A.B. Rohatgi, J.
(1) This petition raises a question of general importance for all charitable organisations. The question is whether lands and buildings exclusively occupied and used by a society or a body for charitable purpose can be subjected to tax or they can claim relief from municipal taxation.
(2) These are the facts. The New Delhi Holy Family Hospital Society is a charitable Society duly registered under the Societies Registration Act, 1860. Its objects are 'to perform works of charity by caring for the sick and disabled without distinction of caste, religion or race.' It can establish hospital for the care of the sick in pursuance of these objects. The Society runs a hospital known as Holy Family Hospital at Okhia. This hospital has indoor as well as outdoor patients departments. It also imparts instructions to nurses, medical technicians, pharmacists, etc. For this purpose it has erected a huge complex of buildings.
(3) The important point to notice about the Society is that it is a nonprofit making society. It is provided in the Memorandum of Association of the Society that 'all the income of the Society from properties vesting in it or from wheresoever derived shall be expended solely on the objects of the Society and for no other purpose, and no portion thereof shall be distributed among its members by way of profits, dividends, bonuses etc.'
(4) There are two departments of the hospital with which we are immediately concerned in this case. One is called the General O.P.D. The other is called the Private O.P.D. In the General O.P.D. any one can go for medical help and treatment. He has to pay Rs. 3.00 for the first time and Rs. 1.00 for every subsequent visit that he make to the General O.P.D. In the Private O.P.D. things are different. The patient has to pay Rs. 40.00 for every visit. In the Private O.P.D. he has not to jostle with the crowd of hundreds of patients. He can have a prior appointment with the doctor and go at the appointed time and consult him. This is a special facility provided to those who can afford to pay. In General O.P.D. no patient is denied the facility of medical care, it is true. But there is a long queue where he has to wait, may be for hours together.
(5) The arrangement made by the Society with regard to the doctors is this. The same doctors who examine the patients in General O.P.D on Mondays, Wednesdays and Fridays available for consultation to the patients in the Private O.P.D. on Tuesdays, Thursdays and Saturdays If a patient wants to consult a particular doctor and can a:tord to pay Rs. 40.00 he can consult him in the Private O.P.D. on one of these days. He need not take the trouble to going to the General O.P.D. and wait there for his turn
(6) For the purpose of opening the Private O.P.D. the Society has set apart eight rooms. The income received from this Private O.P.D. patients who -have the capacity to pay Rs. 40.00 per visit is used to subsidise and meet the costs of patients in the General Wards and the General O.P.D. of the hospital. The Society on affidavit has said that the income that is derived from there eight rooms of Private O.P.D. is applied for charitable purpose that it seeks to promote. That charitable purpose is medical relief. No part of the profits or income is paid as a dividend or bonus to its members.
(7) The Deputy Assessor and Collector of the Municipal Corporation of Delni, the respondent in this case, assessed these eight rooms and levied general tax under Section 115(5) of the Delhi Municipal Corporation Act 1957 (the Act). He arrived at Rs. 31 10.00 as the ratable value of these 8 rooms which are the subject matter of this writ petition. The Society has brought this writ petition to challenge his decision on the ground that general tax cannot be levied in respect of these premises are being exclusively occupied and used by the Society for a charitable purpose. It is the case of the Society that they are entitled to exemption under Section 115(4) of the Act and that they have wrongly been assessed under Section 115(5). The question for decision is whether Sub-section (4) will apply to these eight room of the society or Sub- section (5) will apply.
(8) Before dealing with this question I well sent out the relevant provisions of the Act:
'115.(1) ...... (2) ...... (3) ...... (4) Save as otherwise provided in this Act, the general tax shall levied in respect of all lands and buildings in Delhi except - (a) lands and buildings or portions of lands and buildings exclusively occupied and used for public worship or by a society or body for a charitable purpose ; Provided that such Society or body is supported wholly or in part by voluntary contributions, applies its profits, if any, or other income 'in promoting its objects and does not pay any dividend or bonus to its members.
