M/s. Shri Ram Krupa Medicare Pvt. Ltd., Baroda V. The DCIT, Circle-2(1)(1), Baroda

ITA 123/AHD/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7191 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 10-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: AMRIN KHAN
• Keywords: Gift; Business income; Depreciation; Business expenditure; Corroborative evidences; Capital expenditure
• Section: 37(1); 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA.NO.123/AHD/2018 / ASSTT. YEAR: 2014-2015 SHRI RAM KRUPA MEDICARE P.LTD. 44, HARIBHAKTI COLONY OLD PADRA ROAD BARODA 390 007. PAN : AAECS 3818 F VS. DCIT, CIR.2(1)(1) BARODA. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : MS. AMRIN KHAN, AR REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 29/07/2019 / DATE OF PRONOUNCEMENT: 30/07/2019 +,/ O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF LD.CIT(A)-2, VADODARA DATED 31.10.2017 PASSED FOR THE ASSTT.YEAR 2014-15. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.6,89,920/- OUT OF BUSINESS PROMOTION EXPENSES, GIFT TO DOCTORS AND EN TERTAINMENT EXPENSES. 3. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTS ET CONTENDED THAT IDENTICAL ISSUE WAS CONSIDERED BY THE TRIBUNAL IN T HE ASSTT.YEARS 2011-12 AND 2012-13 AND SIMILAR DISALLOWANCES WERE UPHELD. SH E PLACED ON RECORD COPY OF TRIBUNALS ORDER PASSED IN ITA NO.3461/AHD/2014 AND OTHERS. ITA NO.123/AHD/2018 2 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECORD T HAT THE ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF CARDIA C CARE AND DIAGNOSIS AND PREVENTION OF HEART DISEASE CENTRE. IT HAS FILED ITS RETURN OF INCOME ON 24.11.2014 DECLARING TOTAL INCOME AT RS.3,38,56,090 /-. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE H AS DEBITED FOLLOWING EXPENDITURE: PARTICULARS AMOUNT (RS.) BUSINESS PROMOTION EXP. 14,82,202/- GIFT EXPENSES 2,37,286/- ENTERTAINMENT EXPENSES 4,66,831/- TOTAL 21,86,519/- THE LD.AO HAS DISALLOWED ALL THESE EXPENDITURE AND DETERMINED TAXABLE INCOME OF THE ASSESSEE AT RS.3.69 CRORES. DISSATIS FIED WITH THE DISALLOWANCE, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E LD.CIT(A) WHO PARTIALLY ALLOWED THESE EXPENSES. 5. A PERUSAL OF THE RECORD WOULD REVEAL THAT THE LD .CIT(A) HAS FOLLOWED THE ORDER OF THE CIT(A) IN ASSTT.YEAR 20111-12. TH E TRIBUNAL IN ITA NO.3461/AHD/2014 AND OTHERS HAS UPHELD THE ORDER OF THE LD.CIT(A). THE DISCUSSION MADE BY THE TRIBUNAL ON THIS ISSUE READS AS UNDER: 4. NOW WE TAKE BOTH APPEALS OF THE ASSESSEE. FIRST COMMON ISSUE AGITATED BY THE ASSESSEE IN ASSTT.YEAR 2011-1 2 (GROUND NO.1 AND 2) AND IN ASSTT YEAR 2012-13 (GROUND NO.1, 2 AN D 3) IS THAT, WHETHER THE LD.CIT(A) HAS RIGHTLY CONFIRMED PARTIAL DISALLOWANCE OF EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS GIF T EXPENSES, BUSINESS PROMOTION EXPENSES AND ENTERTAINMENT IN BO TH YEARS. FACTS ON ALL VITAL POINTS ARE COMMON IN BOTH YEARS THEREFORE, FOR FACILITY OF REFERENCE, WE TAKE THE FACTS FROM THE A SSESSMENT YEAR 2011-12. 5. BRIEF FACTS ARE THE ASSESSEE IS ENGAGED IN THE B USINESS OF CARDIAC CARE AND DIAGNOSIS AND PREVENTION OF HEART DISEASE CENTRE ETC. IT HAS FILED ITS RETURN OF INCOME FOR THE ASS TT.YEAR 2011-12 ON ITA NO.123/AHD/2018 3 28.9.2011 DECLARING LOSS AT RS.1,49,536/-. IN THE ASSTT.YEAR 2012- 13 IT HAS FILED RETURN OF INCOME ON 27.9.2012 DECLA RING TOTAL INCOME OF RS.63,96,030/-. AT THE RELEVANT TIME THE ASSESSEE WAS RUNNING THREE DIVISIONS VIZ. BARODA HEART INSTITUTE & RESEARCH INSTITUTE, BARODA HEART INSTITUTE & CRITICAL CARE C ENTRE AND INDRAPURI DIAGNOSTIC CENTRE. AT THE RELEVANT TIME, IT WAS RUNNING THESE THREE DIVISIONS AND THE DETAILS OF DIVISIONS INCLUDING THEIR ACTIVITIES READ AS UNDER: SR.NO. NAME OF DIVISION NATURE OF ACTIVITY 1. BARODA HEART INSTITUTE & RESEARCH INSTITUTE RUNS CARDIAC CARE AND DIAGNOSIS AND PREVENTION OF HEART DISEASE CENTRE 2. BARODA HEART INSTITUTE & CRITICAL CARE CENTRE CARDIAC CARE AND OTHER GENERAL DISEASE CENTRE 3. INDRAPURI DIAGNOSTIC CENTRE. ECHO AND TMT TEST 6. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE A O THAT THE ASSESSEE HAS DEBITED FOLLOWING EXPENDITURE IN THE P ROFIT & LOSS ACCOUNT: SR. NO. PARTICULARS AMOUNT (RS.) A.Y.2011-12 A.Y.2012-13 1. GIFT EXPENSES 11,12,932 4,54,085 2. BUSINESS PROMOTION EXPENSES 1,74,938 4,28,012 3. ENTERTAINMENT EXPENSES 14,01,560 9,17,364 TOTAL 26,89,430 17,99,461 7. THE LD.AO DISALLOWED THE ABOVE EXPENDITURE BY HO LDING THAT THESE WERE NOT INCURRED FOR THE PURPOSE OF BUSINESS . ON APPEAL, THE LD.CIT(A) HAS CONFIRMED DISALLOWANCE AT RS.11,5 7,514/- AS AGAINST RS.17,99,461/- DEBITED BY THE ASSESSEE IN T HE ASSTT.YEAR 2012-13. IN THE ASSTT.YEAR 2011-12, THE LD.CIT(A) HAS CONFIRMED THE DISALLOWANCE OF RS.21,72,749/- AS AGAINST EXPEN DITURE DEBITED AT RS.26,89,430/-. AS OBSERVED EARLIER, THERE IS N O DISPARITY OF FACTS ABOUT THE NATURE OF EXPENDITURE AS WELL AS BU SINESS CARRIED ITA NO.123/AHD/2018 4 OUT BY THE ASSESSEE. WE FIND THAT THE LD.CIT(A) HA S EXAMINED EACH EXPENDITURE ANALYTICALLY AND EXHAUSTIVELY. THE FIN DING OF THE LD.CIT(A) RECORDED IN THE ASSTT.YEAR 2011-12 IS WOR TH TO NOTE. IT READS AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE, THE AO'S OBSERVATIONS AND SUBMISSION MADE BY THE AR OF THE APPELLANT. THE EXPENSES DISALLOWED BY THE AO IN THE FORM OF GIFT EXPENSES, BUSINESS, PROMOTION EXPENSES AND ENTERTAINMENT EXPENSES CONSISTS OF SEVERAL SUB-HEAD S OF SUCH EXPENSES. THE ALLOWABILITY OF THE SAME IS BEING DIS CUSSED IN FOLLOWING PARAGRAPH:- I) OUT OF GIFT EXPENDITURE AN AMOUNT OF RS.3,198/- HAS BEEN INCURRED FOR CELEBRATING BIRTHDAY OF STAFF MEMBER, MARRIAGE GIFT ETC. SUCH EXPENDITURE HAS BEEN HELD TO BE ALLO WABLE BY ME IN ORDER DATED 16/06/2014 IN APPELLANT'S OWN CAS E FOR AY 2010-11 IN APPEAL NO.CAB/III-032/2013-14. FOLLOWING THE SAME, THE EXPENSES ARE DIRECTED TO BE ALLOWED IN TH E CURRENT YEAR ALSO. II) AN AMOUNT OF RS.4,30,724/- AND FURTHER AMOUNT O F RS.2,11,563/- HAS IBEEN SPENT FOR GIVING GIFTS' TO DOCTORS. SUCH GIFTS WERE HELD TO BE ;DISALLOWABLE IN THE DEC ISIONS IN APPELLANT'S OWN CASE FOR AY 2010-11. BESIDES, THE DISCUSSIONS MADE IN THE APPELLATE ORDER FOR AY 2010 -11, THERE IS ONE MORE REASON DUE TO WHICH SUCH EXPENSES CANNOT BE ALLOWED AS A DEDUCTION U/S. 37(1) OF THE IT ACT 1961. IN THIS ASPECT, IT IS SEEN THAT THE MEDICAL COUNCIL OF INDIA IN EXERCISE OF ITS STATUTORY POWER VESTED IN IT UNDER THE INDIAN MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AN D ETHICS) REGULATIONS 