Case: The Management of the Tata Iron &amp; Steel Co. Ltd Vs. Chief Inspecting Officer &amp; Others

is incidental purpose then it will not be entitled to the benefit. In the present case, neither of the situation arises. It is established that this hospital caters as a social measure for the employees of the appellant Management and its associated industries and for the benefit of the Government servants as well as private patients, on payment of fee. Therefore, it does not qualify for any cause as charitable institution so as to be exempted under Section 4(2) of the Act read with item No. 2 of Schedule I. In this connection, our attention was also invited to a decision in the case of Le Cras v. Perpetual Trustee Co. Ltd. & Ors., reported in (1967) 3 All. E.R. 915. In this case, a testator bequeathed by his will two-thirds of the income of his residuary estate to the Sisters of Charity for the general purposes of St. Vincent?s Private Hospital for a period of two hundred years or for so long as they should conduct the Hospital. The private hospital was having 82 beds and close to a public hospital which had 500 beds. This was also conducted by the Sisters of Charity who were a voluntary association of women devoting themselves without reward. The reason for establishing the private hospital was to relieve the pressing demand of the public for admission to the general hospital. Charges were made at the private hospital for beds; it provided accommodation and medical treatment in greater privacy than would be possible in a general hospital. There were surpluses of income over expenditure but the private hospital was not conducted for profit. The surpluses had been used to contribute to the maintenance of the general hospital and for the general purposes of the Sisters of Charity. In that context Their Lordships held that the gift of income to the Sisters of Charity for the general purposes of the private hospital was a valid charitable gift. Therefore, what prevailed in the mind of Their Lordships is the dominant purpose for which the hospital was being run. That is not the case here. 13. Similarly in the case of Trustees of Tribune Press, Lahore v. Commissioner of Income-tax, Punjab, reported in AIR 1939 PC 208 , similar question arose under the Income Tax Act, 1922. In the said case while dealing with the Income Tax Act, 1922 held as follows: ?Though the personal or private opinion of the Judge is immaterial, nevertheless for a charitable gift to be valid it must be shown, (1) that the gift will or may be operative for the public benefit, and (2) that the trust is one the administration of which the Court itself could, if necessary, undertake and control. There is nothing in the Income-tax Act to discharge the Court of its responsibility in coming to a finding as to the character of the object of a trust a matter which bears directly upon its validity.? Here also the question was what is the dominant purpose for which the trust is created. If the trust is dominantly for the purpose of charity then of course it will qualify for the exemption. This is not the case here. Our attention was also invited to a decision of this Court in the case of Joseph Rowntree Memorial Trust Housing Association Ltd. & Ors. v. Attorney General, reported in (1983) 2 W.L.R. 214. Similarly, in this case also, the question came up for determination was whether the scheme was charitable in law or not. Their Lordships held as follows: ?That the words describing the beneficiaries of the first set of charitable purposes in the preamble to the Statute of Elizabeth had to be read disjunctively so that beneficiaries could be either aged, impotent or poor but that in order to be considered charitable the gift to such people had to have as its purpose the ?relief? of a need attributable to the condition of the beneficiaries; that, since the provision of special accommodation relieved a particular need of the elderly, whether poor or not, attributable to their aged condition, the schemes were within the scope of the charitable purpose of providing relief to the aged.? Therefore, the ratio is the dominant purpose in each case. If it is meant essentially for charitable purpose and not open for any other purpose, then of course such institution will qualify for exemption as charitable institution. 14. Similar, in the case of P.C. Raja Ratnam Institution v. M.C.D. & Ors., reported in 1990 (Suppl.) SCC 97, the question arose whether under Delhi Municipal Corporation Act, 1957, the school run by the society is covered under charitable purpose or not. Their Lordships held as follows: ?The test of `charitable purpose? is satisfied by the proof of any of the three conditions, namely, relief of the poor, education, or medical relief. The fact that some fee is charged from the students is also not decisive inasmuch as the proviso indicates that the expenditure incurred in running the society may be supported either wholly or in part by voluntary contributions. Besides, the explanation is, in terms inclusive and not exhaustive.? However, in this case, Their Lordships remitted the case for fresh decision as the High Court had not adverted to the aforesaid cause. But in the present case, the facts are well known and it is more than clear that the establishment of the Hospital was not for charitable purpose, it was meant as social measure for the benefit of the employees of the appellant Management and its associated industries as a statutory obligation and for the other patients charges were levied. Therefore, by no stretch of imagination it can be said that Hospital is being run for a charitable purpose. 15. In the result, in view of our discussions made above, we find that the view taken by the High Court is correct and there is no ground to interfere with the same. The appeal is accordingly dismissed. No costs. Civil Appeal No. 2309 of 1999:

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]So far as the definition of ‘business? is concerned, it is clear from the facts that right from the beginning when the Hospital was established, it was catering to the needs of the employees and their families at TISCO and its associated companies but at the same time it was open for the Government servants and private patients also. The Government servants and private patients were charged for their treatment in the Hospital. It is not primarily meant to cater to the employees of the appellant or their associated companies but also for the private individuals also. Therefore, it cannot be said that the Hospital was only meant to cater the need of the employees of the appellantIt may also be relevant to mention here that the establishment of the present Hospital is an obligation on the part of the appellant management because otherwise they had to contribute under the Employees State Insurance Act, 1948. Under the said Act the employees as well as the employer, both have an obligation to make contribution for the medical facilities provided by the E.S.I. Hospitals. All the establishments have to get themselves registered under Section 2A of the E.S.I. Act. They have also to make necessary contribution as per the provisions of the Act. At the same time, under Section 87 of the Act, exemption can also be granted by the Government by issuing notification exempting any factory or establishment or class of establishments in any specified area from operation of this Act for a period of one year and may from time-to-time by like notification renew any such exemption for periods not exceeding one year at a time.It is admitted by learned Counsel for the appellant that the present establishment had obtained exemption up to the year 1996 but after that exemption was not granted and a petition was filed in the Court and stay order has been granted.Therefore, even if the establishment of the Hospital may be for the purpose of taking care of their employees, it is under statutory obligation of the appellant management otherwise they would have to make registration under Section 2A of the E.S.I. Act, 1948. It is admitted that the appellant sought exemption from operation of the Act which was granted upo to the year 1996. Be that as it may, the fact remains that from the materials available on record it is apparent that the Hospital is not only catering for the employees but it caters to the Government and private patients as well for which it is charging fee for the services rendered, it is irrelevant. Whether it is running for profit or loss. Profit or loss is part of the business and it is incidental to every business. Therefore, it is not decisive of the matter whether the establishment is running for profit or gain.  In the present case,from the facts as mentioned above, it is more than evident that the Hospital is not being run for the employees of the appellant management or their associated industries only but it caters to the need of the Government servants as well as private patients and fee is charged from them. Therefore, the Hospital is doing business and it is not doing charityAnother aspect that was emphasised was that since it is running in loss and it is not making any profit, therefore, it is not covered by the definition of establishment. It may be relevant to mention that the profit or loss is not decisive of the matter with regard to the, to say that the Hospital is not making any profit that is not the touchstone whereby we can judge whether they are doing the business or not. If the activity is frequent, continuous and relating to business, whether they earn profit or not that is not the crux of the matter. Profit or loss is incidental to the business. What is essential is the frequency, continuity and relating to transactions. These ingredients are present in the present activities of the Hospital that it is continuing and regularly taking care of the patients be it private patients or patients belonging to the appellant management or their associated industries. Therefore, the emphasis of the learned Counsel that it is not making profit is not relevant for the present, from the materials placed by the parties, it is more than apparent that the present Hospital is a part of the establishment of the appellant management and it caters not only for the employees of the appellant management and its associated companies but for Government servants and private patients as well from whom fee is charged. Therefore, they are doing business and they fall within the definition of establishment as defined in Section 2(6) of the Act12. The next question which has been argued by learned Senior Counsel for the appellant was that it was doing charity, therefore, it is entitled to exemption under Section 4(2) read with item No. 2 of Schedule I. We fail to understand how this activity of the present Hospital can be treated to be a charity. As pointed out above, it is under the obligation of the appellant Management to subscribe for the employees under the Employees State Insurance Act, 1948 by making contribution. Since they were not subscribing contribution because they obtained exemption under Section 87 of the E.S.I. Act, 1948 as they run the hospital for the benefit of the employees, the exemption was granted to them till 1996 but subsequently that exemption was refused. Therefore, it cannot be said that what they are doing isn the present case, thedominant purpose is to cater for the needs of the employees of the appellant Management and its associated Industries. In fact, it was established for that particular purpose only. But the services were also extended to Government servants and to the private patients not free of cost. Therefore, the dominant purpose for establishing the hospital is not charitable which is exempted under the Act and the law which has been laid down by this Court in the aforesaid case is that the principle of dominant purpose should be found out from the activities or the business. If the dominant purpose is appearing as charity then it will be admissible to the benefit of a charity and if it is incidental purpose then it will not be entitled to the benefit.In the present case,neither of the situation arises. It is established that this hospital caters as a social measure for the employees of the appellant Management and its associated industries and for the benefit of the Government servants as well as private patients, on payment of fee. Therefore, it does not qualify for any cause as charitable institution so as to be exempted under Section 4(2) of the Act read with item No. 2 of Schedule I.15. In the result, in view of our discussions made above, we find that the view taken by the High Court is correct and there is no ground to interfere with the same. The appeal is accordingly dismissed. No costsCivil Appeal No. 2309 of 1999: