M/s Imperial Hospital & Research Centre Ltd., Bangalore V. JCIT, Bangalore

ITA 107/BANG/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7255 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-07-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 05-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMAMEENAKSHI J
• Keywords: Opportunity of being heard; Additional evidence; Revenue expenditure
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI LALIET KUMAR, JUDICIAL MEMBER ITA NO S . 4 1 3 & 414 /BANG/201 5 ASSESSMENT YEAR S : 20 09 1 0 & 2011 12 ACIT CIRCLE 2[3] (1), BANGALORE. VS. M/S. IMPERIAL HEALTH RESEARCH CENTRE LTD., NO. 154/11, OPP. IIMB, BANERGHATTA ROAD, BANGALORE 560 076. PAN: AA B C I5313C APPELLANT RESPONDENT AND ITA NO S . 1 06 & 10 7 BANG/201 5 ASSESSMENT YEAR S : 20 09 10 & 2011 12 M/S. IMPERIAL HEALTH RESEARCH CENTRE LTD., NO. 154/11, OPP. IIMB, BANERGHATTA ROAD, BANGALORE 560 076. PAN: AA BCI5313C VS. DCIT CIRCLE 5[1], BANGALORE. APPELLANT RESPONDENT A SSESSEE BY : SHRI RAVISHANKAR, ADVOCATE RE VENUE BY : S MT. PADMAMEENAKSHI , J CIT DR DATE OF HEARING : 0 9 . 11 .201 7 DATE OF PRONOUNCEMENT : 1 0 .1 1 .2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FILED BY THE REVENUE AND TH E ASSESSEE AND THESE ARE DIRECTED AGAINST A COMBINED ORDER OF CIT (A) II, BANGALORE DATED 14.10.2014 FOR A ASSESSMENT YEARS 2009 10 & 2011 12.ALL TH ESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 106,107,413 & 414/BANG/2015 PAGE 2 OF 6 2. IN A. Y. 2009 10, THREE ISSUES ARE INVOLVED IN THE APPEAL OF THE REVENUE. FIRST ISSUE IS REGARDING DELETION OF DISALLOWANCE O F RS. 34,47,508/- MADE BY THE A.O. IN RESPECT OF THE AMOUNT PAID TO JCI ON TH IS BASIS THAT IT IS CAPITAL IN NATURE BECAUSE IT WOULD GIVE BENEFIT TO THE ASSESSE E FOR AT LEAST 3 YEARS AND HENCE, CANNOT BE TREATED AS REVENUE EXPENDITURE. TH E SECOND GRIEVANCE OF THE REVENUE IN THIS YEAR IS REGARDING RESTRICTING T HE DISALLOWANCE TO RS. 33,55,268/- AS AGAINST DISALLOWANCE MADE BY THE AO OF RS. 83,88,171/- BEING 25% OF TOTAL EXPENSES CLAIMED BY THE ASSESSEE OF RS . 332,54,684/- IN RESPECT OF OMA FEES PAID TO APOLLO HOSPITAL BY INVOKING THE PROVISIONS OF SECTION 40A (2) OF I T ACT. IN THE APPEAL OF THE ASSESSEE FOR T HIS YEAR, THE ASSESSEE IS DISPUTING THE CONFIRMING OF THE PART DISALLOWANCE T O THE EXTENT OF RS. 33,55,268/-. THE THIRD GRIEVANCE OF THE REVENUE IN THIS YEAR IS ABOUT DELETION OF THE DISALLOWANCE MADE BY THE A. O. OF RS. 871,36 9/- IN RESPECT OF THE ASSESSEES CLAIM U/S 35D OF THE I T ACT. 3. IN A. Y. 2011 12, THE REVENUE HAS ONLY TWO GRI EVANCES. THE FIRST GRIEVANCE IS REGARDING RESTRICTING THE DISALLOWANCE TO RS. 5,57, 481/- AS AGAINST DISALLOWANCE MADE BY THE AO OF RS. 13,93,704/- OUT OF TOTAL EXPENSES CLAIMED BY THE ASSESSEE OF RS. 69,68,523/- IN RESPE CT OF OMA FEES PAID TO APOLLO HOSPITAL BY INVOKING THE PROVISIONS OF SECTI ON 40A (2) OF I T ACT. IN THE APPEAL OF THE ASSESSEE FOR THIS YEAR, THE ASSESSEE IS DISPUTING THE CONFIRMING OF THE PART DISALLOWANCE TO THE EXTENT OF RS. 5,57, 481/-. THE SECOND GRIEVANCE OF THE REVENUE IN THIS YEAR IS ABOUT DELETION OF TH E DISALLOWANCE MADE BY THE A. O. OF RS. 18,86,295/- IN RESPECT OF THE ASSESSEE S CLAIM U/S 35D OF THE I T ACT. 4. IN BOTH YEARS, THIS IS ALSO A GRIEVANCE OF THE R EVENUE THAT THE LEARNED CIT (A0 HAS ADMITTED ADDITIONAL EVIDENCES IN VIOLATION OF R ULE 46A AND NO REMAND REPORT IS OBTAINED BY HIM. 5. LEARNED DR OF THE REVENUE SUPPORTED THE ASSESSME NT ORDER. LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF CIT (A) IN RESP ECT OF THE APPEALS OF THE REVENUE. REGARDING THE APPEALS OF THE ASSESSEE, HE SUBMITTED THAT THE ITA NOS. 106,107,413 & 414/BANG/2015 PAGE 3 OF 6 LEARNED CIT (A) SHOULD HAVE DELETED THE ENTIRE DISA LLOWANCE MADE BY THE AO IN RESPECT OF OMA FEES PAID TO APOLLO HOSPITAL INST EAD OF ALLOWING PART RELIEF. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARD ING GROUND NO. 1 & 2 OF THE APPEAL OF REVENUE IN A. Y. 2009 10, WE FIND T HAT AS PER PARA 3.3 OF HIS ORDER, LEARNED CIT (A) HAS DELETED THE DISALLOWANCE BY FOLLOWING THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT V S. INFOSYS TECHNOLOGIES LTD. AS REPORTED IN 349 ITR 606 BY OBSERVING THAT I N THIS CASE, IT IS RULED BY HONBLE APEX COURT THAT THE EXPENSES INCURRED TOWA RDS OBTAINING CORPORATE MEMBERSHIP, THE AMOUNT SPENT TOWARDS ISO CERTIFICAT E AND THE EXPENSES INCURRED TOWARDS REPAIR AND MAINTENANCE OF LEASED P REMISES HAVE BEEN HELD TO BE REVENUE EXPENDITURE AND NOT AS CAPITAL EXPEND ITURE. IT IS SEEN THAT THERE IS NO DISCUSSION ABOUT SIMILARITY OF FACTS IN THE PRESENT CASE AND IN THAT CASE. DETAILS OF EXPENDITURE ARE NOT AVAILABLE IN T HE PAPER BOOK AND HENCE, WE CANNOT EXAMINE AND DECIDE ABOUT THE NATURE OF EX PENSES. HENCE, WE SET ASIDE THE ORDER OF CIT (A) ON THIS ISSUE AND RESTOR E THE MATTER BACK TO CIT (A) FOR A FRESH DECISION BY WAY OF A SPEAKING AND REASO NED ORDER IN THE LIGHT OF ABOVE DISCUSSION AFTER ALLOWING ADEQUATE OPPORTUNIT Y OF BEING HEARD TO BOTH SIDES. 7. IN RESPECT OF THE SECOND GRIEVANCE OF THE REVENU E IN A. Y. 2009 10 AND FIRST GRIEVANCE IN A. Y. 2011 12 AND INTERCONNECTED GRI EVANCE OF THE ASSESSEE IN BOTH YEAR I.E. IN RESPECT OF DISALLOWANCE BY THE AO OUT OF OMA FEES PAID TO APOLLO HOSPITAL (AHEL) BY INVOKING THE PROVISIONS O F SECTION 40A (2) OF I T ACT WHICH IS PARTLY CONFIRMED BY CIT (A), WE FIND THAT ON THIS ISSUE, THE OBJECTION OF THE AO IS THIS THAT IN ADDITION TO DISBURSING OF 4% OF THE GROSS REVENUE, THE ASSESSEE IS PAYING FOR THE SERVICE OF ALL MANAGERIA L STAFF PROVIDED BY AHEL AS DEPUTATION CHARGES WHICH AMOUNTED TO RS. 1.08 CRORE S IN AY 2009 10. THE AO HAS ALSO NOTED IN THE ASSESSMENT ORDER FOR AY 20 11 12 THAT THIS PAYMENT TO AHEL UP TO 31.12.2009 WAS @ 4% BUT IT HA S BEEN @ 1% FROM 01.01.2010. IN AY 2009 10, THE AO HELD THAT PAYME NT OF 1.5% ON USAGE OF BRAND NAME CAN BE TREATED AS ELIGIBLE AND OUT OF RE MAINING 2.5% IN THAT YEAR, HE ALLOWED ONLY 1.5% AND REMAINING 1% BEING 25% OF TOTAL PAYMENT @ 4% WAS HELD BY HIM AS EXCESSIVE AND WAS DISALLOWED. IN A. Y. 2011 12, THE AO ITA NOS. 106,107,413 & 414/BANG/2015 PAGE 4 OF 6 SAYS ON PAGE 4 OF THE ASSESSMENT ORDER THAT 1% PAID BY THE ASSESSEE IS ALLOWABLE BUT IN RESPECT OF PAYMENT OF 4% TILL 31.1 2.2009, PART AMOUNT IS TO BE DISALLOWED. IN THIS REGARD, WE ARE OF THE OPINION T HAT IN AY 2011 12, NO DISALLOWANCE CAN BE MADE ON THIS ACCOUNT IF THE CLA IM OF THE ASSESSEE IS ONLY @1% BUT IF IN THAT YEAR, PART CLAIM IS 2 4%, THEN P ART DISALLOWANCE IS TO BE MADE IN LINE WITH ULTIMATE DISALLOWANCE IN AY 2009 10. ON THIS ASPECT, THE POSITION IS NOT CLEAR BECAUSE THE AO SAYS THAT UP T O 31.12.2009, THE PAYMENT IS @ 4% BUT FROM 01.01.2010, IT IS @ 1%. IF THIS OB SERVATION IS CORRECT THAN NO DISALLOWANCE CAN BE MADE IN THE PRESENT YEAR BECAUS E THE PERIOD UP TO 31.12.2009 DOES NOT FALL IN THIS YEAR SINCE THE PRE VIOUS YEAR RELEVANT TO AY 2011 12 IS FROM 01.04.2010 TO 31.03.2011. BUT IF THE DATE MENTIONED BY THE AO ARE ON ACCOUNT OF TYPOGRAPHICAL MISTAKE AND UP T O 31.12.2010, THE PAYMENT MADE IS @ 4% AND ONLY FROM 01.01.2011, IT I S REDUCED TO 1%, THEN THE PART DISALLOWANCE IS TO BE MADE IN LINE WITH UL TIMATE DISALLOWANCE IN AY 2009 10. HENCE, IN BOTH YEARS, WE RESTORE THE MAT TER BACK TO CIT (A). IN AY 2009 10, THE DETAILS OF THE AMOUNT PAID BY THE AS SESSEE OF RS. 1.08 CRORES IN ADDITION TO 4% OMA HAS TO BE EXAMINED FOR DECIDI NG THIS ASPECT AS TO WHETHER THE PAYMENT OF OMA IN THIS YEAR IS EXCESSIV E OR NOT. SUCH DETAILS ARE NOT AVAILABLE IN THE PAPER BOOK AND THERE IS NO COM MENT OF THE AO OR CIT (A) REGARDING THOSE DETAILS. HENCE, WE SET ASIDE THE OR DER OF CIT (A) IN AY 2009 10 ON THIS ISSUE AND RESTORE THE MATTER BACK TO HIS FILE IN THAT YEAR FOR A FRESH DECISION ON THIS BASIS THAT WHETHER THE PAYMENT OF RS. 1.08 CRORES IN THIS YEAR IS FOR SAME SERVICES FOR WHICH $5 IS BEING PAID AND WHAT IS THE MARKET RATE FOR SUCH SERVICES EXCLUDING 1.5% IN RESPECT OF BRAND US AGE. SIMILARLY, IN AY 2011 12, HE SHOULD FIND OUT AS TO WHETHER SIMILAR EXTR A PAYMENT AS IN AY 2009 10 OF RS. 1.08 CRORES IS PAID IN AY 2011 12 ALSO AND WHAT IS THE AMOUNT OF SUCH PAYMENT IN THAT YEAR AND HOW THE AMOUNT PAID @ 2.5 % EXCLUDING 1.5% FOR BRAND USAGE ALONG WITH SUCH EXTRA PAYMENT, IF A NY, STANDS WHEN COMPARED WITH MARKET RATE FOR SIMILAR SERVICES. HE SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION A FTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. THIS ISSU E IS RESTORED BACK TO CIT (A) IN BOTH YEARS AND THE RELEVANT GROUNDS OF BOTH SIDE S ON THIS ISSUE STAND ALLOWED FOR STATISTICAL SERVICES. ITA NOS. 106,107,413 & 414/BANG/2015 PAGE 5 OF 6 8. IN RESPECT OF THE THIRD ISSUE AS PER THESE TWO A PPEALS OF THE REVENUE IN RESPECT OF DELETION OF DISALLOWANCE OF THE ASSESSEE S CLAIM U/S 35D, WE FIND THAT AS PER THE ASSESSMENT ORDER, THE ASSESSEE HAS AMORTIZED SUCH EXPENDITURE WHICH SHOULD NOT HAVE BEEN AMORTIZED U/ S 35D AS PRELIMINARY EXPENDITURE. IT MEANS THAT AS PER THE AO, THE EXPEN SES CLAIMED BY THE ASSESSEE ARE NOT ELIGIBLE FOR AMORTIZATION U/S 35D. IN SPITE OF THIS CATEGORICAL FINDING OF THE AO, LEARNED CIT (A) HAS DELETED THIS DISALLOWANCE ON THE BASIS OF THIS SUBMISSION OF THE ASSESSEE BEFORE HIM THAT IF THESE EXPENSES ARE NOT ELIGIBLE FOR AMORTIZATION U/S 35D, THE DEDUCTION IS ALLOWABLE IN FULL IN THE FIRST YEAR WHEN THE EXPENSES ARE INCURRED WITHOUT ANY DIS CUSSION IN RESPECT OF THE NATURE OF THESE EXPENSES. BEFORE US, THE DETAIL OF THE EXPENSES IS NOT MADE AVAILABLE. HENCE, WE FEEL IT PROPER TO RESTORE THIS MATTER ALSO BACK TO CIT (A) FOR A FRESH DECISION BY WAY OF A SPEAKING AND REASO NED ORDER AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BOTH SIDES. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE AND BOTH THE APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIET KUMAR) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 10 TH NOVEMBER, 2017. /MS/ ITA NOS. 106,107,413 & 414/BANG/2015 PAGE 6 OF 6 COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.