The ACIT(OSD)Circle-8, Ahmedabad V. Sal Care Pvt.Ltd., Ahmedabad

ITA 1518/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89740 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-04-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital asset; Depreciation
• Section: 143(3)

Judgement Text

ITA NO.1518/AHD/2012 ASSESSMENT YEAR: 2009-10 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND S.S. GODARA JM] ITA NO.1518/AHD/2012 ASSESSMENT YEAR: 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX (OSD), ....... ......APPELLANT CIRCLE-8, AHMEDABAD. VS. SAL CARE PVT. LTD., ........................RE SPONDENT C/O. SAL HOSPITAL & MEDICAL INSTITUTE, OPP. DOORDAR SHAN, DRIVE-IN-ROAD, AHMEDABAD. [PAN: AALCS 7886 G] APPEARANCES BY: DINESH SINGH , FOR THE APPELLANT S.N. SOPARKAR, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : APRIL 27, 2015 DATE OF PRONOUNCING THE ORDER : JULY 21, 2015 O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HAS CHALLENGED CORRECTNESS OF THE ORDER DATED 19 TH APRIL, 2012, PASSED BY THE LEARNED CIT(A) IN THE M ATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), FOR THE ASSESSMENT YEAR 2009-10, ON THE FOLLOWING GROUNDS: 1. A) THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISAL LOWANCE OF RS.2,83,98,569/- MADE BY THE ASSESSING OFFICER. 1. B) THE LD. COMMISSIONER OF INCOME TAX (APPEALS)- XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN NOT APPLYING THE P ROVISIONS OF SECTION 40(A)(IA) OF THE ACT IN VIEW OF HIS FINDINGS THAT T HE ABOVE REFERRED PAYMENTS WERE REVENUE IN NATURE, BEING FEES OR RENT PAID FOR USES OF INFRASTRUCTURAL FACILITIES AND BRAND. ITA NO.1518/AHD/2012 ASSESSMENT YEAR: 2009-10 PAGE 2 OF 3 2. TO ADJUDICATE ON THESE GROUNDS OF APPEAL, SOME M ATERIAL FACTS OF THE CASE NEED TO BE TAKEN NOTE OF. IN THE COURSE OF THE A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAD DISALLOWED RS.1,63,33,576/- O N ACCOUNT OF PAYMENT OF OPERATION AND MANAGEMENT CHARGES PAID TO ADARSH FOU NDATION AND RS.2,15,31,183/- BEING REIMBURSEMENT OF EXPENSES RE LATING TO KESAR SAL HOSPITAL, ON THE GROUND THAT THESE EXPENSE WERE CAP ITAL EXPENSES IN NATURE. IN COMING TO THIS CONCLUSION, THE ASSESSING OFFICER HA D NOTED THAT THE PAYMENTS WERE MADE UNDER AN AGREEMENT AS A RESULT OF WHICH A SSESSE WILL HAVE THE RIGHT TO USE THE TRADENAME/BRAND SAL HOSPITAL AND, THER EFORE, THE ASSESSE HAS MADE THESE PAYMENTS FOR PURCHASE OF OPERATION AND MANAGEMENT RIGHTS OF SAL HOSPITAL. AS THIS WAS A CAPITAL ASSET, THE ASSESSI NG OFFICER PROCEEDED TO HOLD THAT THE EXPENSES ARE REQUIRED TO BE TREATED AS CAP ITAL EXPENSES AND FOR ACQUISITION OF AN INTANGIBLE ASSET IN THE FORM OF O PERATIONS AND MANAGEMENT RIGHTS. HE ALLOWED DEPRECIATION @ 25% ON THIS ASSET AND THE BALANCE AMOUNT OF RS 2,83,98,569 WAS DISALLOWED. AGGRIEVED BY THE STA ND SO TAKEN BY THE ASSESSING OFFICER, ASSESSE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A). LEARNED CIT(A) HELD THAT THESE EXPENSES ARE REVENUE EXPENSES. THE ASSESSING OFFICER IS AGGRIEVED OF THE STAND SO TAKEN BY THE C IT(A) AND IS IN APPEAL BEFORE US ON THE GROUND THAT THE CIT(A) OUGHT TO HAVE HELD THAT THIS IS A CAPITAL EXPENSE AND EVEN IF HE WAS TO COME TO CONCLUSION THAT IT IS A REVENUE EXPENSES, HE OUGHT TO HAVE DISALLOWED THE EXPENSE ON THE GROUND THAT T AX WAS NOT DEDUCTED AT SOURCE FROM THE RELATED PAYMENTS. 3. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF T HE APPLICABLE LEGAL POSITION. 4. AS A LOOK AT THE AGREEMENT BETWEEN THE ASSESSE A ND THE ADARSH FOUNDATION TRUST CLEARLY REVEALS, THE PAYMENT OF 40 % OF PROFITS OR RS 1,00,00,000 EACH YEAR- WHICHEVER IS LESS, IS PAID B Y THE ASSESSE FOR GRANT OF OPERATION AND MANAGEMENT RIGHTS UNDER CLAUSE 4.1 OF THE AGREEMENT. THIS IS NOT FOR ACQUIRING A BRAND BUT FOR USE OF A BRAND. THE B ENEFIT IS CLEARLY IN THE REVENUE FIELD SINCE THE BENEFIT OF THIS PAYMENT IS ON YEAR TO YEAR BASIS AND DOES NOT ITA NO.1518/AHD/2012 ASSESSMENT YEAR: 2009-10 PAGE 3 OF 3 RESULT IN ANY ENDURING OR LASTING BENEFIT BEYOND TH E RELEVANT ASSESSMENT YEAR. LEARNED CIT(A) WAS THUS QUITE JUSTIFIED IN HOLDING THAT THE EXPENSES ARE REVENUE EXPENSES IN NATURE AS THESE EXPENSES ARE INCURRED T O EARN PROFITS FOR THE YEAR. AS REGARDS THE ASSESSING OFFICERS GRIEVANCE THAT T HE CIT(A) OUGHT TO HAVE DISALLOWED THE AMOUNT UNDER SECTION 40(A)(IA), IT W AS NEVER THE CASE OF THE ASSESSING OFFICER. IN ANY EVENT, IN VIEW OF THE FAC T THAT SECOND PROVISO TO SECTION 40(A)(IA) HAS BEEN HELD TO BE RETROSPECTIVE IN EFFE CT, IN THE CASE OF DECISION OF A COORDINATE BENCH IN THE CASE OF RAJEEV KUMAR AGARWA L VS ACIT (149 ITD 363), COPY OF WHICH IS DEEMED TO BE ATTACHED TO AND FORMI NG PART OF THIS ORDER AS WELL, AND AS IT IS AN UNDISPUTED POSITION THAT THE ADARSH FOUNDATION HAS DULY ACCOUNTED FOR THESE PAYMENTS IN COMPUTATION OF ITS TAXABLE INCOME, SECTION 40(A)(IA) DOES NOT COME INTO PLAY ON THE FACTS OF T HIS CASE. COPIES OF RELATED DOCUMENTS HAVE BEEN PLACED BEFORE US AT PAGES 48 TO 77 OF THE PAPER-BOOK AND LEARNED DR HAS NOT POINTED OUT ANY INFIRMITY IN THE SAME. IN VIEW OF THESE DISCUSSIONS, AND BEARING IN MIND ENTIRETY OF THE CA SE, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE LE4ARNED CIT(A) AND D ECLINE TO INTERFERE IN THE MATTER. 5. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNC ED IN THE OPEN COURT TODAY ON THE 21 ST DAY OF JULY, 2015. SD/- S D/- S. S. GODARA PRAMOD KUM AR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) AHMEDABAD, THE 21 ST DAY OF JULY, 2015 COPIES TO: (1) THE APPELLANT (2) THE RESPON DENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD