Reliance Foundation wins charity status appeal against tax authorities

The Income Tax Appellate Tribunal (ITAT) has ruled in favor of Reliance Foundation, overturning the tax department's cancellation of its Mumbai hospital's charitable registration. The tribunal stated that medical relief qualifies as charity irrespective of the prices charged or the level of facilities offered, and that tax laws do not require services to be affordable to the average household.

The decision, which has implications for other charitable trusts, clarifies that an institution does not cease to be charitable simply because it achieves excellence or charges affluent patients more to subsidize care for the needy. The ITAT emphasized that the focus under Section 12AB of the Income Tax Act should be on whether an institution genuinely pursues its charitable objectives, not on a subjective assessment of whether it meets an ideal standard.

The tribunal quashed the retrospective cancellation of Reliance Foundation's registration, upholding it for another five years. Experts noted that while affordability and tariffs may have social relevance, they are not statutory tests for charity under the IT Act. The ruling also highlighted that generating a surplus does not inherently indicate a profit motive, especially when funds are reinvested into charitable work.