruitment and retention of highly qualified doctors, surgeons, researchers, nurses, technicians and allied healthcare professionals necessarily require substantial financial resources. It is, therefore, neither realistic nor legally permissible to examine the tariff structure of such an institution in isolation without simultaneously appreciating the nature of the services rendered and the cost necessarily incurred for sustaining those services. A charitable hospital cannot be expected to compromise the quality of healthcare merely because it seeks to retain its charitable status under the Income-tax Act.

48. The financial model adopted by most charitable hospitals across the world is one of cross-subsidisation. Patients who possess the financial capacity to bear the cost of specialised medical treatment are charged accordingly, thereby generating resources which enable the institution to provide free or substantially subsidised treatment to patients who lack such means. The paying patient and the indigent patient are thus not competing interests but complementary components of the same charitable model. Revenue generated from one category sustains the charitable obligation owed to the other. If hospitals engaged in charitable medical relief were precluded from recovering realistic costs from patients capable of paying, the inevitable consequence would be a serious erosion of their ability to maintain advanced medical infrastructure and, ultimately, a corresponding reduction in their charitable outreach itself. Parliament, being fully conscious of these practical realities, has consciously refrained from imposing any statutory ceiling on tariffs or any prohibition against generation of operational surplus in the case of institutions engaged in medical relief. The statutory emphasis continues to remain on the dominant charitable purpose and the ultimate deployment of income rather than on the quantum of receipts realised from individual patients.

49. The impugned order appears to proceed upon the assumption that because the hospital provides premium accommodation, sophisticated medical facilities and specialised treatment at market-based tariffs, it necessarily operates with a predominant profit motive. We are unable to subscribe to such a proposition. The quality of medical infrastructure or the standard of treatment provided cannot, by themselves, determine the charitable character of an institution. A charitable hospital is not expected to remain technologically stagnant or confine itself to basic healthcare facilities in order to preserve its charitable identity. On the contrary, advancement in medical science demands constant investment in research, technology, innovation and specialised treatment facilities. If charitable institutions are discouraged from developing world-class medical infrastructure on the ground that such infrastructure necessarily involves higher costs and correspondingly higher tariffs for paying patients, the ultimate casualty would be the very objective of advancing public healthcare. The statute does not envisage such a result. Medical excellence and charitable purpose are not mutually exclusive concepts; rather, in the field of tertiary healthcare, the former often becomes the means through which the latter is effectively realised.

50. Equally significant is the fact that the learned CIT(E.) has nowhere recorded any finding that the surplus generated by the assessee has been diverted for private gain or distributed amongst trustees, members or any specified persons. There is no allegation that dividends have been declared, profits appropriated for personal benefit or funds siphoned away from the charitable objects of the Society. On the contrary, the financial statements and the material placed before us indicate that the surplus generated from the hospital operations continued to remain within the institution and was utilised for expansion of medical facilities, acquisition of equipment, modernisation of infrastructure, medical education, research programmes and furtherance of the charitable objects embodied in the Memorandum of Association. This distinction is fundamental. Generation of surplus is a matter of financial result; profit motive is a matter of institutional purpose. The two concepts cannot be equated. An institution may consistently generate surplus and yet remain genuinely charitable if that surplus is only incidental to, and ultimately deployed in furtherance of, its charitable objects. Conversely, an institution may show little or no surplus and yet pursue predominantly commercial objectives. The decisive test under the Act has always been the dominant purpose for which the institution exists and the manner in which its resources are ultimately applied.

51. We also find that the learned CIT(E.) has placed considerable reliance upon comparative financial indicators, average tariffs and broad economic data to conclude that the hospital caters predominantly to affluent sections of society. Such comparisons, though statistically possible, cannot substitute the statutory test prescribed by Parliament. The Income-tax Act does not require a charitable hospital to benchmark its tariffs against median household income, average per capita earnings or other macro-economic indicators. Nor does it prescribe that every charitable hospital must exclusively serve economically weaker sections. A hospital engaged in medical relief may legitimately cater to patients belonging to different economic strata, provided its dominant purpose remains charitable and it continues to discharge its obligations towards those unable to afford treatment. Indeed, it is often the treatment provided to paying patients that generates the financial capacity necessary to extend medical assistance to indigent patients. Therefore, the existence of patients paying market-based tariffs does not, by itself, furnish a legal basis for concluding that the institution has abandoned its charitable purpose.