2002, IMPOSED PROHIBITION ON AN Y MEDICAL PRACTITIONER OR THEIR PROFESSIONAL ASSOCIAT ES FROM ACCEPTING GIFT, TRAVEL FACILITY AND HOSPITALITY, CA SH OR MONETARY GRANT FROM ANY PHARMACEUTICAL AND ALLIED H EALTH SECTOR INDUSTRIES ON 10.12.2009. IN 'PURSUANCE OF T HIS, THE CBDT ISSUED CIRCULAR NO. 5/12 CLARIFYING THAT CLAIM OF ANY EXPENDITURE INCURRED IN PROVIDING ABOVE MENTIONED O R SIMILAR FREEBIES SHALL BE INADMISSIBLE U/S 37 OF TH E INCOME TAX (ACT BEING PROHIBITED UNDER LAW. THUS, THE FACT REMAINS ITA NO.123/AHD/2018 5 THAT THE RELEVANT LAW WAS AMENDED AS ON 10/12/2009 AND HENCE DURING THE PREVIOUS YEAR 2010-11 SUCH PAYMENT S MADE BY THE APPELLANT WERE AGAINST LAW. IT MAY BE MENTIONED HERE THAT THE CONSTITUTIONAL VALIDITY OF CIRCULAR NO. 5/2012 ISSUED BY CBDT WAS CHALLENGED BEFORE HON'BLE HIGH COURT OF HIMACHAL IN SHIMLA IN CWP NO.10793 OF 2012 . VIDE ITS ORDER DATED 26/12/2012, THE HON'BLE COURT UPHELD THE CIRCULAR. THE COURT IN ITS DECISION HAS HELD AS FOLLOWS:- '37(1) ANY EXPENDITURE (NOT BEING EXPENDITURE OF TH E NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPEN SES OF .THE ASSESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER 'THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. (EXPLANATION -FOR THE REMOVAL OF DOUBTS, IT IS HERE BY DECLARED THAT ANY EXPENDITURE INCURRED BY AN ASSESS EE FOR ANY PURPOSE WHICH IS AN OFFENCE OR WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE \SHALL BE MADE IN RESPECT OF SUCH EXPENDITURE.)' 3. SHRI VISHAL MOHAN, ADVOCATE, ON BEHALF OF THE PETITIONER CONTENDS THAT THE CIRCULAR GOES BEYOND T HE SECTION ITSELF. WE ARE NOT IN AGREEMENT WITH THIS SUBMISSION. THE EXPLANATION TO SECTION 37(1) MAKES IT CLEAR THAT ANY EXPENDITURE INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS PROHIBITED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE SUM [AND SUBSTANCE OF T HE CIRCULAR IS ALSO THE SAME. IN CASE THE ASSESSING AUTHORITIES ARE 'NOT PROPERLY UNDERSTANDING THE CIRCULAR THEN THE REMEDY LIES FOR EACH INDIVIDUAL ASSESSEE TO FIFE APPEALS UNDER THE INCOME-TAX ACT B UT THE CIRCULAR WHICH IS TOTALLY IN LINE WITH SECTION 37(1) CANNOT BE SAID TO BE ILLEGAL. IN FACT PARA 4 OF THE ITA NO.123/AHD/2018 6 CIRCULAR QUOTED HEREINABOVE ITSELF CLARIFIES THAT T HE VALUE OF THE FREEBIES ENJOYED BY THE MEDICAL PRACTITIONER IS ALSO TAXABLE AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES DEPENDING ON THE FACTS OF EACH CASE. THEREFORE, IF THE ASSESSEE SATISFIES THE ASSESSING AUTHORITY THAT THE EXPENDITURE IS NOT IN VIOLATION OF THE REGULATIONS FRAMED BY THE MEDICAL COUNCIL THEN IT MAY LEGITIMATELY CLAIM A DEDUCTION, BUT IT IS FOR THE ASSESSEE TO SATISFY THE ASSESSING OFF ICER THAT THE EXPENSE IS NOT IN VIOLATION OF THE MEDICAL COUN CIL REGULATIONS REFERRED TO ABOVE.' THUS, AS PER THE DECISION OF THE COURT, AFTER THE A MENDMENT OF RELEVANT PROVISIONS BY THE MEDICAL COUNCIL OF IN DIA, SECTION 37(1) AUTOMATICALLY CAME INTO PLAY EVEN WIT HOUT CIRCULAR ISSUED BY THE CBDT. ACCORDINGLY THE PAYMEN TS MADE BY THE APPELLANT WERE NOT ALLOWABLE EXPENDITUR E AS PER THE PROVISIONS OF SECTION 37(1) OF THE IT ACT 1961. HENCE, THE DISALLOWANCE MADE BY THE AO IS UPHELD AND THIS GROU ND ALSO. III) THE APPELLANT HAS FURTHER GIVEN RS.55,650/- TO ITS STAFF. BUT THE DETAILS OF THE RECEIPTS ARE NOT AVAILABLE O N RECORD. THE AO HAS ALSO GIVEN THIS FINDING IN THE ASSESSMEN T ORDER. DURING THE COURSE OF THE CURRENT APPELLATE PROCEEDI NGS ALSO, NO SUCH DETAILS HAVE BEEN FILED. HENCE, THIS EXPEND ITURE IS ALSO HELD TO BE NOT ALLOWABLE AND THE DISALLOWANCE OF THE SAME IS UPHELD, IV) THE APPELLANT HAS SPENT AN AMOUNT OF RS.48,354/ - FOR SPONSORING THE MARATHON. SUCH EXPENDITURE HAS BEEN HELD TO BE ALLOWABLE IN APPELLANT'S OWN CASE FOR AY 2010-11 . FOLLOWING THE SAME, THE DISALLOWANCE OF THE SAME IS DIRECTED TO BE DELETED. SIMILARLY, THE SUM OF RS.39,974/- SP ENT TOWARDS DOCTORS MEET AND RS.28,110/- FOR PROVIDING BOARDING AND LODGING FACILITY TO NABH INSPECTOR ARE FOR THE BUSINESS PURPOSES OF THE APPELLANT AND HENCE THE SA ME ARE DIRECTED TO BE ALLOWED IN ITS COMPUTATION OF INCOME . SIMILARLY, THE INCENTIVE PAID TO MR. HARDIK MOD AMO UNTING TO RS.58,500/- IS FOR BRINGING NEW BUSINESS TO THE APPELLANT'S ITA NO.123/AHD/2018 7 CONCERN. HENCE, THESE EXPENSES ARE DIRECTED TO BE A LLOWED. ACCORDINGLY, THE ENTIRE BUSINESS PROMOTION EXPENSES OF RS.1,74,938/- ARE ALLOWED AND ADDITION OF THIS AMOU NT IS DIRECTED TO BE DELETED. V) NOW, COMING TO THE DISALLOWANCE OF ENTERTAINMENT EXPENSES, AMOUNT OF RS.2,75,000/- INCURRED TOWARDS FARASH KHANA CHARGES FOR THE MARATHON ;AND RS.35,545/- TOW ARDS GIVING FAREWELL TO EMPLOYEES IS DIRECTED TO BE ALLO WED AS THE SAME HAS BEEN INCURRED FOR BUSINESS PURPOSES OF THE APPELLANT. THE MARATHON EXPENSES HAVE ALSO BEEN ALL OWED IN APPELLANT'S OWN CASE FOR AY 2010-11. VI) SO FAR AS THE BALANCE EXPENSES OF RS.5,56,831/- AND RS.1,34,184/-REGARDING ARRANGING THE LCD AT FARM HO USES FOR IPL MATCHES FOR DOCTORS ETC. ARE CONCERNED, THE SAME ARE NOT ALLOWABLE ON THE BASIS OF THE DISCUSSIONS MADE REGARDING GIFT EXPENSE INCURRED FOR DOCTORS ABOVE. THESE EXPE NSES ARE NOTHING BUT BRIBERY GIVEN TO THE DOCTORS AND HENCE THE SAME ARE ILLEGAL EXPENSES AS PER THE REGULATIONS OF MEDI CAL COUNCIL OF INDIA AND HENCE ARE NOT ALLOWABLE AS PER THE PROVISIONS OF SECTION 37 OF THE IT ACT. HOW ORGANIZ ING THE VIEWING OF IPL MATCHES AT FARMHOUSES RESULT INTO ADVERTISEMENT OF THE APPELLANT'S BUSINESS HAS NOWHE RE BEEN EXPLAINED BY THE APPELLANT. THE APPELLANT EARNS MON EY FROM PATIENTS AND NOT FROM .DOCTORS. IF THE APPELLANT'S CLAIM THAT THESE EXPENSES ARE IN THE NATURE OF ADVERTISEMENT E XPENSES IS ACCEPTED, THEN IT ONLY MEANS THAT THESE ARE THE IND UCEMENTS GIVEN BY THE APPELLANT TO DOCTORS TO REFER MORE AND MORE PATIENTS TO ITS HOSPITALS AND AGAIN IT MAKES THE EX PENSES ILLEGAL AS PER THE GUIDELINES OF MCI. HENCE, DISALL OWANCE OF THESE EXPENSES ARE UPHELD. 8. THE LD.COUNSEL FOR THE ASSESSEE AT THE TIME OF H EARING FAIRLY ADMITTED THAT SIMILAR DISALLOWANCE WAS MADE IN THE ASSTT.YEAR 2008-09 AND THAT DISALLOWANCE WAS UPHELD UPTO THE T RIBUNAL. HOWEVER, HE CONTENDED THAT ASSESSEE IS IN THE BUSIN ESS OF PROVIDING MEDICAL FACILITIES TO THE PUBLIC AT LARGE , AND THEREFORE, IT HAS TO KEEP GOOD RELATION WITH DOCTORS AS WELL AS W ITH THE STAFF. THUS, IN ORDINARY COURSE OF BUSINESS IT HAS INCURRE D THE ABOVE ITA NO.123/AHD/2018 8 EXPENDITURE. THIS EXPENDITURE IS ALLOWABLE UNDER S ECTION 37 OF THE INCOME TAX ACT. ON THE STRENGTH OF CBDT CIRCULAR T HIS EXPENDITURE CANNOT BE DISALLOWED TO THE ASSESSEE. HE FURTHER CONTENDED THAT ON ACCOUNT OF CORPORATE MORALITY IN GIVING GIFTS TO THE DOCTORS, THE BUSINESS EXPENDITURE CANNOT BE DIS ALLOWED. INCOME FROM THE ACTIVITIES OF THE ASSESSEE IS ASSES SED UNDER THE HEAD BUSINESS INCOME. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER OF THE LD.CIT(A). 9. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 37 OF THE INCOME TAX ACT CONTEMPLATES THAT ANY EXPENDITURE NOT BEING EXPENDI TURE IN THE NATURE DESCRIBED IN SECTION 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENDITURE OF THE ASSESSEE, LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF BUSINESS OR PROVISION, SHALL BE ALLOWED IN COMPUTING THE INC OME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION. THE EXPRESSION WHOLLY AND EXCLUSIVELY IN THE SECTION WOULD PROVIDE THAT EXPENDITURE SHOULD BE LAID OUT FOR THE PURPOSE OF BUSINESS ONLY. THE STAND OF THE ASSESSEE WAS THAT EXPENDITU RE MUST HAVE BEEN INCURRED BY THE ASSESSEE VOLUNTARILY EVEN WITH OUT NECESSITY. BUT IF IT IS FOR THE PROMOTION OF BUSINESS, THE DED UCTION WOULD BE ADMISSIBLE. HOWEVER, LOOKING TO THE NATURE OF EXPE NDITURE AND NATURE OF BUSINESS ACTIVITY OF THE ASSESSEE, IT WOU LD REVEAL THAT THESE EXPENDITURES WERE NOT WHOLLY REQUIRED, IN A S ENSE, FOR THE PURPOSE OF BUSINESS OR COULD IT BE TERMED THAT THES E EXPENSES WERE EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS. THE LD.CIT(A) HAS EXAMINED THIS ASPECT IN DETAILS AND MADE REFERE NCE TO THE DECISION OF HONBLE HIMACHAL PRADESH HIGH COURT, AN D THEREAFTER HELD THAT THESE EXPENSES WERE NOT INCURRED FOR THE PROMOTION OF THE BUSINESS. AS POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE, SIMILAR EXPENSES WERE DISALLOWED TO IT IN EARLIER ASSESSMEN T YEARS UPTO THE LEVEL OF THE TRIBUNAL, THOUGH ORDER OF THE TRIBUNAL HAS NOT BEEN PLACED ON RECORD BY EITHER PARTIES. BUT STATEMENT MADE AT THE BAR IS SUFFICIENT FOR HOLDING THAT SUCH EXPENDITURE HAS BEEN DISALLOWED IN THE PAST ALSO. THUS, IN ORDER TO MAINTAIN CONSI STENCY, THESE GROUNDS OF APPEALS ARE REJECTED IN BOTH THE ASSESSM ENT YEARS. 6. THERE IS NO DISPARITY ON FACTS. THE IMPUGNED OR DER OF THE LD.FIRST APPELLATE AUTHORITY IS BASED ON HER ORDER PASSED IN THE ASSTT.YEAR 2011-12, ITA NO.123/AHD/2018 9 WHICH HAS BEEN CONSIDERED BY THE TRIBUNAL IN THE AB OVE FINDING. THEREFORE FOLLOWING ORDER OF THE ITAT IN THE ASSTT.YEAR 2011- 12, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS DISMISSED. 7. GROUND NO.2: GRIEVANCE OF THE ASSESSEE IN THIS GROUND OF APPEAL IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO WHO RESTRICTED THE CLAIM OF DEPRECIATION ON LIFE SAVING EQUIPMENT TO 1 5% INSTEAD OF 40% CLAIMED BY THE ASSESSEE. 