ACIT, Chandigarh V. M/s City Clinic (P) Ltd., Chandigarh

ITA 1157/CHANDI/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2360 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-05-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 15-05-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: J S NAGAR
• Keywords: Capital asset; Depreciation; Proportionate interest; Bad and doubtful debts; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES ACHANDIGARH BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1157/CHD/2012 ASSESSMENT YEAR:2009-10 ACIT, V M/S CITYCLINIC (P) LTD., CIRCLE 4(1), SCO 47-49, CHANDIGARH. SECTOR 34-A, CHANDIGARH. PAN NO. AABCC-7800N & CO NO. 50/CHD/2012 IN ITA 1157/CHD/2012 M/S CITY CLINIC (P) LTD., V ACIT, SCO 47-49, CIRCLE 4(1), SECTOR 34-A, CHANDIGARH. CHANDIGARH. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI J.S.NAGAR ASSESSEE BY : SHRI PARIKSHIT AGG ARWAL DATE OF HEARING : 15.05.2013 DATE OF PRONOUNCEMENT : 22.05.2013 ORDER PER SUSHMA CHOWLA, JM THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF CIT(A), DATED 14.08.2012 RELATING TO ASSESSMENT YEAR 2009-10 AGAI NST THE ORDER PASSED UNDER SECTION 143(3)/147 OF THE I.T. ACT, 1961 AND THE ASSESSEE HAS FILED C.O. AGAINST THE APPEAL OF THE REVENUE. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND, IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,76,000/- MADE BY THE ASSESSING OFFICER U/S 36(L)(III) OF THE INCOME- TAX ACT, 1961 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND, IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 16,04,409/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF BAD DEBTS WRITT EN OFF. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND, IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.37,57,930/- MADE BY THE ASSESSING OFFICER BY TREATING 'REPAIR & MAINTEN ANCE' EXPENDITURE AS 'CAPITAL EXPENDITURE' 5. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE S ET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OF F. 3. IN C.O., THE ASSESSEE HAS RAISED THE FOLLOWING G ROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE WORTHY CIT(A) IN APPEAL NO. 699/11-12 DATED 20.01.2012 HAS ERRED IN PASSING THAT ORDER N CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961, TO THE EXTENT OF NOT ALLOWING THE GROUND NO. 5 RAISED BEFORE HIM. 2. THAT THE WORTHY CIT(A) HAS ERRED IN NOT ALLOWING TH E GROUND THAT THE LD. AO HAS ERRED IN MAKING ADDITION OF RS. 5,46,000/- B Y ERRONEOUSLY INVOKING THE PROVISIONS OF SEC 36(L)(III) OF THE ACT EVEN WHEN T HE SAID ADDITION IS AGAINST THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE . 3. THAT THE RESPONDENT DOES NOT AGREE WITH THE GROU NDS OF APPEAL RAISED BY THE APPELLANT AND THE ORDER OF WORTHY CIT(A), IN RELATI ON THERETO, MAY BE SUSTAINED. 4. THAT THE RESPONDENT CRAVES LEAVE FOR ANY ADDIT ION, DELETION OR AMENDMENT IN THE GROUNDS OF CROSS-OBJECTIONS ON OR BEFORE THE SA ME IS HEARD OR DISPOSED OFF. 4. BOTH THE APPEAL OF THE REVENUE AND C.O. FILED BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THE CON SOLIDATED ORDER. ITA 1157/CHD/2012 5. GROUND NO.1 RAISED BY THE REVENUE IS GENERAL IN NATURE AND HENCE THE SAME IS DISMISSED. 6. GROUND NO.2 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.6,76,000/-. HOWEVER, FROM THE PERUSAL OF THE APPELLATE ORDER, WE FIND THAT THE AO HAD DISALLOWED RS.6,76,000/- U/S 3 6(1)(III) OF THE ACT. THE ASSESSEE ACCEPTED THE ADDITION OF RS.1,30,000/- AND ONLY APPEALED AGAINST THE ADDITION OF RS.5,46,000/-. THE CIT(APP EALS) VIDE PARA 6 TO 6.3 3 HAD CONFIRMED THE ADDITION OF RS.5,46,000/- AGAINST WHICH THE ASSESSEE HAS FILED C.O. IN THE ENTIRETY OF THE ABOVESAID FACTS AND CIRCUMSTANCES, GROUND NO.2 RAISED BY THE REVENUE IS INFRUCTUOUS. GROUND NO.2 RAISED BY THE REVENUE IS, THUS, DISMISSED. 7. THE ISSUE IN GROUND NO.3 RAISED BY THE REVENUE I S AGAINST THE DELETION OF ADDITION OF RS.16,04,409/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 8. THE BRIEF FACTS RELATING TO THE ISSUE ARE THA T THE ASSESSEE, DURING THE YEAR UNDER CONSIDERATION, HAD DEBITED A SUM OF RS.16,04, 409/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF. THE AO DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, SHOW CAUSED THE ASSESSEE TO EXPLAIN THE SAME WITH DOCUME NTARY EVIDENCE IN SUPPORT OF THE EFFORTS MADE TO RECOVER THE SAID BAD DEBTS. THE ASSESSEE EXPLAINED THAT DESPITE BEST OF ITS EFFORTS, IT COULD NOT RECOVER T HE AMOUNT FROM EX-SERVICEMAN HEALTH SCHEME ( IN SHORT ECHS ) IN RESPECT OF CERTA IN PATIENTS, TILL THE END OF THE YEAR AND THE SAME WERE WRITTEN OFF AS BAD DEBTS . THE AO NOTED THAT THE ASSESSEE HAD FURNISHED LIST OF BAD AND DOUBTFUL DEB TS WRITTEN OFF TO THE TUNE OF RS.13,40,452/-, WITHOUT ANY DOCUMENTARY EVIDENCE. RELIANCE WAS PLACED ON THE RATIO LAID DOWN IN SOUTH INDIA SURGICAL COMPANY LTD. V ACIT 287 ITR 62 (MAD), DHALL ENTERPRISES & ENGINEERS (P) LTD. V CIT 295 ITR 481 (GUJ), THE HON'BLE COURT HELD THAT THE ASSESSEE WAS SUPPLYING GOODS TO GOVT. DEPARTMENTS AND IN LIEU NON PAYMENT DUE TO PAUCITY OF ALLOCATED BUDGET, DO NOT AMOUNT TO BAD DEBTS. THE AO HELD, IN THIS VIEW, IT IS CLEAR THAT THE GOVT. ACCOUNT CAN NOT BE TREATED AS BAD DEBT. SO THE CLA IM OF THE ASSESSEE BAD DEBT WRITTEN OFF IN RESPECT OF ECHS IS NOT TENABLE AND I S REJECTED. THE AO, ACCORDINGLY, DISALLOWED BAD DEBTS AND MADE AN ADDIT ION OF RS.16,04,409/-. 9. BEFORE THE CIT(APPEALS), THE ASSESSEE FURNI SHED COMPLETE DETAILS IN RESPECT OF BAD DEBTS BY WAY OF WRITTEN SUBMISSIONS WHICH ARE INCORPORATED IN PARA 7.2 AT PAGES 7 TO 9 OF THE APPELLATE ORDER. T HE REPLY OF THE ASSESSEE WAS 4 FORWARDED TO THE AO, WHO IN TURN SUBMITTED HIS REPO RT WHICH IS REPRODUCED UNDER PARA 7.2.1 AT PAGE 9 OF THE APPELLATE ORDER. THE REPLY OF THE ASSESSEE IN REJOINDER IS REPRODUCED IN PARA 7.2.2 AT PAGE 10 OF THE APPELLATE ORDER. FURTHER PLEA OF THE ASSESSEE WAS THAT OUT OF THE SAID BAD D EBTS WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION, SUM OF RS.519,544/- WAS R ECOVERED IN THE FINANCIAL YEAR 2010-2011 WHICH HAD BEEN OFFERED TO TAX U/S 41 OF THE IT ACT. THE CIT(APPEALS) VIDE PARA 7.3 HELD AS UNDER : 7.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. CO UNSEL, THE REPORT OF THE ASSESSING OFFICER AND THE APPELLANT'S REPLY ON THE REPORT. IT IS SEEN THAT THE BAD DEBTS WRITTEN OFF BASICALLY PERTAIN TO CLAIMS F ILED WITH ECHS. ACCORDING TO THE ASSESSING OFFICER, THE CLAIMS WERE PROBABLY REJECTED BY ECHS AUTHORITIES BY RAISING OBJECTIONS REGARDING AU THENTICITY OF CLAIMS. AS PER THE REPORT OF THE ASSESSING OFFICER, NO EFFO RTS WERE MADE BY THE APPELLANT TO RECOVER THE AMOUNT AND THE APPELLANT H AD NOT TAKEN RECOURSE TO ALL POSSIBLE LEGAL MEANS. THE VIEW OF THE ASSESS ING OFFICER THAT ALL POSSIBLE STEPS HAD NOT BEEN TAKEN TO RECOVER THE AM OUNT IS NOT CORRECT BECAUSE THE APPELLANT HAS BEEN ABLE TO RECOVER A SU BSTANTIAL AMOUNT OF RS. 5,19,544/- IN F.Y. 2010-11, WHICH WAS OFFERED AS IN COME U/S 41 OF THE ACT. MOREOVER, THE ASSESSING OFFICER CANNOT QUESTION THE AUTHENTICITY OF THE CLAIMS MADE TO ECHS IN THE ABSENCE OF ANY EVIDENCE TO THIS EFFECT. IF THE ASSESSING OFFICER FELT THAT THE CLAIMS MADE TO ECHS WERE NOT GENUINE, HE SHOULD HAVE MADE ENQUIRIES IN THIS REGARD. IN MY CO NSIDERED VIEW, ON THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, TH E CLAIM MADE ON ACCOUNT OF BAD DEBTS WRITTEN OFF IS CORRECT AND IS TO BE AL LOWED. THE ADDITION MADE ON THIS ACCOUNT IS ACCORDINGLY DELETED. GROUND OF A PPEAL NO.6 IS ALLOWED. 10. REVENUE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT(APPEALS). THE LD. DR FOR THE REVENUE STATED THAT THE SAID AMOUNT WAS DUE FROM THE GOVERNMENT BODY AND THERE IS NO QUESTION OF ANY BAD DEBTS IN RESPECT THEREOF. THE LD. AR FOR THE ASSESSEE, HOWEVER, POINTED OUT T HAT IT IS NOT THE CASE WHERE THE RECOVERY COULD NOT BE MADE FROM ECHS BUT IT IS A CASE WHERE THE EXPENDITURE INCURRED ON PATIENTS COVERED BY ECHS HA VE BEEN REJECTED BY ECHS. THE LD. AR FOR THE ASSESSEE DREW OUR ATTENTI ON TO THE BILL OF PATIENT 5 NO.1 OF RS.519,544/- PLACED AT PAGE 240 OF THE PAPE R BOOK. OUR ATTENTION WAS FURTHER DRAWN TO THE REJECTION LETTER PLACED AT PAG ES 57 & 58 OF THE PAPER BOOK. IT WAS FURTHER POINTED OUT BY LD. AR FOR THE ASSESSEE THAT THE SAID AMOUNT WAS RECOVERED IN THE LATER YEARS AND THE SAM E WAS OFFERED TO TAX. IN RESPECT OF THE SECOND CLAIM OF BAD DEBT WRITTEN OFF OF RS.660,067/- IT WAS POINTED OUT THAT THE SAID CLAIM, TILL DATE HAS NOT BEEN SETTLED AND THE AMOUNT HAS NOT BEEN RECOVERED DESPITE BEST EFFORTS BY THE ASSESSEE. OUR ATTENTION WAS DRAWN TO SERIES OF CORRESPONDENCE BETWEEN THE ASSES SEE AND ECHS WITH REGARD TO THE RECOVERY OF THE SAID AMOUNT PLACED AT PAGES 65-68 OF THE PAPER BOOK AND OTHER DOCUMENTS. THE BALANCE EXPENDITURE OF RS. 4,24,798/- WAS CLAIMED TO BE BAD DEBT ON ACCOUNT OF PETTY AMOUNTS NOT RECEIVE D FROM ECHS AGAINST BILLS OF VARIOUS PATIENTS. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PER USED THE RECORD. THE ISSUE ARISING VIDE GROUND NO.3 IS IN RELATION TO THE CLAI M OF BAD DEBTS WRITTEN OFF. THE EXPENDITURE OF RS.16,04,409/- COMPRISED OF BAD DEBT OF RS.519,544/- OF THE PATIENT NACHATTAR SINGH AND RS.660,067/- OF THE PATIENT SHRI JAGIR SINGH AND OTHER PETTY CLAIMS OF BAD DEBT OF RS.424,798/-. THE ASSESSEE IS RUNNING A HOSPITAL AND IT PROVIDED MEDICAL SERVICES TO THE VA RIOUS PATIENTS AND THE CLAIM WAS FILED WITH ECHS IN RESPECT OF SUCH PATIENTS WHO ARE COVERED UNDER THE SCHEME OF ECHS, WHICH IS AN ASSOCIATION OF EX-SERVI CEMAN EMPLOYEES (RETIREES OF THE ARMED FORCES), WHO IN TURN CONTRIB UTE TOWARDS THE CORPUS OF THE ORGANIZATION. AS PER THE EXPLANATION OF THE AS SESSEE, OUT OF THIS CORPUS, THE ASSOCIATION ASSURES FREE MEDICAL FACILITIES TO SUCH MEMBER EMPLOYEES. THE SAID SCHEME IS ALSO FINANCED BY THE GOVT. OF INDIA, BUT IS NEITHER DIRECT GOVERNMENT ORGANIZATION NOR GOVERNMENT GUARANTED SC HEME. HOWEVER, IN RESPECT OF SHRI NACHATTAR SINGH, THE CLAIM WAS REJE CTED BY ECHS, AS IS EVIDENT FROM THE DOCUMENTS PLACED AT PAGES 57-58 OF THE PAP ER BOOK. HOWEVER, THE SAID AMOUNT WAS REIMBURSED TO THE ASSESSEE IN FINAN CIAL YEAR 2010-11 WHICH 6 HAS BEEN OFFERED TO TAX BY THE ASSESSEE IN THE SAID YEAR. THE SAID AMOUNT OF RS.519,544/- HAD BEEN WRITTEN OFF AS BAD DEBT DURIN G THE YEAR AS ALL EFFORTS TO RECOVER THE SAID AMOUNT HAD FAILED. IN VIEW OF THE AMENDED PROVISIONS OF THE ACT, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE IN RESPECT OF BAD DEBT WRITTEN OFF. WE ARE IN CONFORMITY WITH THE ORDER OF CIT(APP EALS) IN THIS REGARD. 12. THE SECOND BAD DEBT OF RS.660,067/- RELATES TO PATIENT SHRI JAGIR SINGH, WHO IN TURN IS ALSO COVERED BY ECHS. THE MEDICAL S ERVICES WERE RENDERED BY THE ASSESSEE TO THE SAID PATIENT. HOWEVER, THE CLA IM FILED WITH ECHS FOR RECOVERY OF THE AMOUNTS SPENT ON THE SAID PATIENT W AS REJECTED BY ECHS AND AS PER THE STATEMENT OF THE ASSESSEE DURING THE COURSE OF HEARING THE SAID AMOUNT, TILL DATE HAS NOT BEEN RECOVERED BY THE ASSESSEE FR OM ECHS. IN THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND MERIT IN THE CLAIM OF THE ASSESSEE IN RESPECT OF THE SAID CLAIM OF BAD DEBT OF RS.660, 067/- WHICH ADMITTEDLY HAS BEEN WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF AC COUNT DURING THE YEAR UNDER CONSIDERATION. WE UPHOLD THE ORDER OF CIT(APPEALS) IN THIS REGARD. 13. THE BALANCE CLAIM OF BAD DEBT WRITTEN OFF RELAT ES TO PETTY AMOUNTS WRITTEN OFF IN RESPECT OF CLAIMS OF VARIOUS PATIENT S, NOT BEING ALLOWED FULLY BY ECHS. AS PER THE WRITTEN SUBMISSIONS FILED BY THE ASSESSEE BEFORE THE CIT(APPEALS), THE AMOUNT RANGES BETWEEN RS.136/- TO RS.27,829/- PATIENT- WISE, WHICH AS PER THE ASSESSEE HAVE BEEN WRITTEN O FF IN ITS BOOKS OF ACCOUNT. THE WRITE OFF OF THE BAD DEBTS IS AN ACCEPTED POSIT ION AND IN VIEW OF THE AMENDED PROVISIONS OF SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT, WHERE CERTAIN AMOUNT HAS BEEN DECLARED AS INCOME OF THE ASSESSEE IN THE YEAR ITSELF OR IN ANY EARLIER YEARS AND WHERE THE RECOVE RY OF THE SAID AMOUNT HAS BECOME BAD, THEN SAID AMOUNT ONCE WRITTEN OFF AS IR RECOVERABLE IN THE BOOKS OF ACCOUNT IS TO BE ALLOWED AS DEDUCTION ON ACCOUNT OF BAD DEBT WRITTEN OFF U/S 36(1)(VII) SUB-SECTION 36(2) OF THE ACT. THUS, WE UPHOLD THE ORDER OF THE 7 CIT(APPEALS) IN ALLOWING THE CLAIM OF THE ASSESSEE AT RS.424,798/-. THE GROUND NO.3 RAISED BY THE REVENUE IS DISMISSED. 14. THE ISSUE IN GROUND NO.4 RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.33,57,932/- MADE OUT OF REPAIRS AND MAINTENANCE HOLDING THE SAME TO BE CAPITAL EXPENDITURE. THE BRIEF FACTS RE LATING TO THE ISSUE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD DEBITED A SUM OF RS.44,21,093/- UNDER THE HEAD REPAIRS AND MAINTENA NCE ON ACCOUNT OF THE UNDER MENTIONED EXPENDITURE: REPAIR & MAINTENANCE (CATH LAB) 560092.00 REPAIR & MAINTENANCE (AC PLANT) 634518.00 REPAIR & MAINTENANCE (MEDICAL EQUIPMENT) 763565.00 REPAIR & MAINTENANCE (BUILDING) 1415013.00 REPAIR & MAINTENANCE (GAS PLANT) 1047905.00 TOTAL 4421093.00 15. THE AO OBSERVED THAT, 'A BARE PERUSAL OF THE SAME SHOWS THAT THE ABOVE EXPENDITURE ARE NOT REVENUE IN NATURE BUT ARE CAPITAL EXPENDITURE. THE HUGE EXPENSES ON THIS SHOWS THAT THESE REPAIR A ND MAINTENANCE EXPENSES ARE INCREASING VALUE OF ASSETS, SO IN THIS REFERENCE THIS EXPENSES CAN NOT BE REVENUE EXPENSES. SINCE, THESE ARE CAPIT AL IN NATURE THE SAME IS NOT ALLOWED AS REVENUE EXPENDITURE AND DEPRECIATION @ 15 % AT RS 6,63,163/- ON THIS AMOUNT OF RS. 44,21,093/- IS ALL OWED AND THE BALANCE AMOUNT OF RS. 37,57,930/- WILL BE ADDED TO THE INCO ME OF THE ASSESSEE BEING OF CAPITAL EXPENDITURE. 16. BEFORE CIT(APPEALS), THE ASSESSEE VIDE ITS WRIT TEN SUBMISSIONS, FURNISHED COMPLETE BREAK-UP OF THE REPAIR AND MAINT ENANCE EXPENDITURE BOOKED BY IT UNDER DIFFERENT HEADS WHICH IS REPRODUCED UND ER PARA 8.2 AT PAGES 11 TO 14 OF THE APPELLATE ORDER. THE AO IN HIS REMAND RE PORT OBSERVED THAT THE STAND OF THE ASSESSEE THAT MAJOR PART OF THE EXPENDITURE WAS ANNUAL MAINTENANCE CONTRACT (AMC CHARGES) SEEMED TO BE AN AFTER THOUGH T AS THE ASSESSEE HAD NOT 8 FURNISHED THE RELEVANT DOCUMENTS DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE IN REJOINDER POINTED OUT THAT THE FINDINGS OF THE A O WERE INCORRECT AS DURING THE ASSESSMENT PROCEEDINGS, ASSESSEE WAS NOT CONFRO NTED WITH THE ADVERSE OPINION THAT THE EXPENSES IN QUESTION WERE CAPITAL IN NATURE. FURTHER, IT WAS STRESSED BY THE ASSESSEE BEFORE THE CIT(APPEALS) TH AT COMPLETE RECORDS AND VOUCHERS OF AMC CHARGES WERE PRODUCED BEFORE THE AO DURING THE ASSESSMENT PROCEEDINGS. THE CIT(APPEALS) TOOK NOTE OF THE FAC T THAT THE AO HAD NOT CONFRONTED THE ASSESSEE WITH HIS PROPOSAL TO DISALL OW THE EXPENDITURE AS CAPITAL EXPENDITURE. THE CLAIM OF THE ASSESSEE WAS ALLOWED BY THE CIT(APPEALS) AS MAJOR PART OF THE IMPUGNED EXPENDIT URE WAS ON ACCOUNT OF ANNUAL MAINTENANCE CONTRACTS AND THE BALANCE EXPEND ITURE IS BACKED BY VOUCHERS. EXPENDITURE BEING ON ACCOUNT OF REPAIR A ND MAINTENANCE WAS HELD TO BE REVENUE IN NATURE BY THE CIT(APPEALS). 17. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER OF THE CIT(APPEALS) AND HAS RAISED GROUND NO.4 IN THIS REGARD. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE AO. THE LD. AR FOR TH E ASSESSEE PLACED RELIANCE ON THE SUMMARY OF EXPENSES CLAIMED UNDER THE HEAD REPAIR AND MAINTENANCE PLACED AT PAGE 71A OF THE PAPER BOOK AND ALSO REFER RED TO THE COPIES OF VARIOUS BILLS PLACED IN THE PAPER BOOK IN RESPECT O F THE RELEVANT INVOICES RAISED IN RELATION TO THE REPAIR AND MAINTENANCE EX PENDITURE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD BO OKED EXPENDITURE OF RS.44,21,093/-. THE HEAD-WISE DETAILS OF REPAIR AN D MAINTENANCE EXPENDITURE WERE AS UNDER : REPAIR & MAINTENANCE (CATH LAB) 560092.00 REPAIR & MAINTENANCE (AC PLANT) 634518.00 REPAIR & MAINTENANCE (MEDICAL EQUIPMENT) 763565.00 REPAIR & MAINTENANCE (BUILDING) 1415013.00 REPAIR & MAINTENANCE (GAS PLANT) 1047905.00 TOTAL 4421093.00 9 19. THE PERUSAL OF THE TABULATED DETAILS AT PAGE 71 A OF THE PAPER BOOK REFLECTS THAT OUT OF THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE UNDER VARIOUS SUB-HEADS ON ACCOUNT OF REPAIR AND MAINTENANCE, CER TAIN EXPENDITURE WAS ON ACCOUNT OF AMC CHARGES PAID AND THE BALANCE WAS ON ACCOUNT OF VARIOUS EXPENDITURES INCURRED BY THE ASSESSEE UNDER VARIOUS SUB-HEADS. NOW, COMING TO THE EXPENDITURE BOOKED BY THE ASSESSEE HEAD-WISE , IT TRANSPIRES THAT THE ASSESSEE HAS BOOKED A SUM OF RS.560,092/- ON ACCOUN T OF REPAIR AND MAINTENANCE OF CATHLAB, OUT OF WHICH THE AMC CHARGE S WERE TO THE TUNE OF RS.420,367/- AND IN THE BALANCE EXPENDITURE BOOKED WAS REPLACEMENT OF MOTOR-DRIVE OF RS.139,725/-. THE ASSESSEE HAS PLAC ED ON RECORD THE BILL IN RESPECT THEREOF AT PAGE 73 OF THE PAPER BOOK. THE AMC CHARGES BEING EXPENDITURE INCURRED FOR THE UPKEEP OF THE EQUIPMEN T WHICH AS PER THE ASSESSEE WDV WAS RS.82.35 CRORES, MERITS TO BE ALLOWED AT TH E OUTSET. FURTHER, THE PERUSAL OF THE BILL PLACED AT PAGE 73 OF THE PAPER BOOK IN RELATION TO REPLACEMENT OF MOTOR-DRIVE TOTALS TO RS.139,725/- A ND THE PERUSAL OF THE SAME REFLECTS IT TO BE AN EXPENDITURE ON REPAIRS AND MAI NTENANCE WHICH IS REVENUE IN NATURE. THUS, WE HOLD THAT THE SAID EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE TOTALING R S.560,092/-. 20. THE NEXT SUB-HEAD OF EXPENDITURE IS REPAIRS AND MAINTENANCE OF AC PLANT TOTALING RS.634,518/-, OUT OF WHICH AMC CHARGES TOT ALING RS.218,784/- AND THE BALANCE EXPENDITURE IS ON ACCOUNT OF REPAIR AND OVE RHAULING OF COOLING, OIL AND MOTORS OF AHUS AMOUNTING TO RS.209,570/- AND WELDIN G, RE-INSTALLATION OF AHUS TOTALING RS.201,954/- IN TURN TOTALING RS.411, 524/-. THE COPIES OF THE RELEVANT BILLS ARE PLACED AT PAGES 85 AND 87 OF THE PAPER BOOK. A PERUSAL OF THE SAID BILLS REFLECTS THE NATURE OF THE EXPENDITU RE TO BE IN RELATION TO REPAIR AND MAINTENANCE AND NOT FOR PURCHASE OF ANY NEW ASS ET. THE AMC CHARGES, AS HELD IN PARA ABOVE, ARE TO BE ALLOWED AS REPAIR AND MAINTENANCE EXPENDITURE. 10 ACCORDINGLY, THE EXPENDITURE TOTALING RS.634,518/- IS TO BE ALLOWED AS REVENUE EXPENDITURE IN THE HANDS OF THE ASSESSEE. 21. THE NEXT SUB-HEAD IS REPAIR AND MAINTENANCE OF MEDICAL EQUIPMENT, TOTALING RS.763,565/- WHICH INCLUDED AMC CHARGES O F RS.122,616/-, WHICH ARE TO BE ALLOWED AS REVENUE EXPENDITURE IN THE HANDS O F THE ASSESSEE. FURTHER, THE ASSESSEE HAD PURCHASED ELECTRO LIFTING FIVE SECTION AL OPERATION THEATRE TABLE FOR RS.119,350/- WHICH IS CAPITAL ASSET PURCHASED BY TH E ASSESSEE. HENCE THE SAID EXPENDITURE IS CAPITAL IN NATURE AND IS NOT TO BE A LLOWED AS DEDUCTION. THE ASSESSEE HAD FURTHER INCURRED EXPENDITURE OF RS.2,0 0,000/- ON REPAIR AND UPGRADATION OF X-RAY MACHINE GEOMETER AND BILL IN R ESPECT THEREOF IS PLACED AT PAGE 97 OF THE PAPER BOOK. THE EXPENDITURE BEING F OR THE PURPOSE OF REPAIR AND MAINTENANCE IS TO BE ALLOWED AS REVENUE EXPENDI TURE. FURTHER, THE ASSESSEE HAS BOOKED PETTY EXPENSES TOTALING RS.321,599/- UND ER THE SAID HEAD WHICH ARE DAY-TODAY EXPENDITURE OF REPAIR AND MAINTENANCE INC URRED BY THE ASSESSEE IN THE COURSE OF RUNNING THE HOSPITAL AND THE SAME ARE TO BE ALLOWED AS REVENUE EXPENDITURE. 22. FURTHER, THE ASSESSEE HAS BOOKED EXPENDITURE OF RS.14,15,013/- UNDER THE HEAD REPAIR AND MAINTENANCE OF BUILDING WHICH INC LUDED EXPENDITURE OF RS.67,483/- ON PURCHASE OF TILES, RS.5,75,000/- ON WATER-PROOFING OF HOSPITAL ROOF AND FURTHER PETTY EXPENSES OF RS.772,530/- ON DAY-TODAY BASIS. AS POINTED OUT IN THE PARAS HEREIN ABOVE, THE ASSESSEE IS RUNNING HOSPITAL AND THE EXPENDITURE IS REQUIRED TO BE INCURRED FOR THE MAIN TENANCE OF THE SAID BUILDING AND THE PERUSAL OF THE DETAILS FURNISHED BY THE ASS ESSEE REFLECTS THE NATURE OF THE EXPENSES TO BE REPAIR AND MAINTENANCE AND CON SEQUENTLY, THE TOTAL EXPENDITURE INCURRED ON DAY-TODAY BASIS TOTALING RS .772,530/- MERITS TO BE ALLOWED AS REVENUE EXPENDITURE. FURTHER, THE EXPEND ITURE ON PURCHASE OF TILES TOTALING RS.67,483/- CANNOT BE HELD TO BE CAPITAL I N NATURE, KEEPING IN VIEW THE HOSPITAL BUILDING. FURTHER, THE EXPENDITURE INCURR ED ON WATER-PROOFING OF 11 HOSPITAL ROOF AT RS.5,75,000/- DOES NOT BRING INTO EXISTENCE ANY ASSET OF ENDURING NATURE AND CONSEQUENTLY, THE SAME IS TO BE ALLOWED AS AN EXPENDITURE UNDER THE HEAD REPAIR AND MAINTENANCE. 23. THE NEXT ITEM OF REPAIR AND MAINTENANCE WAS O F GAS PLANT TOTALING RS.10,47,905/- WHICH INCLUDED AMC CHARGES OF RS.215 ,400/- WHICH MERITS TO BE ALLOWED IN VIEW OF OUR DECISION IN PARAS HEREIN ABOVE. THE BALANCE EXPENDITURE INCLUDED REPAIR, MAINTENANCE AND SHIFTI NG OF GAS PLANT OF RS.3,50,000/- AND REPAIR AND MAINTENANCE AND UPGRAD ATION OF GAS PLANT OF RS.3,55,000/-. THE TOTAL WDV VALUE OF THE ASSET IS RS.1,18,519/- AS SHOWN BY THE ASSESSEE IN THE CHART PLACED AT PAGE 71A OF THE PAPER BOOK. THE ASSESSEE HAS PLACED ON RECORD THE BILLS AT PAGES 222 AND 223 AND IN VIEW OF THE FACT THAT THE TOTAL WDV OF THE EQUIPMENT WAS RS.1,18,519/-, T HE EXPENDITURE OF RS.7,05,000/- IS HELD TO BE CAPITAL IN NATURE AND T HE SAME IS NOT TO BE ALLOWED AS AN EXPENDITURE. THE ASSESSEE HAS FURTHER BOOKED PETTY EXPENSES OF RS.127,505/- UNDER THE HEAD REPAIR AND MAINTENANCE OF GAS PLANT WHICH MERITS TO BE ALLOWED AS REVENUE EXPENDITURE. 24. IN VIEW OF OUR DECISION IN PARAS HEREIN ABOVE, OUT OF TOTAL EXPENDITURE OF RS.44,21,093/-, EXPENDITURE OF RS.119,350/- UNDER SUB-HEAD REPAIR AND MAINTENANCE OF MEDICAL EQUIPMENT AND RS.7,05,000/- UNDER SUB-HEAD REPAIR AND MAINTENANCE OF GAS PLANT ARE HELD TO BE CAPITAL EXPENDITURE AND THE BALANCE EXPENDITURE IS HELD TO BE REVENUE IN NATURE. IN VI EW THEREOF, WE MODIFY THE ORDER OF CIT(APPEALS) AND DISALLOW A SUM OF RS.8,24 ,350/- HOLDING THE SAME TO BE CAPITAL EXPENDITURE. HOWEVER, THE AO IS DIRECTE D TO ALLOW DEPRECIATION @ 15% ON THE SAID ADDITION OF RS.8,24,350/- AND THE B ALANCE IS TO BE ADDED AS INCOME OF THE ASSESSEE. THE BALANCE EXPENDITURE IS ALLOWED AS REVENUE EXPENDITURE. THE GROUND NO.4 IS, THUS, PARTLY ALLO WED. 12 C.O. 50/CHD/112 25. THE ONLY ISSUE RAISED IN THE CO FILED BY THE AS SESSEE IS AGAINST THE DISALLOWANCE U/S 36(1)(III) OF THE ACT AT RS.546,00 0/-. 26. THE BRIEF FACTS RELATING TO THE ISSUE RAISED IN THE CO ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAD PAID INTEREST OF RS.1.25 CRORES ON SECURED/UNSECURE D LOANS AND ON THE OTHER SIDE, HAD ADVANCED SUM OF RS.95,60,000/- DURING THE YEAR UNDER CONSIDERATION ON WHICH NO INTEREST WAS RECEIVED. T HE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE AFORESAID ADVANCES WAS THAT A SUM OF RS.45,50,000/- WAS FOR THE PLOT OF LAND ON WHICH TH E HOSPITAL WAS CONSTRUCTED. IN THE REPLY SUBMITTED BEFORE THE AO, IT WAS CLAIMED BY THE ASSESSEE THAT THE SAID PLOT OF LAND WAS PURCHASED M ORE THAN 15 YEARS AGO IN THE NAME OF THE DIRECTORS AND THE HOSPITAL WAS CONS TRUCTED THEREON AND THE COST OF THE BUILDING WAS REFLECTED IN THE FIXED ASS ETS OF THE ASSESSEE. FURTHER, IT WAS SUBMITTED BY THE ASSESSEE THAT AS I T WAS ENJOYING ALL THE BENEFITS OF LAND AND INDIRECTLY OWNED THE LAND, NO INTEREST WAS CHARGED FROM THE ADVANCES AND EVEN NO RENT WAS CHARGED BY THE DI RECTORS AGAINST THE SAID PLOT OF LAND. IN RESPECT OF THE OTHER TWO LOANS OF RS.30 LACS GIVEN FOR THE ACQUISITION OF NURSING HOSPITAL AND RS.20 LACS TO M RS. PARVINDER KAUR, THE CLAIM WAS THAT THE SAID ADVANCE WAS MADE FOR COMMER CIAL EXIGENCY. THE AO REJECTING THE CLAIM OF THE ASSESSEE DISALLOWED INTE REST @ 12% P.A. ON SUCH ADVANCES. ON THE ADVANCE OF RS.45,50,000/-, INTERE ST OF RS.5,46,000/- WAS DISALLOWED AND ON THE BALANCE ADVANCE TOTALING RS.5 0,00,000/- PROPORTIONATE INTEREST RELATING TO THE PERIOD OF LOAN TOTALING RS .1,30,000/- WAS DISALLOWED. 