Holding

The hospital is an establishment within the meaning of Section 2(6) of the Bihar Shops and Establishments Act, 1953 and is not exempt as a charitable institution under Section 4(2) Schedule I Item 2.

Summary

The Management of Tata Iron & Steel Co. Ltd. established a hospital to provide medical care to its employees, their families, associated companies, as well as government and private patients for a fee. The authorities issued a notice requiring registration of the hospital under the Bihar Shops and Establishments Act, 1953. The appellant argued that the hospital was not an "establishment" under Section 2(6) and that, being charitable, it was exempt under Section 4(2) Schedule I Item 2. The Supreme Court held that the hospital carries on business by charging fees, is a division of the company, and its dominant purpose is not charitable; therefore it falls within the definition of "establishment" and is not entitled to the exemption. Consequently, the appeals were dismissed.

Issues considered

Whether the hospital qualifies as an "establishment" under Section 2(6) of the Bihar Shops and Establishments Act, 1953.
Whether the hospital is a charitable institution entitled to exemption under Section 4(2) of the Act read with Schedule I Item 2.
Whether the profit or loss status of the hospital is relevant to the definition of business for the purpose of the Act.

Legislation cited

Employees' State Insurance Act, 1948s. 2A, s. 87

Subjects

EstablishmentBihar Shops and Establishments ActCharitable exemptionHospitalBusiness definitionEmployees State Insurance ActProfit motiveRegistrationCivil AppealSupreme Court

Judgment

A THE MANAGEMENT OF THE TAT A IRON & STEEL CO. LTD.
v.
CHIEF INSPECTING OFFICER AND ORS.,

DECEMBER 17, 2004
B
[ASHOK BHAN AND A.K. MATHUR, JJ.]

Bihar Shops and Establishments Act, 1953-Sections 2(6) and 4(2)
read with Schedule I, Item No. 2-Estab!ishment of hospital by management
of a Company-If an establishment within section 2(6)-Held : Hospital
C is part of establishment of management and caters for employees of
management and its associated companies as statutory obligation but also
for Government servants and private parties on payment of fees, profit or
loss being irrelevant-Therefore, hospital is doing business and is not doing
charity, as such an establishment as defined in section 2(6) and covered
D by the Act-Exemption under section 4(2) read with Schedule I, Item No.
2-Entitlement of-Held : Since the hospital is not being run for charitable
pwpose, it is not entitled to exemption under section 4(2) read with Schedule
I, Item No. 2-f!ihar Shops and Establishment Rules, 1956-Employees State
Insurance Act, 1948.

E Words and Phrases

'Establishment' and 'business '-Meaning of

Appellant-management of a company established a hospital for
F providing medical facilities to the employees, their families and
dependents of its associated companies. Medical facilities were also
provided to Government employees and private patients on payment of
charges. Notice was issued to the appellant for registration of the Hospital
as an establishment under the Bihar Shops and Establishments Act,
1953. Appellant contended that since it is providing medical service to
G its employees and its associated industries, it is not involved in commer-
cial activities and as such is not an establishment under the Act. Authori-
ties rejected the contention. Appellan( then filed writ petition. High
Court held that the hospital is an establishment within the meaning of
section 2(6) of the Act and as such covered by the Act. Hence the present
H appeals.
1088
THE MANGT. OF THE TATA IRON & STEEL CO. LTD. 1·. CHIEF INSPECTING OFFICER 1089

Appellant-management contended that the Hospital does not fall A
within the definition of 'establishment' as defined in Section 2(6) of the
Act; that being a charitable hospital, it is entitled to exemption under
section 4(2) read with Schedule 1 of item No. 2; and that normally
business is for some profit or gain, but this Hospital is not working for
any profit or gain and is running in loss, as such not covered by the B
definition of 'establishment'.

