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Consistent Surplus Does Not Negate Charitable Status of Hospitals – Bombay HC October 22, 2026
Published in: Alerts
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The Bombay High Court, in Breach Candy Hospital Trust v. CCIT (Writ Petition No. 2462 of 2010, order dated 12 October 2026), has held that the consistent generation of surplus by a charitable hospital does not, by itself, negate its philanthropic character or disentitle it from tax exemption under Section 10(23C)(via) of the Income-tax Act, 1961.
The Court observed that the determination of whether an institution exists solely for philanthropic purposes and not for profit must consider its actual objects, activities, and utilisation of income. It emphasised that surplus must be assessed alongside capital expenditure on medical equipment, infrastructure, modernisation, and expansion.
In the absence of profit distribution, diversion of funds, or private enrichment, the generation of recurring surplus cannot be treated as conclusive evidence of a profit motive. The Court accordingly directed renewal of the hospital’s registration for five years.
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