7. THE ASSESSEE HAS CLAIMED DEPRECIATION AT THE RAT E OF 40% ON CERTAIN ASSETS, WHOSE DETAILS HAVE BEEN NOTICED BY THE AO. THE AO OBSERVED THAT DEPRECIATION ADMISSIBLE ON THESE ASSETS IS ONLY 15% AS PROVIDED IN SCHEDULE ATTACHED TO INCOME TAX RULES. ACCORDINGLY, HE DISA LLOWED RS.7,82,486/-. THE LD.CIT(A) HAS UPHELD THIS DISALLOWANCE BY FOLLO WING ORDER OF HIS PREDECESSOR IN THE ASSTT.YEAR 2011-12. THE LD.COUN SEL FOR THE ASSESSEE CONCEDED THAT SIMILAR DISALLOWANCE WAS UPHELD BY TH E ITAT IN THE ASSTT.YEAR 2011-12 AND DISCUSSION MADE BY THE ITAT READS AS UN DER: 10. NEXT COMMON ISSUE AGITATED BY THE ASSESSEE IN BOTH THE YEAR IS WITH RESPECT TO DEPRECIATION REQUIRED TO BE GRAN TED TO THE ASSESSEE ON THE ALLEGED LIFE SAVING EQUIPMENTS. IN THE DETAILS OF ASSETS, ON WHICH DEPRECIATION HAS BEEN CLAIMED, THE ASSESSEE HAS SHOWN THE FOLLOWING MACHINERIES: 1. STRESS TEST MACHINE 2. TMT MACHINE, TMT MACHINE WITH PC PRINTER/ACCESSORIES 3. TRADE MILLS FOR STRESS TEST MACHINE 4. REGULATOR, LIFE PRESSURE ALARM 5. SYRINGE PUMP 6. PATIENT MONITOR SYSTEM WITH ACCESSORIES AND MODU LES NEW ICU MONITORS 8. VITAL SIGNS VIEW STATION 9. KLV 46W400A SONY LCD TV & DAV DZ87 OW SONY HT 10.HEAT EXCHANGER AND LITHIUM BROMIDE ITA NO.123/AHD/2018 10 11.PLUGA MAKE 100 MM SUMBERSIBALE PUMP SET MODEL 12.IPB MODULE FOR MONITOR V24 13.1 BIG TROLLY WITH 3 TRAY AND SMALL TROLLY WITH 2 TRAY 14.OT INSTRUMENT WITH OT TABLE AND DIFFERENT LIGHT SETS 15.OPTHALMIC SIGHT SAVING EQUIPMENTS 16.MICROSCOPE 17.MONITORS, 40' MONITOR, MULTIPA MONITOR FOR ICU 18.AMD DIPLOMAX PHACO MACHINE 19. NEOTECH CHAIR UNIT AND OT TABLE 20.HORIZONTAL CYLINDER GAS STERILIZER WITH VACUUM P UMP 11. ACCORDING TO THE ASSESSEE, THESE ARE PART OF PL ANT & MACHINERY OF THE ASSESSEE-COMPANY, AND THESE ARE LI FE SAVING EQUIPMENTS. THEREFORE, IT CLAIMED DEPRECIATION AT THE RATE OF 40%. ON THE OTHER HAND, THE LD.AO HAS GRANTED DEPRECIATI ON AT THE RATE OF 15%. ON APPEAL, THE LD.CIT(A) CONFIRMED THIS ST AND OF THE AO BY RECORDING FOLLOWING FINDING: I HAVE CONSIDERED THE FACTS OF THE CASE, THE AO'S OBSERVATIONS AND SUBMISSION MADE BY THE AR OF THE APPELLANT. THE AO HAS CLEARLY STATED THAT THE 20 AS SETS/ LIST OF WHICH HAS BEEN GIVEN IN THE ASSESSMENT ORDER, AR E NOT ELIGIBLE FOR DEPRECIATION @ 40% AS PER NEW APPENDIX L(III)(3)(XIA) OF THE IT ACT 1962. THE ONLY SUBMIS SION MADE BY THE APPELLANT DURING THE COURSE OF THE APPELLATE PROCEEDINGS ARE THAT THESE ASSETS ARE IN THE NATURE OF SPARES/AUXILIARY EQUIPMENT. BUT THE SAME HAS NOT BE EN EXPLAINED BY THE APPELLANT BY GIVING EVEN A SINGLE EXAMPLE. ONE FAILS TO UNDERSTAND AS TO HOW STRESS TEST MACHI NES, TMT MACHINES, TRADE MILLS ETC. CAN BE HELD TO BE .A UXILIARY EQUIPMENT OF THE LIFE SAVING EQUIPMENTS. THE LIST G IVEN IN APPENDIX L(III)(3)(XIA) OF THE IT RULES 1962 IS VER Y SPECIFIC AND NAMES OF THE MACHINES LISTED IN THIS APPENDIX A RE QUITE CLEAR. THE LIST NOWHERE SAYS THAT THE AUXILIARY EQU IPMENT OF SUCH EQUIPMENT WILL ALSO BE HELD TO BE ELIGIBLE FOR DEPRECIATION @ 40%. THUS, ON ACCOUNT OF THE FACT TH AT THESE 20 MACHINES ARE NOT SPECIFICALLY MENTIONED IN THE A PPENDIX, AND THE APPELLANT HAS FAILED TO FILE ANY EXPLANATIO N AS TO HOW THESE MATCHES CAN BE HELD TO BE PART OF THE LIFE SA VING EQUIPMENT LISTED IN THIS APPENDIX, THE DISALLOWANCE MADE BY THE 'AO IS UPHELD AND THIS GROUND OF APPEAL IS DISM ISSED. ITA NO.123/AHD/2018 11 12. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE HAVE PERUSED APPE NDIX I(III(3)(XIA) OF THE INCOME TAX RULES, 1962, WHICH IS AVAILABLE AT PAGE NO.1.474 OF INCOME TAX RULES TAXMANN (2018) EDITION. WE FIND THAT A LIST OF LIFE SAVING MEDICAL EQUIPMEN TS HAS BEEN GIVEN IN THIS APPENDIX ON WHICH DEPRECATION AT THE RATE OF 40% IS PERMISSIBLE. WHERE RATE OF DEPRECIATION HAS BEEN PR OVIDED ON SPECIFIC MACHINERY, IT IS NOT TO BE GRANTED ON EACH AND EVERY MACHINERY INSTALLED AT THE HOSPITAL. THUS, THE LD. CIT(A) HAS RIGHTLY REJECTED THE STAND OF THE ASSESSEE. THE DE PRECIATION IS TO BE GRANTED ON THE BASIS OF RATE PROVIDED IN THE TABLE GIVEN IN THE INCOME TAX RULES. THE MACHINERY ON WHICH DEPRECIAT ION HAS BEEN CLAIMED BY THE ASSESSEE AT 40% IS NOT BEING PROVIDE D IN THE APPENDIX. THEREFORE, THE DEPRECIATION ON SUCH MACH INERY IS AT 15% WHICH HAS RIGHTLY BEEN UPHELD BY THE LD.CIT(A). THIS GROUND OF APPEAL IS REJECTED IN BOTH YEARS. 8. WE DO NOT FIND ANY DISPARITY ON THE FACTS. ADMI TTEDLY THE ASSETS ARE SIMILAR, AND THEREFORE, DEPRECIATION HAS RIGHTLY BE EN PARTLY DISALLOWED BY THE AO. THIS GROUND OF APPEAL IS REJECTED. 9. GROUND NO.3: IN THIS GROUND OF APPEAL, GRIEVANC E OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWA NCE OF DEPRECIATION AMOUNTING TO RS.1,28,322/-. 10. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AS CLAIMED DEPRECIATION ON CERTAIN ELECTRONICAL INSTALLATION AT THE RATE OF 15 % WHICH HAS BEEN RESTRICTED BY THE AO TO 10%. THIS ACTION OF THE AO HAS BEEN UPHE LD BY THE LD.CIT(A). THE LD.COUNSEL FOR THE ASSESSEE CONCEDED THAT SIMIL AR DISALLOWANCE WAS MADE IN EARLIER YEARS, AND THE TRIBUNAL HAS ALSO CONCURR ED WITH THE AO IN THE ASSTT.YEAR 2011-012. THE FINDING RECORDED BY THE T RIBUNAL ON THIS ISSUE READS AS UNDER: 13. IN THE NEXT GROUND OF APPEAL, THE ASSESSEE HAS CLAIMED DEPRECIATION ON CERTAIN ELECTRICAL INSTALLATION AT 15% WHICH HAS ITA NO.123/AHD/2018 12 BEEN RESTRICTED BY THE AO TO 10%. WHILE DEALING WI TH THIS ISSUE IN THE ASSTT.YEAR 2011-12, THE LD.CIT(A) HAS TAKEN NOT E OF THE FINDING GIVEN BY THE AO AS WELL AS SUBMISSIONS MADE BY THE ASSESSEE. THEREAFTER, THE LD.CIT(A) HAS UPHELD DISALLOWANCE. THE DISCUSSION MADE BY THE LD.CIT(A) READS AS UNDER: 6. THE THIRD GROUND OF APPEAL IS AS FOLLOWS:- '3. THE ID. AO ERRED IN FACT AND IN LAW IN RESTRICT ING THE CLAIM OF DEPRECIATION ON ELECTRICAL INSTALLATION TO 10% INSTEAD OF 15% CLAIMED BY THE APPELLANT AND THEREBY DISALLOWING DEPRECIATION OF RS.2,08,952/- 6.1. THE AO HAS STATED IN HIS ORDER AS FOLLOWS:- '7.0 DISALLOWANCE OF EXCESS DEPRECIATION ON ELECT RIC INSTALLATION:- 7.1 ON VERIFICATION OF DEPRECIATION CHART ANNEXED A LONG WITH THE RETURN OF INCOME, IT IS NOTED THAT THE ASSESSEE COMPANY HAS CLAIMED DEPRECIATION OF @ 15% ON ITS ELECTRICAL INSTALLATION HAVING W.D.V AS ON 01.04.2010 OF RS.39,30,030/- AND ADDITION MADE DURING THE YEARS O F RS.2,49,000/- ON 24.06.2010. HOWEVER, AS PER ,NEW A PPENDIX I OF THE INCOME TAX RULES, THE RATE OF ALLOWABLE DE PRECIATION ON ELECTRICAL INSTALLATION IS 10%, WORKED OUT TO RS .4,17,903/- DEPRECIATION ON ELECTRICAL INSTALLATION IS 10%, WOR KED OUT TO RS.6,26,855/-. THUS, AS PER THE PROVISIONS OF INCOM E TAX RULE, 1962, THE ASSESSEE COMPANY CLAIMED EXCESS DEPRECIATION EXCEEDED BY 2,08,952/~. ACCORDINGLY, T HE EXCESS CLAIM OF DEPRECIATION ON ELECTRICAL INSTALLA TION WORKED OUT TO RS.2,08,952/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE.' 6.2. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE AR OF THE APPELLANT HAS MADE THE FOLLOWING SUBMISSION:- 1. VIDE GROUND NO. 3, THE APPELLANT HAS CHALL ENGED THE ACTION OF AO IN RESTRICTING THE CLAIM OF DEPRECIATI ON ON ELECTRICAL INSTALLATION TO 10% INSTEAD OF 15% CLAIM ED BY THE APPELLANT AND THEREBY MAKING ADDITION OF RS. 2,08,9 52/- TO THE INCOME OF THE APPELLANT. ITA NO.123/AHD/2018 13 2. IT MAY BE MENTIONED THAT THE APPELLANT HAS P URCHASED THE ELECTRICAL ITEMS LIKE LDB PANEL, BOX FOR X-RAY MACHINE, INDUSTRIAL CABLE OF VARIOUS SIZE FOR RUNNING THE ME DICAL EQUIPMENTS, PCC PANELS ETC. THE PURCHASE OF ELECTRI CAL ITEMS WAS MADE AT BARODA HEART & MULTI SPECIALITY HOSPITAL, BHARUCH. THE EQUIPMENTS PURCHASED WERE US ED TO RUN THE MEDICAL EQUIPMENTS. THE ELECTRICAL FITTINGS FORM PART AND PARCEL OF THE MEDICAL EQUIPMENTS. THEREFORE, DEPRECIATION ON THE SAME HAS TO BE ALLOWED @ 15% BE ING PART OF PLANT & MACHINERY. FURTHER, THE APPELLANT H AS CLAIMED THE DEPRECIATION BASED ON THE RATES MENTION ED IN THE INCOME TAX RULES, 1962. 3. WE MAY ALSO LIKE TO CLARIFY THAT THE ELECT RICAL INSTALLATIONS IN THE CASE OF THE APPELLANT DO NOT F ORM PART OF 'FURNITURE AND FITTINGS INCLUDING ELECTRICAL FITTIN GS'. NOTE 5 UNDER THE APPENDIX DEFINES 'ELECTRICAL FITTINGS' INCLUDE ELECTRICAL WIRING, SWITCHES, SOCKETS, OTHER FITTING S AND FANS ETC. WE SUBMIT THAT THE ELECTRICAL INSTALLATIONS REFERRED TO ABOVE FORM PART OF MACHINERY AND NOT FURNITURE & FI XTURES. THESE ARE NOT IN THE FORM OF FITTINGS LIKE FANS ETC OR IN THE NATURE OF FURNITURE AND FITTINGS. IN VIEW OF THE SAME HIGHER RATE OF DEPRECIATION IS REQUIRED TO BE ALLOWED. 4. THE APPELLANT IN CASE OF FURNITURE AND FI TTINGS IS CLAIMING DEPRECIATION @ 10 % ONLY. 5. CONSIDERING THE ABOVE WE REQUEST YOUR KIND OFFICE TO ALLOW THE DEPRECIATION ON ELECTRICAL INSTALLATION @ 15% AS CLAIMED BY THE APPELLANT. 6.3. I HAVE CONSIDERED THE FACTS OF THE CASE, THE AO'S OBSERVATIONS AND SUBMISSION MADE BY THE AR OF THE APPELLANT. AGAIN, THE APPELLANT HAS FAILED TO EXPLA IN WITH SUPPORTING EVIDENCES THAT THE ELECTRIC INSTALLATION IS IN THE NATURE OF PART AND PARCEL OF THE MEDICAL EQUIPMENTS . THE INDUSTRIAL CABLE OF VARIOUS SIZES FOR RUNNING THE M EDICAL EQUIPMENTS, PCC PENAL ETC. ARE IN THE NATURE OF ELE CTRICAL WIRING AND OTHER FITTINGS ONLY. HENCE, THE DISALLOW ANCE MADE BY THE AO IS UPHELD AND THIS GROUND OF APPEAL IS DI SMISSED. ITA NO.123/AHD/2018 14 14. WITH THE ASSISTANCE OF THE LD.REPRESENTTIVES, W E HAVE GONE THROUGH THE RECORD. WE FIND THAT DEPRECIATION HAS BEEN RESTRICTED AT THE RATE OF 10% BY THE LD.AO BECAUSE THE ASSESSE E FAILED TO DEMONSTRATE THAT ELECTRICAL PANEL INSTALLED BY IT W AS PART OF THE MACHINERY. HE CONSIDERED ELECTRICAL INSTALLATION A S INDEPENDENT ASSET THAN THE MEDICAL EQUIPMENTS. THE LD.CIT(A) H AS CONSIDERED ALL THESE ASPECTS IN RIGHT PERSPECTIVE AND NO INTER FERENCE IS CALLED ON THIS ISSUE. HENCE, THIS GROUND OF APPEAL IS ALS O REJECTED. 11. HERE ALSO, WE DO NOT FIND ANY DISPARITY ON FACT S WITH EARLIER YEAR. THEREFORE, WE UPHOLD ORDER OF THE LD.CIT(A) ON THIS ISSUE. THIS GROUND OF APPEAL IS DISMISSED. 12. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 30 TH JULY, 2019 AT AHMEDABAD. S D / - (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER S D / - (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 30/07/2019