Dismissing the appeals, the Court

HELD : 1.1. The Hospital is a part of the appellant-management
and is one of its Divisions, as evident from the budgetary provisions. It C
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 thei.r
families, and its associated companies but at the same time it was open
for the Government servants and private patients also on payment of
fees. It is not primarily meant to cater to the employees of the appellant
or their associated companies but also for the private individuals also. D
Therefore, it cannot be said that the Hospital was only meant to cater
the need of the employees of the appellant. It had the business activities
by charging fees from the Government servants as well as private
patients for their treatment in the hospital. [1097-A-B]
E
Black's Law Dictionary, referred to.

1.2. The establishment of the present Hospital is an obligation on
the part of tile 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 F
to make contribution for the medical facilities provided by the E.s.f.
Hospitals. AH the establishment have to get themselves registered under
section 2A of the E.S.I. Act. At the same time, under section 87 of the
Act, examination can also be granted from making contribution by the
Government. It is admitted that the present establishment had obtained
exemption up to the year 1996 but after that exemption was not granted G
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 obliga-
tion of the appellant management, otherwise they would have to make
registration under Section 2A of the E.S.I. Act, 1948. [1097-C-D)
H
1090 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 1.3. The profit and loss is not an essential ingredient of business. It
is incidental to the business. Therefore, it is not decisive of the matter
whether the establishment is running for profit or gain. What is impor-
tant is that the activity is frequent, continuous and relating to business.
In the instant case, the activities of the Hospital is continuing and regularly
B taking care of the patients be it private patients or patients belonging to
the appellant management or their associated industries. To say that the
Hospital is not making any profit is not the touchstone whereby it can
judge whether they are doing the business or not. [1100-B-C]

Board of Revenue & Ors. v. A.M Ansari & Ors., [1976) 3 SCC 512,
c referred to.
1.4. From the materials placed on record, it is clear 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
D its associated companies but for Government servants and private
patients as well from whom fee is charged for the services rendered,
profit or loss being irrelevant. Therefore, the Hospital is doing business
and it is not doing charity and as such falls within the definition of
'establishment' as defined in Section 2(6) of the Bihar Shops and Estab-
lishments Act, 1953. [1100-CJ
E
Ruth Soren v. Managing Committee, EAST I.S.S.D.A. & Ors., [2001)
2 SCC 115 and B.R. Enterprises Etc. Etc. v. State of UP. & Ors. Etc.,
[1999) 9 sec 700, referred to.

F 2. In each case, 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 instant case, the dominant purpose is to cater for the needs of the
employees of the appellant-management and its associated Industries. In
G 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. It is established that this hospital caters as a social
measure for the benefit of employees of the appellant-management and -
its associated industries as a statutory obligation and for the benefit of the
H Government servants- as well as private patients, on payment of fee.
THE MANGT OF THE TATA IRON & STEEL CO. LTD " CHIEF INSPECTING OFFICER [~tATHUR. J] 1091

Therefore, the dominant purpose for establishing the hospital was not for A
charitable purpose and as such is not entitled to exemption under section
4(2) read with Schedule 1 of item No. 2. [1101-D-EJ

Additional Commissioner ofIncome Tax, Gujarat, Ahmedabad v. Surat
Art Silk Cloth Manufacturers' Association, Surat, (1980) 2 SCC 31; Trus-
B
tees of Tribune Press, Lahore v. Commissioner ofIncome-tax, Punjab, AIR
(1939) PC 208 and P.C. Raja Ratnam Institution v. MC.D. & Ors., [1990)
Supp. SCC 97, referred to.

Le Cras. v. Perpetual Trustee Co. Ltd. & Ors., (1967) 3 All E.R. 915
and Joseph Rowntree Memorial Trust Housing Association Ltd. & Ors. v. C
Attorney General, (1983) 2 W.L.R. 214, referred to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 37of1998.

From the Judgment and Order dated 14.2.97 of the Patna High Court
in C.W.J.C. No. 249 of 1986. D

WITH

C.A. No. 2309 of 1999.
E
T.R. Andhyarujina, Ms. Kavita Dahiya, Ajay Aggarwal, Ms. Meghalee
Barthakur and Rajan Narain for the Appellant.

Ashok Mathur, Arup Banerjee, Somnath Mukherjee (N.P.), Nandini
Mukherjee and D.P. Mukherjee for the Respondents.
F
The Judgment of the Court was delivered by

A.K. MATHUR, J. : Both these appeals raise common question of
law, therefore they are disposed off by this common order.

CIVIL APPEAL NO. 37 OF 1998 G

This appeal is directed against an order passed by the Division Bench
of the Patna High Court dated February 14, 1997 whereby the Division
Bench of the High Court held that the Tata Main Hospital at Jamshedpur
(hereinafter referred to as the 'Hospital') is an establishment within the H
1092 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.
r
A meaning of Section 2(6) of the Bihar Shops and Establishments Act, 1953
(hereinafter to be referred to as the "Act") and it is covered by the aforesaid
Act. Aggrieved by the aforesaid order this appeal has been filed by the
appellant.

B Brief facts which are necessary for the disposal of this appeal are that
the Hospital was established by the Management of Tata Iron & Steel
Company Ltd in the year 1908 for providing medical facilities to the
employees as well as their families and dependent of the Company, and its
associated companies namely, TELCO, Tata Yodogawa, Tata Robin Fraser
and their employees at Jamshedpur. It is also alleged that apart from catering
C for the employees of the appellant and its associated industries it also caters
for the Government employees on payment of charges about Rs.50 per day
and from other private patients at the rate of Rs.120 per day. It is alleged
that 75 % of the patients treated are either employees of the appellant or
its associated companies or family members of the employees of the appel-
D !ant or its associated companies. 15% of the patients are Government
employees and the rest l 0% of the patients are outsiders. It is alleged that
a letter was sent by the Labour Superintendent, Jamshedpur to the appellant
on November 7, 1995 for registration of the Hospital as an establishment
under the provisions of the Act. An objection was taken by the appellant
to the effect that since it is providing medical service to its employees and
E its associated industries and it is not involved in the commercial activities,
as such it is not an establishment within the meaning of the Act and it cannot
be covered by the aforesaid Act. This objection was overruled by the
authorities. Hence the present writ petition was filed.

F The Division Bench of the Patna High Court after considering neces-
sary provisions of the Act and the Rules framed there under affirmed the
order of the authority and held that the establishment is covered by the Act.
Hence the present appeal by way of special leave before this Court.

We have heard learned counsel for the parties. Principally two submis-
G sions have been made; (i) that the present Hospital does not fall within the
definition of 'establishment' as defined in Section 2(6) of the Act and (ii)
that under section 4(2) read with Schedule 1 of item No. 2 it is a charitable
hospital and therefore it is exempted under the aforesaid section.

H Before we advert to the facts of the case, we may mention here that
THE ~1ANGT. OF THE TAT A IRO~ & STEEL CO l..TD. r. CHIEF INSPECTING OFFICER (MA THUR, J ] l 093

a statement of revenue and expenditure of the budget of the Medical Di- A
vision has been furnished by the appellant and it has been pointed out that
there is always deficit in the medical account under the Hospital head. It
is also admitted position that the Hospital is one of the Divisions of the
appellant. It has also given the details as to the numbers of patients of the
appellant and its associated companies are taken care and number of Gov- B
ernment servants and private patients are also being treated by the Hospital.

Intervenors have also filed a statement showing what are the charges
effective from April I ,2000 for non-entitled category of patients and it has
been pointed out that admission charge ofRs.75 has been revised to Rs. I 000,
charges in the general ward is Rs.400 per bed, VIP cabin is charged at C
Rs.1250 and ICU cabin charge is Rs.2250 per day. Likewise, the details for
·each of the medical speciality charges are being levied varying from Rs.100
to Rs. I 000. It is an admitted position that the Hospital is a part of the
establishment of the appellant and the Medical is one of its Department.
D
In this background now, we may examine the legal position.