52. Having regard to the statutory framework, the evidence available on record and the practical realities governing the functioning of charitable healthcare institutions, we are unable to uphold the conclusion of the learned CIT(E.) that the assessee has ceased to be a charitable institution merely because it has developed advanced medical infrastructure, charges appropriate tariffs from paying patients and generates operational surplus in the course of its activities. Such factors, viewed either individually or collectively, do not satisfy the statutory test contemplated under section 12AB. The true enquiry is whether the institution continues to exist predominantly for the charitable purpose of medical relief and whether its activities remain genuine. On the material before us, the answer to both these questions is clearly in the affirmative. We shall now proceed to examine whether, quite apart from the legal infirmities noticed above, the appreciation of the documentary evidence by the learned CIT(E.) itself suffers from material omissions affecting the sustainability of the impugned orders.

53. Having examined the legal sustainability of the principal conclusions recorded by the learned CIT(E.), we may now independently evaluate the documentary evidence which formed part of the proceedings. This exercise assumes significance because an appellate authority is not merely required to examine whether reasons have been recorded but also whether those reasons emerge from a fair and objective appreciation of the material available on record. In the present case, the assessee had placed before the learned CIT(E.) an unusually comprehensive body of documentary evidence extending far beyond the ordinary records generally produced in proceedings under section 12AB. Apart from its constitutional documents, audited financial statements and annual reports, the assessee furnished statistical statements relating to indigent and economically weaker patients, details of free and concessional treatment, acknowledgements evidencing submission of statutory reports before the Charity Commissioner, reports of the Monitoring Committee, explanatory notes regarding the functioning of the Medical Social Work Department, illustrative patient records, internal implementation guidelines and detailed written submissions explaining every objection raised during the course of the proceedings. The record thus does not disclose a case where registration came to be rejected for want of cooperation or absence of material. On the contrary, it is a case where voluminous material was admittedly produced and the controversy centres around the manner in which that material came to be appreciated by the learned CIT(E.).

54. One aspect which particularly deserves notice is the consistent stand taken by the assessee regarding the monthly reports submitted under the Maharashtra Public Trusts Act. The assessee specifically explained that these reports, maintained on a continuous basis over several years, comprised several thousand pages and had already been filed before the competent regulatory authorities in accordance with the statutory requirements. Recognising the practical difficulty in reproducing the entire record before the Incometax authorities, the assessee furnished representative summaries together with official acknowledgements establishing that the prescribed reports had in fact been submitted before the Charity Commissioner. Simultaneously, the assessee expressed its willingness to produce any original report or underlying record which the learned CIT(E.) considered necessary for verification. This assertion assumes importance because the impugned order does not indicate that any particular report was thereafter requisitioned and withheld by the assessee. In such circumstances, an adverse inference founded upon alleged non-production of records ought not to have been drawn without first calling upon the assessee to produce the specific documents considered necessary for adjudication. The principles governing quasijudicial proceedings require that where an authority considers the material already produced to be insufficient, the deficiency should be clearly indicated before adverse conclusions are reached.

55. We also find that the reports of the Monitoring Committee, which formed part of the documentary record, have not received the consideration which they deserved. The Monitoring Committee is not an internal body constituted by the assessee but forms part of the institutional mechanism evolved for supervising implementation of the obligations cast upon charitable hospitals under the Maharashtra Public Trusts Act pursuant to the directions of the Hon’ble Bombay High Court. The significance of such reports lies not merely in the factual details contained therein but in the fact that they emanate from the very regulatory framework entrusted with monitoring compliance. If the learned CIT(E.) intended to depart from the factual position emerging from such contemporaneous material, it was incumbent upon him to record cogent reasons demonstrating why the said material was considered unreliable or insufficient. We find no such discussion in the impugned order. Instead, the conclusions appear to have been recorded without undertaking a comparative examination of the documentary evidence emanating from the statutory monitoring mechanism. Such an approach, in our respectful opinion, falls short of the standard of objective evaluation expected while exercising quasi-judicial powers having serious civil consequences.

56. Another feature emerging from the record is that the assessee had consistently asserted, and supported its assertion with documentary material, that the expenditure incurred by it towards free and concessional treatment was not confined to the minimum obligations prescribed under the Indigent Patients Fund Scheme. The Medical Social Work Department independently evaluated patients facing financial hardship and recommended financial assistance in deserving cases even where such cases did not strictly fall within the statutory parameters of the Scheme. Thus, the charitable activity undertaken by the assessee operated on two parallel planes first, compliance with the statutory obligations under the Maharashtra Public Trusts Act, and secondly, voluntary charitable assistance extended from its own resources in furtherance of its broader philanthropic objects. In our opinion, while evaluating the genuineness of the activities of a charitable institution under section 12AB, the authority is expected to examine the institution’s charitable conduct in its entirety. Concentrating exclusively upon alleged deficiencies in one segment of its activities while overlooking substantial evidence demonstrating wider charitable engagement inevitably results in an incomplete appreciation of the factual matrix. The evidence on record, viewed as a whole, does not indicate an institution attempting to evade its charitable responsibilities; rather, it reflects an institution engaged in organised and sustained charitable medical activities extending well beyond the minimum statutory framework.

57. We are, therefore, of the considered opinion that the appreciation of evidence by the learned CIT(E.) suffers from a material imbalance. Certain facts, particularly those relating to tariffs, receipts and financial indicators, have been examined in considerable detail, whereas equally relevant material relating to charitable expenditure, statutory reporting, regulatory oversight, discretionary charity and the institutional framework through which such activities were implemented has either received only cursory consideration or has remained substantially undiscussed. Judicial determination, particularly in proceedings affecting the continued charitable status of a long-standing institution, requires evaluation of the entire evidentiary landscape rather than selective reliance upon isolated circumstances. When the record is examined in its totality, the evidence overwhelmingly demonstrates that the assessee has continued to carry on the activity of medical relief through an established institutional framework, that such activities are genuine, and that the conclusions recorded in the impugned orders are not supported by a comprehensive appreciation of the material placed before the authority. It is in the backdrop of this evidentiary position that the legality of the retrospective cancellation of registration and the consequential rejection of approval under section 80G now requires consideration.

58. We shall now examine the legality of the retrospective cancellation of registration, which constitutes one of the most serious consequences flowing from the impugned order. The learned CIT(E.), while rejecting the application under section 12AB, has also directed cancellation of the registration already available to the assessee with retrospective effect. In our considered opinion, such a course is wholly unsustainable both on facts and in law. Registration granted under section 12A or section 12AA, and now continued under section 12AB, is not intended to remain perpetually vulnerable to retrospective withdrawal merely because, at a later stage, the Commissioner entertains a different opinion regarding the manner in which certain expenditures have been incurred or certain statutory provisions ought to have been interpreted. The legislative scheme proceeds upon the principle that once an institution has been recognised as existing for charitable purposes, that recognition continues unless the statutory conditions warranting cancellation are clearly established on the basis of cogent material. The power of cancellation, therefore, is undoubtedly an important supervisory power, but it is equally a power which carries grave civil consequences and must consequently be exercised within the narrow confines prescribed by the statute. It cannot be converted into an instrument for reopening the settled charitable status of an institution on debatable issues which properly belong to the domain of assessment.

59. The expression “activities are not genuine” or “are not being carried out in accordance with the objects”, which forms the statutory foundation for cancellation of registration, has acquired a well-understood legal connotation. The enquiry is directed towards the authenticity of the charitable activities themselves and their conformity with the declared objects of the institution. It contemplates situations where the institution has either abandoned its charitable objects, diverted its activities towards purposes alien to those objects, or is functioning in a manner that demonstrates that the professed charitable purpose is merely a facade. Mere disagreement regarding the allowability of a particular item of expenditure, interpretation of a statutory provision, method of accounting, quantum of application of income or compliance with conditions governing exemption cannot automatically lead to the conclusion that the activities themselves have ceased to be genuine. If every debatable issue arising during assessment were to furnish a ground for cancellation of registration, the statutory distinction between registration proceedings and assessment proceedings would stand completely obliterated. Parliament has consciously maintained these as two separate jurisdictions, each intended to operate within its own field.

60. Applying the aforesaid principles to the facts before us, we find no material whatsoever which demonstrates that the assessee has abandoned its foundational object of providing medical relief. The hospital continues to function as a tertiary-care charitable institution. It continues to render specialised medical treatment, undertake research, provide medical education, extend free and concessional treatment to financially weaker patients, maintain statutory charitable programmes and apply its resources towards expansion and improvement of healthcare infrastructure. The Memorandum of Association remains unchanged. The charitable objects continue to subsist. There is no allegation that the institution has been converted into a profit-distributing enterprise or that its income has been appropriated for the personal benefit of trustees or specified persons. Equally, there is no finding that the hospital has ceased to carry on the activity of medical relief. The entire reasoning of the learned CIT(E.) proceeds upon certain perceived deficiencies in the manner of application of income and interpretation of statutory obligations. Even if such issues were assumed to exist, they would, at the highest, require examination in the appropriate assessment proceedings. They do not furnish a legal foundation for retrospectively extinguishing the charitable status of an institution which has continued to pursue the very objects for which it came into existence.

61. The retrospective nature of the impugned action renders the matter even more serious. Retrospective cancellation does not merely affect the year in which the alleged irregularity is noticed; it unsettles the legal status of the institution for earlier years during which it had functioned on the legitimate assumption that its registration continued to remain valid. Such a consequence necessarily has cascading implications for exemption under section 11, accumulation of income, donor confidence, approvals granted under allied provisions and several completed assessments. It is precisely because of these far-reaching consequences that the statutory power of cancellation cannot be exercised on assumptions, general observations or debatable legal interpretations. The existence of clear, objective and convincing material demonstrating cessation of genuine charitable activities becomes an indispensable pre-condition before such an extraordinary power can be invoked. We do not find any such material on the record before us. The impugned order, in substance, proceeds by treating disputed issues relating to section 11(1)(c), compliance with the Maharashtra Public Trusts Act and the financial model of the hospital as sufficient to retrospectively withdraw registration. In our considered opinion, such an approach is fundamentally inconsistent with the statutory framework governing section 12AB.

62. Once the order cancelling registration is found to be unsustainable, the consequential rejection of approval under section 80G also cannot survive independently on the reasons recorded in the impugned order. The reasoning adopted while refusing approval under section 80G is substantially founded upon the very conclusions which we have already held to be legally untenable, namely, that the activities of the assessee are not genuine, that the institution has assumed a commercial character and that the charitable status itself deserves to be withdrawn. Approval under section 80G undoubtedly has its own statutory requirements; however, where the foundation on which the rejection rests itself disappears, the superstructure erected upon that foundation cannot continue to stand. More importantly, we find no independent material brought on record by the learned CIT(E.) demonstrating that the statutory conditions governing approval under section 80G stood violated on grounds separate and distinct from those relied upon for cancellation of registration. Consequently, the impugned order rejecting approval under section 80G also becomes unsustainable.

63. Before parting, we consider it necessary to observe that the present decision should not be understood as restricting the jurisdiction of the Assessing Officer to examine, in appropriate assessment proceedings, the allowability of exemption in relation to any specific item of expenditure, the applicability of section 11(1)(c), or compliance with the provisions contained in sections 11 to 13 of the Act, if such issues legitimately arise on the facts of a particular assessment year. Those questions continue to remain open for examination in accordance with law on the basis of the evidence relevant to the respective assessment year. Our decision is confined to the limited but important question arising before us, namely, whether the material relied upon by the learned CIT(E.) legitimately justified cancellation of the assessee’s registration under section 12AB and the consequential rejection of approval under section 80G. For the reasons discussed in the foregoing paragraphs, our answer to that question is unequivocally in the negative. The impugned orders, therefore, cannot be sustained.

64. Having carefully considered the entire factual matrix, the statutory scheme governing sections 12AB and 80G of the Act, the documentary evidence placed before the learned CIT(E.) as well as before us, and the reasons assigned in the impugned orders, we are unable to sustain the conclusions reached therein. None of the grounds relied upon by the learned CIT(E.), whether relating to reimbursement of expenditure incurred by doctors for attending professional conferences and training programmes abroad, the alleged non-compliance with the provisions of section 41AA of the Maharashtra Public Trusts Act and the Indigent Patients Fund Scheme, or the financial model adopted by the assessee in charging paying patients and generating operational surplus, either individually or collectively, establishes that the activities of the assessee are not genuine or that they are not being carried out in accordance with its stated charitable objects. On the contrary, the material placed on record overwhelmingly demonstrates that the assessee continues to carry on the charitable activity of medical relief through a well-established institutional framework; that its objects remain unchanged; that its activities continue to be directed towards providing advanced medical care, medical education and research in furtherance of those objects; and that the income generated from its operations is deployed towards strengthening and expanding its charitable healthcare activities. The findings recorded by the learned CIT(E.) substantially proceed upon issues concerning the allowability of exemption, interpretation of particular statutory provisions and appreciation of individual items of expenditure, all of which properly fall within the domain of assessment proceedings and cannot, in the facts of the present case, furnish a valid foundation for holding that the activities of the assessee have ceased to be genuine or are no longer being carried out in accordance with its charitable objects. We, therefore, hold that the learned CIT(E.) was not justified either in cancelling the registration granted to the assessee under section 12AB of the Act or in rejecting its application for approval under section 80G.

65. Accordingly, the impugned order passed by the learned CIT(E.) cancelling the registration granted to the assessee under section 12AB is hereby set aside and the registration of the assessee shall continue in accordance with law. For the very same reasons, the consequential order rejecting approval under section 80G is also set aside.

66. In the result, ITA No. 4201/Mum/2026 challenging the cancellation of registration under section 12AB is allowed. Consequently, ITA No. 4200/Mum/2026 challenging the rejection of approval under section 80G is also allowed.