Grant Of Certificate Under S. 80-G Of I-T Act Would Not Automatically Exempt Certificate Holder From Payment Of Bonus: Delhi HC [Read Judgment]

The Delhi High Court has ruled that grant of a certificate under Section 80-G of the Income Tax Act, which allows deduction of donations or funds to institutes established for charitable purposes, would not automatically lead to an exemption from the purview of the Payment of Bonus Act, 1965.

Justice C. Hari Shankar was hearing an Appeal filed by the Batra Hospital Employees Union, challenging an order passed by the Industrial Tribunal-I, Karkardooma which had held that the 1965 Act would not apply to Batra Hospital and Medical Research Centre. The Tribunal had rejected the Union's claim for bonus, ruling that the Hospital had not been established for earning a profit.

The Union had now submitted that the "“charitable” exterior of the Hospital was a mere facade and that, therefore, the Hospital was reneging on its statutory obligation to disburse bonus under the Act".

The Court, at the outset, rejected the objections with regard to the existence of the Union itself as put forth by the Hospital, opining that the Hospital was trying to make a mountain out of a molehill in order to avoid an adjudication on merits.

It then went on to interpret Section 32(v)(c) of the Act, which excludes from the purview of the Act employees working with hospitals "established not for purposes of profit". It opined that the provision must be interpreted expansively rather than restrictively, observing, "In the case of an institution which is making profits, therefore, the judicial effort, clearly, has to aim at ensuring bonus, to its workers, rather than denying the same by resorting to any hyper-technical interpretation of the statute. Of course, if the statute unambiguously excludes an institution, then, needless to say, it is no part of the duty of the court to bend backwards to encompass the institution within the ambit thereof."

It then went on to reject the reliance placed by the Hospital on the exemption granted to it under Section 80-G (5) of the I-T Act, noting that under the I-T Act, providing medical relief, ipso facto, is treated as a 'charitable purpose'. It therefore ruled, "In view of the somewhat peculiar definition of “charitable purpose”, contained in clause (15) of Section 2 of the Income Tax Act, therefore, it is not possible to regard grant of a certificate, under Section 80-G (5) of the Income Tax Act, as automatically excepting the holder of such certificate from the applicability of the Payment of Bonus Act."

The Court further explained, "That apart, the object and purpose of the Income Tax Act, and of the Payment of Bonus Act, are completely distinct and different from each other. Per sequitur, the purpose of grant of exemption, in respect of donations made to an organization certified under Section 80-G of the former Act, would be distinct from the purpose of granting immunity, to an organization or institution, from the applicability of the Payment of Bonus Act, under Section 32(v)(c) thereof. No attempt has been made, before me, to equalize, or even analogise, the objects and purposes of the two statutes. What is being sought to be contended is that recognition under Section 80-G of the Income Tax Act would, for that very reason, exclude the institution from the applicability of the Payment of Bonus Act. I am unable to agree with the said contention."

It then noted that the Hospital was, in fact, earning profits and rapped the Hospital for not complying with the provisions of the 1965 Act. Quashing the impugned award, it observed, "It has to be realised, in this context, that expectation of profit, while running an enterprise, is not a sin. Neither is it immoral to run a hospital on commercial lines. However, earning of such profit would necessarily entail the responsibility of sharing some part of such profit with the employees or workmen, whose effort have significantly contributed towards the earning of the profit. That is all that the Act requires, and it would be ex facie unconscionable, for the enterprise, to shirk the said responsibility."