(A)'Charitable purpose' includes relief of the poor, education and medical relief but does not include a purpose which relates exclusively to religious teaching ; (b) lands and buildings vested in the Corporation and not used for intended to be used exclusively for the purposes of the Delhi Electric Supply Undertaking, or the Delhi Water Supply and Sewage Disposal Undertaking, in respect of which the said tax, if levied, would under the provisions of this Act be livable primarily on the Corporation; (c) agricultural lands and buildings (other than dwelling houses). (5) Lands and buildings or portions thereof shall not be deemed to be exclusively occupied and used for public worship or for a charitable purpose within the meaning of clause (a) of Subsection (4), if any trade or business is carried on in such lands and buildings or portions thereof or if in respect of such lands and buildings or portions thereof, any rent is derived. (6) Where any portion of any land or building is exempt from the general tax by reason of its being exclusively occupied and used for public worship or for a charitable purpose such portion shall be deemed to be a 'separate property for the purpose of municipal taxation.'
(10) I have to interpret these provisions in this case. Sub-section (4)(a) of Section 115 says that on all lands and buildings in Delhi general tax shall be levied. On exception to this general rule is that lands and buildings or portions of lands and buildings which are exclusively occupied and used for public worship or by a society or body for a charitable purpose shall not be subject to the general tax. The proviso says that such society or body as is entitled to claim exemption under Sub-section (4)(a) must be a body supported wholly or in part by voluntary contributions. This is the first requirement for claiming exemption from liability to pay general tax. The second requirement is that the society or body must apply the profits or other income which it earns in promoting its objects and does not pay any dividend or bonus to members. This part of the proviso can be divided into two parts. Fitstly, the profits and income of the society must be applied in promoting the object to the Society. The second is that no part of the profit should be paid as dividend or bonus to its members.
(11) The expression 'charitable purpose' used in Sub-section (4)(a) is defined in the Explanationn as including relief of the poor, education and medical relief. The definition is not exhaustive as the word 'includes' is used. There is no dispute and it is not denied by the Corporation that the present Society is supported by voluntary contributions. The question is whether these eight rooms are entitled to exemption on the ground that they are being used exclusively for a charitable purpose.
(12) Counsel for the Corporation strongly relies on Sub-section (5) and says that these eight rooms are not exclusively used for a charitable purpose within the meaning of Sub-section (4)(a) of the Act because a business is carried on in these eight rooms. He submits that examining patients by charging Rs. 40.00 fees from each patient is a business and if the Society is engaged in business and uses these eight rooms of its buildings for this purposes then relying on Sub-section (6), he says, these eight rooms are a separate property for purpose of municipal taxation and are not exempt from the general tax merely because other portions of the buildings are being used exclusively for charitable purposes. In my opinion the argument of the counsel for the Corporation is based on a confusion of thought.
(13) The Central question in this case is whether the petitioner Society is an organisation established or conducted for profit. The Memorandum of Association of the Society expressly says that it is a non-profit making organisation. No dividend or share of income is payable to its members. Care for the sick and disabled without distinction of caste, religion or race is its main object. It is indeed a laudable object which benefits a wide and diverse cross-section of the community.
(14) The Society by its memorandum is required to perform works of charity by caring for the sick and disabled. The main object of the Society is, thereforee, a charitable object. The one thing that distinguishes charitable objects from all others is that they are for the good of the community, i.e., for public rather than for private benefit. In order to qualify the organisation for the relief given by Section 115(4) there must be present, I think, the concept of public benefit. 'For this purpose the main objects must be altruistic- must be concerned with doing good to others rather than for yourself-for others, that is, who are outside your own circle of relatives and friends and to whom you are under no personal obligation.' National Deposit Friendly Society Trustees v. Skegness Urban District Council 1959 A.C. 293 per Lord Denning).
(15) What is necessary, in order-to enable the Society to qualify for the benefit of Section 115(4) is that the main object of the Society must be a charitable purpose e.g., relief of the poor, education and medical treatment. (See Income Tax Special Purposes Commissioners v. Pemsel (18)1) A.C. 531 per Lord Macnaughten.
(16) As long ago as 1898 Fitz Gibbon L.J. said in an Irish case :
'THE essential attributes of a legal charity are, in my opinion, that it shall be unselfish-i.e., for the benefit of other persons than the donor-that it shall be public, i e., that those to be benefited shall form a class worthy, in numbers or importance, of consideration as a public object of generosity, and that it shall be philanthropic or benevolent-i.e., dictated by a desire to do good.'
(In re Cranston Webb v. Oldfield (1898) A.C. 431.
(17) Counsel for the Corporation says that the Society is engaged in business because in the Private O.P.D. it charges Rs. 40.00 from each patient when he comes to consult its doctors. That it is so no one will deny. But it is only a means for achieving the objects for which the Society was founded. The making of profits is not the main object of the organisation. When it makes profits it is only a means whereby its main objects can be furthered or achieved, i.e., it can give medical relief to those who by reason of their poverty are under a disadvantage compared to others more favorably placed in life.
(18) The test is the purpose for which lands and buildings are used. If the lands or buildings are exclusively occupied and used for a charitable purpose, the Society qualifies for relief from municipal taxation under Subsection (4). But if any trade or business is carried on by the organisation in such lands or buildings or portions thereof or any rent is derived there from then such lands and buildings shall be subject to general tax under Subsection (5).
(19) The point of distinction between Sub-section (4) and Sub-section (5) is this. Sub-section (4) is based on the concept of public benefit. There is a desire to do good to others which motivates the action of the Society or the organisation. This is why in the case of deserving organisations the law provides relief from the burden of municipal taxation. It is engaged in an altruistic activity. It is not furthering any private interests of the members because it applies its profits or income in promoting the objects of the Society. It docs not pay any dividend or bonus to its members. Sub-section (5) is not based on public benefit. The main objects are not charitable because there is no application of income or profits either for relief of the poor education or medical relief or other charitable purpose. Under Sub-section (5) the lands and buildings are used for purposes of private profit or gain, whether from trade or business or from rental income of the property.
(20) Under Sub-section (4) business or trade can be carried on by the Society but if it applies its profits or income in promoting a charitable object and does not pay dividend or bonus to its members the organisation will qualify for relief from taxation. Under Sub-section 5) the lands or buildings are not exempt from municipal taxation if any portion of these buildings is used for carrying on trade or business or for getting rental income. The trade or business or rental income referred to in Sub-section (5) are essentially activities for private benefit In Sub-section (4) the dominant idea is public benefit. In Sub-section (5) the ruling conception is private benefit The difference between the. two is that main object of the one are directed to the public benefit, whereas the others are not. As Viscount Simonds said in Skegness Urban District Coliitzil v. Derbyshire Miners' Welfare Committee 1059 A.C. 807:
'THE crucial test is the purpose to which money is devoted, not the source from which it is derived.'
(21) If profits or income is applied to charitable purpose the lands and building qualify for relief. If profits or income is applied to private benefit no exemption is given and there is no relief from taxation.
(22) SUB-SECTION (6) deals with the portion of the land or building which is being exclusively occupied and used for a charitable purpose Such portion, it says, shall be deemed to 'a separate property for the purpose of municipal taxation.' Sub-section (6) contemplates those cases where a part of the land or building is used for trade or business or for getting rental income there from. This portion will be subject to tax Suppose there is another portion of the same lands or buildings where trade or business is carried on and profits are made and are applied to charitable purposes then that portion shall, for purposes of municipal taxation, be deemed to be a separate property. In other words this part of the land or buildings will qualify for relief. But the other part will be subject to tax. This is the idea of making a part of the lands or buildings a ''separate property' so that the entire building does not get the exemption. The trade portion is subject to tax. The charity portion is not subjected to tax.
(23) That the lands and buildings for this purpose will be divided into two parts-one qualifying for exemption under Sub-section (4)(a) and the other part not qualifying for such exemption is clear from Sub-section (6).
(24) Trade or business can be present in both Sub-sections (4) and (5). But if the profits are income of trade or business is devoted to a charitable purpose and no part thereof is distributed among the members as dividends or bonus then that trade or business is a means to an end. It is charity But if there is a trade or business carried on in a land or building and its profits are not applied to a charitable purpose, Sub-section (6) says that that part of the land or building where a trade or business carried on or from which rent is derived will be subject to tax.
(25) The question now is whether the New Delhi Holy Family Hospital Society which has opened a Private OP.D. in eight rooms qualifies for relief of taxation in respect of this portion of their lands and buildings. This question admits of only one answer. The society fulfills all the criteria laid down in Sub-section (4) of Section 115. It is substantially altruistic and benevolent in its purposes and it is for the public benefit. The purpose of the Society is a charitable purpose. It does not distribute any dividend or bonus to its members. It applies its profits for charitable purposes. The Society is is a charitable organisation motivated by Good Samaritan principles. It is an organisation deserving of relief from the burden of municipal taxation. My conclusion is that these eight rooms qualify for exemption under Sub-section (4) of Section 115.
(26) Counsel invited my attention to the counter-affidavit of the Joint Assessor and Collector who has described this Society as 'a purely commercial medical institution' 'established with the sole purpose of commercial exploitation.' The Private O.P.D., he says, is 'exclusively meant for the elite class of persons who are called 'haves' and not the unfortunate 'haves not'. This is an unjust criticism of a charitable organisation. The object is to not 'commercial exploitation'. The object is to serve the suffering humanity by charging from those who can pay and by spending on those who cannot. The one thing that it is doing is that it is giving medical relief to the 'have nots'. Quite the contrary to what the Joint Assessor says. The Assessor has misapprehended the meaning of the Section and has confused charity with business, and business with charity. He has ignored the important fact that it is the purpose and application of money which distinguishes the one from the Other.
(27) To qualify under Sub-section (4) the organisation must not be established or conducted for profit. It is apparent that there is a distinction between the carrying out of profitable transactions and the carrying on of a business for the purpose of earning profits. The organisation's main object must be charitable. These main objects must be sought in the organisation's written constitution if there is one, or otherwise deducted from the available evidence as to its activities and the purpose thereof. The 'charitable purpose' means a desire to do good to others, and there must be some altruistic activity.
(28) Applying this principle to the Society I find that receipts from fees do no more than keep the hospital going and enable the Society to meet heavy working expenses. There is no overall profit going into the pockets of the members which might have disqualified the Society's lands and buildings from relief from general tax. For the first time in the history of Municipal taxation the Act of 1957 introduced Section 115 to given relief to charitable institutions from the burden of municipal taxes on a rational basis.
(29) The Society does not hold any brief for the capitalists or capitalism. It is dedicated to charity. The Society does not exist for the 'elite' or the ''haves'. This criticism is unfair. I am reminded of what Derle has said : 'The capital is there, and so is capitalism. The waning factor is the capitalist'. (Berle : The Twentieth Century Capitalist Revolution).
(30) SUB-SECTION (4) deals with public charity. Sub.Section (5) is concerned with private gain. Public charity is exempt from municipal taxation but not trade or business which results in private gain. This distinction is brought out inthe decision of this court. On Subsection (4) the decision of Sachar J. in New Delhi Holy Family Hospital Society v. Municipal Corporation of Delhi, 1974 Delhi Law Times 39 may usefully be referred to. That was a case where this very Society was charging Rs. 10.00 as lodging expenses from student nurses who were residing in the nurses hostel building. This nurses hostel was built by the Society in 1970. The Corporation subjected it to tax. The learned judge held that the mere fact that Rs. 10.00 per month was being charged from each resident student nurse will not take the case out of the purview of Section 115(4). It was not a payment of rent under Sub-section (5). It was not trade or business. After the case was remitted by the courtthe corporation exempted the nurses hostel from municipal taxation.
(31) On Sub-section (5) I will refer to the Municipal Corporation of Delhi v. The Children Book Trust 1980 Municipalities and Corporation Cases 10 decided by Prakash Narain and B.N. Kirpal J). That was a case where the Children Book Trust owns a property called Nehru House at 4, Bahadur Shah Zafar Marg, New Delhi. The Trust is a non-profit making body. It has set apart some portion of that building for purposes of Dolls Museum etc. It was held that the portion which was used for the Dolls Museum was being used exclusively for a charitable purpose. The Dolls Museum has an educational purpose, the judges held. But there were certain portions of the property which were in occupation of the tenants. The house tax in respect of that portion was held to be payable by the trust. That portion was subject to tax. The portion where the property had been let out was not entitled to exemption. The exemption was only in respect of the property in the occupation of Dolls Museum, Library and administrative staff office, the judges held.
(32) The question arose about the portion of the premises where the Press was located. In addition to the printing of children books the Press was also printing other material on job work basis, the question arose whether this part was assessable to tax or not. The division bench held that the 'printing press is used both for charitable and trade purposes. It was not possible to bifurcate the premises in which the press is situated into that portion in which charitable activity is carried on and other portion where trade is carried on. As long as commercial printing is done by the responent, which cannot be regarded as charitable, the position occupied by the press cannot be exempt from tax.' The Press building was refused relief from municipal taxation on the footing that it was not being used exclusively for a charitable purpose. Exclusive use and occupation is an essential requirement of Sub-sections (4), (5) and (6) of Section 115.
(33) Two other contentions were raised by counsel for the Corporation. One was that in view of Section 169 of the Act this writ petition was not maintainable. This question was raised before Sachar J. In the case of this very Society. At page 45 he rejected this argument by saying that it is a question of discretion and not of jurisdiction. I am in perfect agreement with his view. He decided the case against the Corporation on the footing that Nurses Hostel was promoting a charitable purpose. The Corporation has again assessed these 8 rooms on a view which I find is entirely inconsistent with the decision of Sachar, I think, was right in claiming exemption from tax on their buildings which are exclusively used for charitable purposes, as I have said.
(34) The other contention was that the writ petition is signed by the Administrator who is not competent to bring these proceedings in the name of the Society, & have not allowed counsel to raise this objection because it has not been taken in the coulter-affidavit. If it had been raised the Society would have shown that the governing body by a resolution had authorised the Administrator to bring these proceedings against the Corporation. As it is not raised so I cannot allow counsel to take a point which will spring a surprise on the Society.
(35) To sum up Under Section 115(4) relief from municipal taxation is accorded to any lands or buildings or portions thereof which are exclusively occupied for the purposes of charity. The Society earns money from the Private O.P.D. It is done wholly to facilitate the carrying out of the charity's main purpose-medical relief for the sick and the disabled. What the Society is seeking to do is to run the hospital premises as economically as possible in order that they may be in a position to charge as little as possible from the poor. Rs. 40.00 is charged in Private O.P.D. to defray the cost of maintenance and to keep the hospital thus functioning. The Society is a non-profit making body. It was not established for profit. If it caters to the needs of the rich and earns money it does so in order that it can serve the public generally and not a particular class There is a public purpose which animates its activities. It works for the benefit of the community. It .exists for public benefit and not for the benefit of his members. The proceeds from fees in Private O.P.D. are applied for the purposes of a charity. They are used for balancing the cost and not to make profits out of the Private 0.P.D. The fees are not appro. priated. by the members for their private benefit. The Society can best be described' by the epithets Fitz-Gibbon L.J. used in 1898. It is 'unselnsh' 'benevolent', 'public', 'philanthropic' in its purposes.
(36) For these reasons I hold that the lands and buildings of Private O.P.D. squarely and fairly fall within the four corners of Sub-section (4) of Section 115 and thereforee exempt from general tax The writ petition is accordingly allowed. The assessment is quashed and set aside. The parties are, however, left to bear their own costs.