Section 2(4) defines 'employee' which reads as under:

"(4) "employee" means a person wholly or partially employed for
hire, wages including salary, reward, or commission in, and in E
connection with any establishment and includes 'apprentice' but
does not include member of the employer's family. It also includes
person employed in a factory who are not workers within the
meaning of the Factories Act, 1948(63 of 1948), and for the pur-
pose of proceeding under this Act, include an employee, who has F
been dismissed, discharged or retrenched for any reason whatso-
ever;"

Section 2(5) defines 'employer' which reads as under:

" (5) "employer" means a person who owns or exercises ultimate G
control over the affairs of an establishment and includes a manager,
agent or any other person in the immediate charge of the general
management or control of such establishment;"

Section 2(6) defines 'establishment' which reads as under: H
1094 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

~A
r-
"(6)" establishment" means an establishment which carries on any
business, trade or profession or any work in connection with, or
incidental or ancillary to, any business, trade or profession and
includes-

(i) administrative or clerical service appertaining to such estab-
B
lishment;

(ii) a shop, restaurant, residential hotel, eating house, theatre or
any place of public amusement or entertainment; and

c (iii) such other establishment as·the State Government may, by
notification, declare to be an establishment to which the Act
applies;

but does not include a 'motor transport undertaking' as defined in
D clause (g) of Section 2 of the Motor Transport Workers Act,
1961 (27 of 1961);"

Section 2(16) defines 'shop' which reads as under :

"(16) "Shop" means any premises where goods are sold, either by
E retail or wholesale or where service:. are rendered to customers and
includes an office, store-room, godown, warehouse and work place,
whether in the same premises or elsewhere, used in connection with
such sales or services, but does not include a restaurant, a residen-
tial hotel, eating-house, theatre or other place of public amusement
L
or entertainment;" ;
F
Section 4 deals with exceptions which reads as under :

"4. Exceptions - (l) The provisions of this Act shall not apply to
any precinct or premises of a mine as defined in clause (f) of
G Section 2 of the Mines Act, 1952 (XXV of 1952).

(2) Notwithstanding anything contained in this Act, the provisions
thereof specified in the third column of the Schedule shall not apply
~'
to the establishment, employees and other persons referred to in the
H corresponding entry in the second column;
THE ~tANGT. Of THE TATA IRON&. STEEL CO LTD.•·. CHIEF INSPECTING OFFICER [MATHt;R, J J I 095

Provided that the State Government may, by notification, add to, A
omit or alter any of the entries in the Schedule in respect of one
or more areas of the State and on the publication of such notifica-
tion, the entries in either column of the Schedule shall be deemed
to be amended accordingly."

Item No. 2 of Sehedule I which is relevant for our purpose reads as under:
B

" SCHEDULE I

Serial Establishments, emplo).'.ees or other Provisions of the c
No. persons Act

xx xx xx

2. Establishments for the treatment or All provisions D
the care of the infirm, sick, destitute
or the mentally unfit, which are not
run for the profits but for charitable,
philanthropic, religious or educational
object."
E
Section 6 deals with registration and renewal of the establishment. It reads
as under :

"6. Registration of establishments and renewal thereof- The State F
Government may make rules requiring the registration of establish-
ment or any class of establishments or renewal thereof and prescrib-
ing manner and the fees payable for such registration or renewal."

Rest of the provisions deal with hours of work, weekly holidays, other
service conditions and removal of the employees and with necessary pro- G
visions for implementation of the provisions of the Act.

/ Rules have been framed under this Act in exercise of the powers
conferred under Section 40, they are known as the Bihar Shops & Estab-
lishment Rules,1955 (hereinafter to be referred to as the 'Rules'). Rule 3 H
1096 SUPREME COURT REPORTS (2004) SUPP. 6 S.C.R.

A lays down that within thirty days of coming into force of the aforesaid Rule$,
an employer shall make application for registration of the establishment.
Rule 3-A deals with renewal of certificate of registration. Other provisions
with regard to the service conditions have been dealt with under the Rules.

B Under the scheme of the Act, when the Hospital did not apply for
registration, then a notice was sent to the Hospital for registration. The
appellant objected to the registration. The said objections were overruled
and the appellant was asked to get the Hospital registered. Against this order,
the present writ petition was filed before the High Court. The question is
whether the present Hospital is an establislptent or not. If it is an establish-
c ment, then it is under obligation to apply for registration. It is an admitted
position that the Hospital is a part of the appellant management and as is
more than evident that it is one of the Divisions of the appellant, as per the
budgetary provisions pointed out above. Therefore, there is no two opinion
in the matter that the Hospital is a part of the appellant-management. But
D the question is whether this Hospital is covered by the definition of the
'establishment' or not. The definition of 'establishment' as reproduced
above, clearly shows that any establishment which carries on any business,
trade or provisions or any work connected with or incidental or ancillary
to, any business, trade or profession and it includes shop, restaurant and
E other place of amusement and it further says that the State Government by
notification may declare such other establishment to be an establishment to
which this Act applies. The only exception is the motor transport undertak-
ing as defined in clause (g) of the Motor Transport Workers Act, 196 l. The
question is whether this Hospital is engaged in business or not. In this
connection, Mr. T. R. Andhyarujina, learned senior counsel for the appellant
F has submitted that the definition of 'business is too wide and normally
business or trade is for some profit or gain. But this Hospital is not working ,,--
for any profit or gain and he emphasized with reference to the particulars
given by him, that the Hospital is running in loss. Therefore, the question
is what are the attributes of the business. In this connection, learned counsel
G has invited our attention to the dictionary meaning of the word, 'business'
as given in Black's Law Dictionary, which reads as under:

""business". A commercial enterprise carried on for profit; a par- ,..
ticular occupation or employment habitually engaged in for live-
lihood or gain."
H
THE ~IANGT OF THE TATA IRON & STEEL CO. _LTD "·CHIEF INSPECTING OFFICER [~IATHUR, !J 1097

So far as the definition of 'business' is concerned, it is clear from the A
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 B
meant to cater to the employees of the appellant or their associated com-
panies 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
appellant. It had the business activities by charging fees from the Govern-
ment servants as well as private patients for their treatment in the Hospital.
It may also be relevant to mention here that the establishment of the present c
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 D
registered under section 2 A 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 Govern-
ment by issuing notification exempting any factory or establishment or class
of establishments in any specified area from operatio!l of this Act for a
period of one year and may from time to time by like notification renew E
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 F
purpose of taking care of their employees , it is under statutory obligation
of the appellant management otherwise they would have to make registra-
tion under Section 2A of the E.S.I. Act, 1948. It is admitted thatthe appellant
sought exemption from operation of the Act which was granted up to the
year 1996. Be that as it 'llay, the fact remains that from the materials
available on record it is apparent that the Hospital is not only catering for G
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. Our attention was H
1098 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A drawn to a decision of this Court in the case of Ruth Soren v. Managing
Committee, EAST IS.SD.A. & Ors. reported in [200 I] 2 SCC I 15. There
also, their Lordships have observed that an establishment for the purpose
of this Act i.e. Bihar Shops and Establishments Act, I 953 means an estab-
lishment which carries on any business , trade or profession or any work
B in connection with or incidental or ancillary thereto. In the context of
educational institution after referring to the case of Bangalore Water Supply
& Sewerage Board's case, Their Lordships observed that in the case of an
educational institution, it may be industry but not Establishment under the
Act of 1953, it was observed as under:

c " Even so, the question for consideration is whether educational
institution falls within the definition of "establishment" carrying
business, trade or profession or incidental activities thereto, "J?:s-
tablishment" , as defined under the Act, is not as wide as "industry"
as defined under the Industrial Disputes Act. Hence, reliance on
D Bangalore Water Supply & Sewerage Board v. A. Rajappa for the
appellant is not of any help"

Therefore, this case does not provide any assistance with regard to the
present case at hand. In the said case also it was held that the respondent
which was running an educational institution in which the appellant was
E employed, being not an establishment, the application under section 26(2),
before the Labour Court against the appellant made by the respondent was
incompetent and it was observed that runriing of the educational institution
will not be covered by the establishment. But in the present case. from the
facts as mentioned above, it is more than evident that the Hospital is not
F 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 charity.

Similarly, in the case of B.R. Enterprises Etc. Etc. v. State of UP. &
G Ors. Etc. Etc. reported in [ 1999] 9 sec 700, it was observed as follows:

" Article 30 l is confined to trade and commerce while Article 298
refers to trade and business and to the making of contracts for any
purpose. The use of the words "business " and "contracts for any:
H purpose" and its title" .... trade, etc." makes the field of Article 298
THE MANGT. OF TllE TATA IRON & STEEL CO. LTD '" CHIEF INSPECTING OFFICER [MATHUR, l.J 1099

wider than Article 301. Significantly, the different use of words in A
the two articles is for a purpose; if the field of the two articles are
to be the same, the same words would have been used. It is true,
that since "trade" is used both in Articles 298 and 301, the same
meaning should be given. But when the two articles use different
words, in a different set of words conversely, the different words B
used could only be to convey different meanings. Ifdifferent meaning
is given then the field of the two articles would be different. So,
when instead of the words "trade and commerce" in Article 301,
the words " trade or business" are used it necessarily has a different
and wider connotation than merely "trade and commerce". " Busi-
ness" may be of varying activities, may or may not be for profit, c
but it necessarily includes within its ambit "trade and commerce";
so sometimes it may be synonymous but its field stretches beyond
"trade and commerce"

Another aspect that was emphasized was that since it is running in loss D
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 business. In this connection,
reference may be made to the decision of this Court in the case of Board
of Revenue & Ors. v. A. M. Ansari & Ors. reported in [1976] 3 SCC 512
wherein their Lordships while interpreting the definition of business with E
reference to A.P.General Sales Tax Act, 1957 have held as follows:

" ... profit motive is not an essential constituent m view of the
amendment introduced in the definition of the term 'dealer' in
1966. As regards the other ingredients the auctions of the forest F
produce by the Government of Andhra Pradesh are admittedly
carried on only annually and not at frequent intervals. Thus the
important element of frequency being lacking in the instant cases,
it cannot be held that the said Government was carrying on the
business of sale of forest produce."
G
Therefore, 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 H
1100 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A relating to transactions. These ingredients are present in the present activi-
ties of the Hospital that it is continuing and regularly taking care of the
patients be it private patients or patients belonging to the appellant-manage-
ment or their associated industries. Therefore, the emphasis of the learned
counsel that it is not making profit is not relevant for the present case. Our
B attention was also invited to various other definitions with regard to the
business in the context of relevant enactment. It is not necessary to refer to
those definitions. Suffice it to say that the profit and loss is not an essential
ingredient of business, what is important is frequency, relating to business
and continuity. Therefore, from the materials placed by the parties, it is more
than apparent that the present Hospital is a part of the establishment of the
C appellant-management and it caters not only for the employees of the
appellant-management & its associated companies but for Government
servant~ 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 Act.
D
The next question which has been argued by learned senior counsel
for the appellant was that it was doing charity, therefore, it is entitle~ 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 appell~nt-.
E management to subscribe for the employees unde.r the Employees State
Insurance Act, 1948 by making contribution. Since they were not subscrib-
ing 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 exemp-
F tion was refused. Therefore, it cannot be said that what they are doing is
charity. Apart from that they are charging fee from the Government Servants
and the private patients for the services rendered by them. It is not their case
that they are treating all and sundry without any charges. In this connection,
learned counsel for the appellant invited our attention to a decision of this
Court in the case of Additional Commissioner of Income Tax, Gujarat,
G Ahmedabad v. Surat Art Silk Cloth Manufacturers' Association, Surat re-
ported in [ 1980] 2 SCC 31. This was a case under the Income-Tax Act, 1961
and in that connection Their Lordships reviewed all the case law in para-
graph 6 of the judgment and observed that law is well settled that if there
are several objects of a trust or the institution, some of which are charitable
H and some non-charitable and the trustees or the managers in their discretion
THE ~IANGT. OF THE TATA IRON & STEEL CO LTD .-. CHIEF INSPECTING OFFICER [MATHUR, l.] l l 0l

are to apply the income or property to any of those objects, the trust or A
institution would not be liable to be regarded as charitable and no part of
its income would be exempt from tax. In other words, where the main or
primary objects are distributive, each and every one of the objects must be
charitable in order that the trust or institution might be upheld as a vajid
charity. Their Lordships have applied the principle of dominant purpose. B
The question is whether it is satisfied in the present case or not. In the present
case, the dominant purpose is to cater for the needs of the employees of the
appellant-management and its associated Industries. In fact, it was estab-
lished for that partict u purpose only. But the services were also extended
to Government servants and to the private patients not free of cost. There-
fore, the dominant iJurpose for establishing the hospital is not charitable c
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 ~he
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 appel-
lant-management and its associated industries and for the benefit of the
Government servants as well as private patients, on payment of fee. There-
fore, 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 E
I

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 F
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 iras
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 0
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 H
! 102 SUPREME COURT REPORTS [2004] SUPP. 6 S.C.R.

A 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.

Similarly in the case of Trustees of Tribune Press, Lahore v. Commis-
B sioner of Income-tax, Punjab reported in AIR (1939) PC 208, similar
question arose under the Income Tax Act, 1922. In the said case while
del,!ling with the Income Tax Act, 1922 held as follows :

"Though the personal or private opinion of the Judge is im-
c material, 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 respon-
sibility in coming to a finding as to the character of the object of
D a trust- a matter which bears directly upon it's 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
E also invited to a decision of this Court in the case of Joseph Rowntree
Memorial Trust Housing Association Ltd. & Ors. v. Attorney General re-
ported 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 Jaw or not.
Their Lordships held as follows:

F "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
G
provision of special accommodation relieved a particular need of
the elderly, whether poor or not, attributable to their aged condi-
tion, the schemes were within the scope of the charitable purpose
of providing relief to the aged."

H Therefore, the ratio is the dominant purpose in each case. If it is meant
THE MANGT. OF THE TATA !RON & STEEL CO. LTD."· CHJEF !NSPECTJNG OFFICER [MATHUR, J] 1103

essentially for charitable purpose and not open for any other purpose, then A
of course such institution will qualify for exemption as charitable institution.

... Similarly, in the case of P.C.Raja Ratnam Institution v. MC.D.& Ors .
reported in 1990 (Supp.) SCC 97, the question arose whether under Delhi
Municipal Corporation Act, 1957, the school run by the society is covered B
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 C
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 explana-
tion is, in terms inclusive and not exhaustive."
D
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 & for the other patients E
charges were levied. Therefore, by no stretch of imagination it can be said
that Hospital is being run for a charitable purpose.

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 p
with the same. The appeal is accordingly dismissed. No costs.

Civil Appeal No. 2309 of 1999:

In view of the order passed in Civil Appeal No. 37of1998, this appeal
also fails and is accordingly dismissed. No costs. G
N.J. Appeals dismissed.

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