27. THE ASSESSEE DID NOT FILE ANY APPEAL AGAINST TH E SAID DISALLOWANCE OF RS.1,30,000/- BEFORE CIT(APPEALS) AND ONLY ISSUE RA ISED WAS AGAINST THE DISALLOWANCE OF RS.5,46,000/-. THE CIT(APPEALS) UP HELD THE SAID 13 DISALLOWANCE AND THE ASSESSEE IS IN APPEAL AGAINST THE SAME BY WAY OF THE PRESENT C.O. 28. THE LD. AR FOR THE ASSESSEE POINTED OUT THAT TH E SAID PLOT OF LAND ON WHICH THE HOSPITAL WAS CONSTRUCTED AND IS BEING RUN BY THE ASSESSEE, WAS PURCHASED IN THE FINANCIAL YEAR 1992-93 OUT OF ITS OWN FUNDS. IT WAS STRESSED BY LD. AR FOR THE ASSESSEE THAT NO INTEREST BEARING FUNDS WERE UTILIZED FOR INVESTMENT IN THE PLOT OF LAND. THE ALLOTMENT OF T HE SITE FOR HOSPITAL WAS MADE IN THE NAME OF THE DIRECTORS AND HENCE, THE AM OUNT WAS ADVANCED TO THE SAID DIRECTORS IN ORDER TO AVAIL THE BENEFIT OF PURCHASING THE SAID PLOT OF LAND AND BUILDING OF THE HOSPITAL WAS CONSTRUCTED B Y THE ASSESSEE FROM ITS OWN FUNDS. IT WAS FURTHER STRESSED BY THE LD. AR F OR THE ASSESSEE THAT THE PROVISIONS OF PROVISO TO SECTION 36(1)(III) WERE IN TRODUCED W.E.F. 1.4.2004 AND WERE NOT APPLICABLE TO THE FACTS OF THE CASE. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON THE ORDER OF THE AO IN PARA 4.2 AND CIT(APPEALS). 29. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. 30. THE ASSESSEE IS ADMITTEDLY RUNNING A HOSPITAL A ND HAS REFLECTED INCOME FROM RUNNING OF THE HOSPITAL DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAD ADVANCED SUM OF RS.45,50,000/- TO ITS DIRECTORS FOR INVESTMENT IN THE PURCHASE OF PLOT OF LAND. THE ASSESSEE CONS TRUCTED THE BUILDING OF THE HOSPITAL ON THE SAID SITE AND THE SAID BUILDING IS REFLECTED IN THE LIST OF FIXED ASSETS OF THE ASSESSEE. THE SAID BUILDING OF THE H OSPITAL WAS CONSTRUCTED MORE THAN 15 YEARS AGO. THE CLAIM OF THE ASSESSEE IN THIS REGARD WAS THAT THE SAID INVESTMENT WAS MADE OUT OF OWN FUNDS AND N O PART OF THE FUNDS WERE UTILIZED FOR MAKING THE SAID INVESTMENT IN THE PLOT OF LAND. THE REVENUE HAS FAILED TO CONTROVERT THE SAME AND IN TH E TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO MERIT IN THE AFORESAID DISALLOWANCE 14 MADE U/S 36(1)(III) OF THE ACT. THE ASSESSEE COMPA NY WAS ENJOYING THE BENEFITS OF THE SAID PLOT OF LAND ON WHICH THE BUIL DING WAS CONSTRUCTED AGAINST WHICH NO RENT OR CHARGES WERE BEING PAID BY THE ASSESSEE TO ITS DIRECTORS AND THE INVESTMENT HAD BEEN MADE FOR THE PURPOSE OF CARRYING ON THE BUSINESS. WE FIND NO MERIT IN DISALLOWING ANY PART OF THE INTEREST EXPENDITURE BEING RELATABLE TO SUCH ADVANCES MADE B Y THE ASSESSEE FOR THE PURCHASE OF PLOT OF LAND. REVERSING THE ORDER OF T HE CIT(APPEALS), WE DELETE THE ADDITION OF RS.5,46,000/-. THE CROSS OBJ ECTIONS RAISED BY THE ASSESSEE ARE, THUS, ALLOWED. 31. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED AND THE CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF MAY, 2013. SD/- SD/- ( T.R.SOOD) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 22 ND MAY,2013 POONAM COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH