DR B D KABRA V. COMMISSIONER OF INCOME TAX

ITA/119/2002

AI Insights

The case revolves around the appellant, Dr. B D Kabra, who challenged the decision of the Income Tax Appellate Tribunal which had dismissed his appeal regarding the depreciation rate on a nursing home building. The primary legal contention was whether the appellant was entitled to claim depreciation at 10% on the nursing home building, contrary to the 5% claimed in the original return. The Tribunal had earlier allowed the department's appeal, leading to the current challenge in the High Court. The High Court, referencing decisions from the Supreme Court, particularly noted that the claim for higher depreciation could be considered at the appellate stage, even if not claimed in the original return or during the assessment proceedings.

• Counselvise Citation: [2016] 140 COUNSELVISE.COM (IT) 750981 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 13-12-2016
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Vs. Dr. B. Venkata Rao, National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: DAKSH PAREEK
• Assessee Lawyers: SANJAY JHANWAR
• Keywords: Appeal; Assessment; Depreciation; Income Tax; Medical practice; Nursing Home
• Section: 143(2); 154; 143(1)(a); 32(1)(ii)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 119 / 2002 DR B D Kabra, Seth Sita Ram Kabra Memorial Nursing Home, Sikar ----Appellant Versus 1. The Commissioner of Income Tax, Rajasthan, Jaipur. 2. The Income Tax Officer, Ward-2, Sikar. ----Respondent __________________________________________ For appellant : Mr. Sanjay Jhanwar For Respondents : Mr. Daksh Pareek on behalf of Mr. Sameer Jain __________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Judgment Per Hon’ble Jhaveri, J. 13/12/2016 1. By way of this appeal the appellant has challenged the judgment & order of the Tribunal whereby the Tribunal has allowed the appeal of the department and dismissed the appeal of the assessee. 2. The facts of the case are that return declaring income of Rs.84,784/- was filed on 23.3.1993. The main source (2 of 9 ) [ITA-119/2002] of income was from medical practice and running of a Nursing Home. The assessee was also having business income and income from other sources. While processing the return u/s 143 (1)(a) excess depreciation of Rs.26,518/- in respect of Car and Plant and Machinery was added to the total income and thus determining the total income at Rs.1,11,300/- , which has been accepted as correct by the assessee himself vide his letter dated 28.9.1993 and the demand also stands paid. However, such mistake was noticed in as much as neither the arrears of salary amounting to Rs.99,744/- were added to the total income nor relief u/s 89 was allowed to the assessee. Notice u/s 154 dated 29.9.1991 for the proposed addition and relief was served upon the assessee on 29.9.1993 fixing the case for 28.9.1993. The assessee filed his written submission vide his letter dated 28.9.1993 and as per order-sheet of even date agreed in principal for the proposed addition as well as relief u/s 89. Accordingly an order u/s 154 was passed on 28.9.1993 determining the total income at Rs.2,11,042/- and additional demand of Rs.37,189/- after allowing relief u/s 89 of the Act. 3. Notice u/s 143(2) for the first time was served upon the assessee alongwith a detalied questionare on 26.8.1993 fixing the case for hearing on 9.9.1993. On the request of the assessee and his A/R, Shri P.D. Jain, case was adjourned to 27.9.1993. Details filed by the assessee were examined and further information on various points as mentioned in order- sheet dated 17.9.1993 was called for by 7.10.1993. But in view (3 of 9 ) [ITA-119/2002] of the illness of the Counsel the case had to be adjourned . 4. Enquiries got conducted through ward inspector revealed that 2nd floor of the Nursing Home was being used by the assessee and his family for the purpose of their residence. In his statement recorded on oath on 12.10.1993 Shri (Dr. B.D.Kabra) admitted the following order:- (i). He alongwith his family has been residing in Nursing Home premises w.e.f.9.9.89 on 2nd floor which was entirely in his possession. (ii). No part of interest and depreciation of building has been disallowed by the Assessing Officer on account of personal purposes. 5. The CIT (Appeals) has partly allowed the appeal, while not allowing additional depreciation @ 10% as against the depreciation @ 5% claimed in original return. Against the order of CIT (Appeals), the assessee preferred an appeal, which interaila including a ground that the appellant was entitled to depreciation on hospital building @10%, though it had claimed depreciation @ 5% while filing its original return. 6. This Court, while admitting the appeal on 14.08.2003, has framed the following substantial questions of law for consideration: “1. Whether on the facts and in the circumstances of the case, the Tribunal was justified in not entertaining the appellant’s claim regarding depreciation @ 10% instead of 5% on Nursing Home Building on the ground that such claim was not made either in the return or in the (4 of 9 ) [ITA-119/2002] assessment proceedings? 2. Whether the Assessing Officer was not obliged to allow the deduction as stipulated in law and compute the income in accordance with the provisions of law?” 7. Counsel for the appellant has taken us to the provisions of Section 32(1)(ii) and Explanation 5, which reads as under: Depreciation. 32. (1) In respect of depreciation of— (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed— (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that no deduction shall be allowed under this clause in respect of— (a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 but before the 1st day of April, 2001, unless it is used— (i) in a business of running it on hire for tourists ; or (5 of 9 ) [ITA-119/2002] (ii) outside India in his business or profession in another country; and (b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42: Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) 33[or the first proviso to clause (iia)], as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business or profession for a period of less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (i) or clause (ii) or clause (iia), as the case may be : [Provided also that where an asset referred to in clause (iia)or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent of the amount calculated at the percentage prescribed for an asset under clause (iia)for that previous year, then, the deduction for the balance fifty per cent of the amount calculated at the percentage prescribed for such asset under clause (iia)shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset:] Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business or profession, the deduction in respect of such asset shall be allowed on such percentage on (6 of 9 ) [ITA-119/2002] the written down value thereof as may be prescribed. Explanation.—For the purposes of this proviso,— (a) the expression \"commercial vehicle\" means \"heavy goods vehicle\", \"heavy passenger motor vehicle\", \"light motor vehicle\", \"medium goods vehicle\" and \"medium passenger motor vehicle\" but does not include \"maxi-cab\", \"motor-cab\", \"tractor\" and \"road-roller\"; (b) the expressions \"heavy goods vehicle\", \"heavy passenger motor vehicle\", \"light motor vehicle\", \"medium goods vehicle\", \"medium passenger motor vehicle\", \"maxi-cab\", \"motor-cab\", \"tractor\" and \"road roller\" shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988): Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991: Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know- how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv)of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may (7 of 9 ) [ITA-119/2002] be, had not taken place, and such deduction shall be apportioned between the predecessor and the successor, or the amalgamating company and the amalgamated company, or the demerged company and the resulting company, as the case may be, in the ratio of the number of days for which the assets were used by them. –---------------- Explanation 5.—For the removal of doubts, it is hereby declared that the provisions of this sub- section shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income;” 8. Counsel for the appellant has, therefore, contended that in view of the above provisions of law, it was the bounden duty of the ITO to allow depreciation in accordance with law, though it has claimed @ 5%, keeping in view of the decision of the Supreme Court in the case of Commissioner of Income Tax Vs. Dr. B. Venkata Rao- (2000) 243 ITR 81 and more particularly; the conclusion given by the Supreme Court in para 3 and 4 which reads as under: “3. The most apposite decision in this context is that delivered by the Allahabad High Court in S. K. Tulsi and Sons v. CIT . Reference was made to an earlier judgment, where also the functional test approved by this court in several decisions was applied. It was held that if it was found that the building or structure constituted an apparatus or a tool of the taxpayer by means of which business activities were carried on, it amounted to a \"plant\" ; but where the structure played no part in the carrying on of those activities but merely constituted a place wherein they were carried on, the building could not be regarded as a plant. 4. The Tribunal and the High Court in the instant case proceeded upon assumptions of what a nursing home should contain. This may not be (8 of 9 ) [ITA-119/2002] altogether appropriate. What is to be determined is whether the particular nursing home building was equipped as to enable the assessee to carry on the business of a nursing home therein or whether it is just any premises utilised for that object.” 9. Learned counsel has also relied on the decision of Supreme Court in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax- (1998) 22 ITR 383 (SC) wherein Supreme Court has held that the claim of depreciation can be raised at appellate stage, though such claim was not raised before the Assessing Officer. Counsel contended that in case before Supreme Court the claim of depreciation was raised before the Tribunal, whereas in appellants case it had been raised before CIT(Appeals). 10. The counsel for the respondent has supported the order of the Tribunal and contended that the view taken by the Tribunal is required to be accepted. 11. Heard Mr. Sanjay Jhanwar, learned counsel for the appellant and Mr. Daksh Pareek learned counsel for the respondent. 12. Taking into consideration the law declared by the Supreme Court in the aforementioned two judgments, we are of the opinion that the claim of additional depreciation @ 10% made at the level of CIT (Appeals) is required to be allowed and the same is required to be raised from 5% to 10%. 13. In view of the aforementioned Supreme Court decisions, both the issues are answered in favour of the assessee, to the extent that the depreciation @ 10% as against (9 of 9 ) [ITA-119/2002] @5% permitted by the Assessing Officer will be allowed. 14. The appeal stands disposed of. (DINESH MEHTA)J. (K.S. JHAVERI)J. bblm "