DCIT, Mohali V. RGS Healthcare Private Limited, Mohali

ITA 18/CHANDI/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81038 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-11-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Keywords: Depreciation; Bad and doubtful debts; Onus to prove
• Section: 133(6); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 18/CHD/2014 ASSESSMENT YEAR: 2010-11 THE DCIT, VS. RGS HEALTHCARE PRIVATE LTD., CIRCLE-6(1), MOHALI MOHALI PAN NO. AADCR1242B (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI RESPONDENT BY : SHRI TEJ MOHAN SINGH DATE OF HEARING : 03.11.2014 DATE OF PRONOUNCEMENT : 18.11.2014 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 4.10.2013 OF CIT(A), CHANDIGARH 2. IN THIS APPEAL, REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT(A) HAS ERRED IN ALLOWING APPEAL OF THE ASSESSEE WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS. 5,48,79,032/- WHICH WAS MADE ON ACCOUNT OF DISALLOW ANCE OF BAD DEBT WRITTEN OFF AS IT WAS CLEARLY MENTIONED BY THE AO THAT THE SAME WERE NOT DEBTS IN THE FIRST PLACE AND FURTHER THE ECHS POLYCLINIC HAD ALSO NOT WITHHELD ANY LEGIT IMATE BILL SUBMITTED BY THE ASSESSEE. 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 26 ,16,143/- WHICH WAS MADE ON ACCOUNT OF DISALLOWANCE OF DEPREC IATION CLAIMED BY THE ASSESSEE IN RESPECT OF THOSE ASSETS WHICH WERE ACQUIRED FREE OF COST BY THE ASSESSEE FROM ITS SIST ER CONCERN AS THE ASSESSEE HAD NOT INCURRED ANY EXPENDITURE ON THE ACQUISITION OF THE SAID ASSETS. 3. GROUND NO.1 IS GENERAL IN NATURE AND DOES NOT RE QUIRE SEPARATE ADJUDICATION 4. GROUND NO.2: AFTER HEARING BOTH THE PARTIES WE F IND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAS WRITTEN OFF BAD DEBTS TO THE TUNE OF RS. 5,48,79,032/-. ON ENQUIRY THE ASSESSEE PROVIDED COMPLETE DETAILS AND BREAK OF SUCH BAD DEBTS. THE A SSESSEE PROVIDED DETAILED REPLY ETC. VIDE LETTER DATED 18.12.2012 WHICH READS AS UNDER:- THE COMPANY HAS WRITTEN OFF BAD DEBTS OF RS. 548. 79 LACS OUT OF WHICH MAJORITY OF BAD DEBTS ARE OF EX-SERVIC EMAN CONTRIBUTORY HEALTH SCHEME (ECHS) A SCHEME PROMOTED BY CENTRAL GOVERNMENT FOR THE TREATMENT OF RETIRED ARM Y PERSONNEL. OUT OF THE ABOVE MENTIONED AMOUNT RS. 7.98 LACS PER TAINING TO THE F.Y. 2009-10 HAS BEEN WRITTEN OFF TO BAD DEBTS ACCOUNT ON ACCOUNT OF PARTIAL DEDUCTION MADE BY ECHS IN THE PA YMENT MADE AGAINST BILLS SUBMITTED FOR PAYMENTS. RS. 1.96 LACS PERTAINING TO THE F.Y. 2009-10 HAS BE EN WRITTEN OFF TO BAD DEBTS ACCOUNT ON ACCOUNT OF PARTIAL DEDU CTION MADE BY OTHER CORPORATE IN THE PAYMENT MADE AGAINST BILLS SUBMITTED FOR PAYMENTS, IMPEREST GIVEN TO STAFF FOR PETTY PURCHASES BUT NOT RECOVERABLE AND ADVANCE GIVEN TO SUPPLIERS DEALING WITH HOSPITAL. RS. 35.49 LACS OF ECHS BILLS PERTAINING TO THE F.Y. 2007-08 HAS BEEN WRITTEN OFF TO BAD DEBTS ACCOUNT AS ALL TH E PATIENTS 3 COMING TO THE HOSPITAL THROUGH ECHS WERE GIVEN MEDI CINES DURING THE OPERATION, STAY AND DISCHARGE AS PRESCRI BED BY THE DOCTOR BUT WITHOUT LOOKING INTO THE ASPECT THAT APP ROVAL FOR THE SAME NEEDS TO BE TAKEN. LATER ON THE BILL OF TH E PATIENT FOR WHICH NO APPROVAL WAS TAKEN FOR GIVING MEDICINE AT THE TIME OF OPERATION, STAY AND DISCHARGE WERE NOT ACCEPTED BY THE ECHS WITH OBJECTION STATING APPROVAL NOT TAKEN. THE MATTER WAS TAKEN UP WITH HIGHER AUTHORITIES BUT THE SAME F ROM THE ECHS HAS LAPSED OUT AS MAXIMUM TIME PERIOD GIVEN BY THE ECHS TO CLAIM THE BILL IS 2 MONTHS FROM THE DATE OF DISCHARGE OF THE PATIENT. RS. 163.85 LACS OF ECHS BILLS PERTAINING TO THE F.Y . 2008-09 HAVE BEEN WRITTEN OFF TO BAD DEBTS ACCOUNT AS ALL T HE PATIENTS COMING TO THE HOSPITAL THROUGH ECHS WERE GIVEN MEDI CINES DURING THE OPERATION, STAY AND DISCHARGE AS PRESCRI BED BY THE DOCTOR BUT WITHOUT LOOKING INTO THE ASPECT THAT APP ROVAL FOR THE SAME NEEDS TO BE TAEN. LATER ON THE BILL OF THE PATIENT FOR WHICH NO APPROVAL WAS TAKEN FOR GIVING MEDICINE AT THE TIME OF OPERATION, STAY AND DISCHARGE WERE NO ACCEPTED B Y THE ECHS WITH OBJECTION STATING APPROVAL NOT TAKEN. THE MATTER WAS TAKEN UP WITH HIGHER AUTHORITIES BUT THE SAME W ERE NOT ACCEPTED AS TIME BAR TO CLAIM THE SAME FROM THE ECH S HAS LAPSED OUT AS MAXIMUM TIME PERIOD GIVEN BY THE ECHS TO CLAIM THE BILL IS 2 MONTHS FROM THE DATE OF DISCHAR GE OF THE PATIENT. RS. 339.51 LACS OF ECHS BILLS PERTAINING TO THE F.Y . 2009-10 HAS BEEN OFF TO BAD DEBT ACCOUNT AS ALL THE CRITICA L PATIENTS COMING TO THE HOSPITAL THROUGH ECHS WERE TREATED UN DER EMERGENCY TO SAVE THEIR LIFE WITHOUT LOOKING INTO T HE ASPECT THAT APPROVAL FOR THE SAME NEEDS TO BE TAKEN. LATER ON THE BILL FOR THE PATIENTS FOR WHICH NO APPROVAL FOR TREATMEN T WAS TAKEN WERE NOT ACCEPTED BY THE ECHS WITH OBJECTION STATIN G APPROVAL NOT TAKEN. THE MATTER WAS TAKEN UP WITH HI GHER AUTHORITIES BUT THE SAME WERE NOT ACCEPTED AS TIME BAR TO CLAIM THE SAME FROM THE ECHS HAS LAPSED OUT AS MAXI MUM TIME PERIOD GIVEN BY THE ECHS TO CLAIM THE BILL IS 2 MONTHS FROM THE DATE OF DISCHARGE OF THE PATIENT. 4 THE LAW IS WELL SETTLED IN WRITING OFF BAD DEBTS AS PER INCOME TAX ACT, 1961 IN THE BOOKS OF ASSESSEE AS PER SUPRE ME COURT JUDGMENT IN THE MATTER OF T.R.F LIMITED V/S COMMISS IONER OF INCOME TAX, RANCHI. THE MAIN PARAGRAPH OF THE JUDGM ENT IS REPRODUCED AS UNDER:- THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL,1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT TH E DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 5. ACCORDING TO ASSESSING OFFICER THE ABOVE REPLY C LEARLY SHOWS THAT MAIN REASON GIVEN FOR THE WRITTEN OFF OF THE BAD DEBTS W AS THAT SINCE EX SERVICEMEN CONTRIBUTORY HEALTH SCHEME ( IN SHORT ECHS) HAS R EFUSED TO ACCEPT THE BILLS. THEY REFUSED TO ACCEPT THE BILLS BECAUSE THE ASSESS EE HAS PROVIDED ADMISSION AND TREATMENT TO VARIOUS PATIENTS WITHOUT RECEIVING THE PRIOR APPROVAL OF THE AUTHORITIES. IN ORDER TO VERIFY THIS CONTENTION TH E ASSESSING OFFICER SOUGHT INFORMATION U/S 133(6) FROM THE STATION HEADQUARTER , ECHS POLYCLINIC, CHANDIMANDIR CANTT., PANCHKULA. IN RESPONSE TO THI S QUERY, THE ECHS SUBMITTED THE FOLLOWING REPLY VIDE LETTER DATED 21.12.2012 WH ICH READS AND UNDER:- THE REQUISITE INFORMATION AS ASKED VIDE YOUR LETTE R UNDER REFERENCE IS AS UNDER: A. DETAILS OF PAYMENT MADE TO GRECIAN HOSPITAL MOHALI ALONG WITH PV NO. OF BILL AND CHEQUE NO. AS PER ACCOUNT B OOK MAINTAINED BY THIS OFFICE DURING F.Y. 2007-08, 2008 -09, 2009-10 IS ENCLOSED AS PER APPENDIX ATTACHED. B. BILLS WHICH ARE PLACED UNDER OBSERVATION DUE TO VAR IOUS REASONS ARE NOT BEING PAID/WITHHOLD BY THIS OFFICE AS THE SAME IS RETURNED TO CONCERN CFA/HOSPITAL FOR RECTIF ICATION. THE MEDICAL BILLS ARE SANCTIONED AND PAID AS PER TH E ECHS 5 RATES/POLICY. THE EXCESS AMOUNT CLAIMED BY HOSPITAL IS DEDUCTED BY CONCERNED CFA AND ARE NOT BEING PAID. C. AMOUNT PAID AS SANCTIONED COMPETENT CFA AND NO PAYM ENT HAS BEEN WRITTEN OFF BY THIS OFFICE. 7. ACCORDING TO THE ASSESSING OFFICER THE ECHS HAS CLEARLY STATED THAT NO PAYMENT HAVE BEEN WRITTEN OFF BY THEM IN THE CASE O F THE ASSESSEE. THIS REPLY WAS CONFRONTED TO THE ASSESSEE AGAINST WHICH SIMILA R SUBMISSIONS AS MADE EARLIER WERE REITERATED AND RELIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF T.T.F. LTD VS. CIT 323 ITR 397. AFTER PERUSING THIS JUDGMENT THE ASSESSING OFFICER OBSERVED THAT I T WAS WELL SETTLED THAT ENTRY FOR WRITING OFF OF BAD DEBTS IN THE BOOKS OF ACCOUN T ITSELF IS NOT CONCLUSIVE AND THE ASSESSING OFFICER WAS NOT PRECLUDED FROM MAKING ENQUIRES AS TO WHETHER THE ENTRIES ARE GENUINE OR IMAGINARY OR FANCIFUL. HE A LSO OBSERVED THAT CONTENTION THAT ECHS HAS NOT ACCEPTED SOME OF THE BILLS WAS N OT TENABLE BECAUSE OF THE REPLY OF THE ECHS. HE ALSO OBSERVED THAT AUDITOR IN THE TAX AUDIT REPORT HAD MADE THE FOLLOWING COMMENTS IN RESPECT OF BAD DEBTS . DURING THE YEAR, THE MANAGEMENT HAS WRITTEN OFF DE BTORS OF RS. 5,48,79,032/- OUT OF WHICH DEBTORS OF RS. 5,46, 84,292/- BELONGING TO ECHS. THE MANAGEMENT EXPLAINS THAT TH E PAYMENT WAS NOT MADE FOR ONE YEAR AFTER THE SUBMISS ION OF BILLS HENCE WRITTEN OFF. ACCORDING TO ASSESSING OFFICER THIS REASON WAS DIF FERENT FROM THE REASON GIVEN BY THE ASSESSEE. ALTERNATIVELY, THE ASSESSING OFFIC ER OBSERVED THAT EVEN IF IT IS ASSUMED THAT ECHS HAS NOT ACCEPTED THE BILLS AS STA TED BY THE ASSESSEE THEN ONLY REASON WHICH CAN BE THOUGHT OF WAS THAT ASSESSEE FA ILED TO COMPLY WITH TERMS AND CONDITIONS PROVIDED IN THE AGREEMENT AND IN THI S REGARD HE REFERRED TO PARA NO.6 OF THE MEMORANDUM OF AGREEMENT WHICH READS AS UNDER;- IN GRAVE EMERGENCY PATIENT SHALL BE ADMITTED AND L IFE SAVING TREATMENT BE GIVEN ON PRODUCTION OF ECHS CAR D BY MEMBERS, EVEN IN THE ABSENCE OF REFERRAL SLIP. THE REFERRAL 6 SLIP BE ALLOWED TO BE SUBMITTED WITHIN 24 HOURS FRO M ADMISSION IN SUCH CASES. 8. ACCORDING TO HIM A DEBT WAS AN OBLIGATION OF LI ABILITY OWED BY ONE PARTY (THE DEBTOR ) TO THE SECOND PARTY (THE CREDITOR). THEREFORE, THE DEPARTMENT PRESUPPOSES THE ACCEPTANCE OF THE DEBTS AND THE REL ATIONSHIP OF DEBTOR AND CREDITOR. SINCE THE REFUSAL TO ACCEPT THE BILLS WA S ON ACCOUNT OF FAILURE OF THE TERMS AND CONDITIONS BY THE ASSESSEE THE CLAIM COUL D NOT BE ALLOWED. THE ASSESSEE COULD RECOGNIZE ONLY THOSE SALES IN RESPEC T OF WHICH THERE IS A LEGAL CLAIM FOR RECEIVING THE AMOUNT. IN THIS BACKGROUND THE ASSESSING OFFICER REJECTED THE CLAIM OF THE BAD DEBTS. 9. ON APPEAL, THE FOLLOWING SUBMISSIONS WERE MADE B EFORE LD. CIT(A). THE PAYMENTS WERE NOT MADE FOR THE BILLS NOT PROCE SSED BY THE POLYCLINIC. IT WAS ONLY IN THE F.Y. 2009-10 WHE N THE ASSESSEE ENQUIRED ABOUT THE FATE OF THE OUTSTANDING PAYMENTS FROM VARIOUS QUARTERS THAT IT CAME TO KNOWLEDGE THA T THE BILLS WHICH WERE RETURNED BY POLYCLINIC WERE NOT PR OCESSED FOR INADEQUATE PAPERWORK AND WERE NEVER FORWARDED T O THE ARMY HOSPITAL / STATION HEADQUARTER. IT WAS IN SUCH A SITUATION THAT THE ASSESSEE HOSPITAL GOT TO KNOW OF ALL THE DEBTS BECOMING BAD WHICH WERE SUBSEQUENTLY WRITTEN OFF IN THE BOOK OF ACCOUNTS. AS PER PROVISIONS OF SECTION 36(1)(VII) ANY BAD DEBT OR PART THEREOF WHICH IS IRRECOVERABLE IN ACCOUNT OF ASSESSEE OF THE PREVIOUS YEAR CAN BE WRI TTEN OFF. SIMPLY, W.E.F 01.04.1981 CONJOINT READING OF SECTIO N 36(2) AND SECTION 36(1)(VII) MAKES IT CLEAR THAT THE ASSE SSEE WOULD BE ENTITLED TO A DEDUCTION OF THE AMOUNT OF ANY BAD DEBT WHICH HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN ITS ACCOUNTS FOR THE PREVIOUS YEAR. ANY LINGERING DOUBT WOULD VA NISH ON A CAREFUL READING OF CIRCULAR NUMBER 551, DATED JANUA RY 23,1990. IT LEAVES NO SCOPE FOR DEBATE SINCE IT SPE CIFICALLY NOTICES THE PREVIOUS PRACTICE OF HAVING TO ESTABLIS H THAT A DEBT HAD BECOME BAD IN THE PREVIOUS YEAR, WHICH HAD 7 GENERATED ENORMOUS LITIGATION ON THE QUESTION OF AL LOWABILITY OF BAD DEBT IN A PARTICULAR YEAR. THE ASSESSING OFFICER HAS MISINTERPRETED THE REPLY OF ECHS, CHANDIMANDIR. THE STATION HEADQUARTER, CHANDIMANDIR WAS NOT THE APPROPRIATE AUTHORITY WHICH HAD NOT ACCEPTE D THE BILLS SUBMITTED BY THE ASSESSEE. THE APPROPRIATE AU THORITY WAS THE POLYCLINIC WHO HAD THE RIGHT TO EITHER ACCE PT AND CLEAR THE BILL OR REJECT THE BILL FOR DEFICIENCIES. THE ASSESSING OFFICER HAS MISINTERPRETED THE PROVIS ION OF SECTION 36(1)(VII) AND HAS GONE AGAINST THE LEGAL P ROVISIONS BY MAKING ENQUIRIES AS TO WHETHER THE ENTRIES ARE G ENUINE OR FANCIFUL. THE ASSESSEE HAD DISCHARGED ITS ONUS OF R EFLECTING THE BILLS RAISED IN THE INCOME & EXPENDITURE STATEM ENT AND WRITING OFF THE SAME FROM THE BOOKS ONCE HE REALIZE D THE DEBT HAD BECOME IRRECOVERABLE. THE ASSESSING OFFICER HAS FURTHER GONE IN STATING THAT IT IS HIGHLY UNLIKELY THAT THE ORGANIZATION LIKE ECHS PROMOTED BY GOVERNMENT FOR TREATMENT OF A RMY PERSONS WOULD WITHHOLD ANY PAYMENT OF LEGITIMATE BI LLS. THIS OBSERVATION OF ASSESSING OFFICER IS DEVOID OF ANY M ERITS AS THE POLYCLINICS HAD RETURNED THE BILLS FOR DEFICIEN CIES. I ENCLOSE HEREWITH PHOTOCOPY OF MONTHLY SAMPLE OF BIL LS FOR F.Y. 2007-08, 2008-09 AND 2009-10 TO SUBSTANTIATE M Y CONTENTION THAT THE BILLS SUBMITTED ARE RETURNED BY POLYCLINIC AND PAYMENT OF THE BILLS RAISED HAS NOT BEE MADE BY STATION HEADQUARTER, CHANDIMANDIR. THE NOTE OF THE AUDITORS THAT THE AMOUNT WRITTEN OFF REPRESENTS PAYMENT NOT MADE FOR ONE YEAR AFTER SUBMISSION OF BILLS WERE ACTUALLY OF F.Y . 2007-08 AND 2008-09. THE OBSERVATION OF ASSESSING OFFICER I S ILLEGAL AND BASED OF PRESUMPTIONS. I ENCLOSE HEREWITH COPY OF ACCOUNT OF BILLS RAISED TO THE POLYCLINIC WHICH PRO VES THE BILLS RAISED BY THE ASSESSEE CONSTITUTES A VALID/PR OPER DEBT. THUS THIS CONTENTION OF ASSESSING OFFICER IS ALSO N ULLIFIED. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT T HE ASSESSEE CAN ONLY RECOGNIZE THOSE SALES MADE / SERV ICES PROVIDED AS REVENUE IN RESPECT OF WHICH IT IS LEG ALLY ENTITLED TO RECEIVE PAYMENTS. THIS OBSERVATION OF ASSESSING OFFICER IS ALSO WRONG AS THE ASSESSEE HAS RIGHTLY A CCOUNTED 8 FOR ALL THE BILLS IN ITS BOOKS OF ACCOUNTS WHICH WE RE RAISED TO POLYCLINIC. IT IS A THUMB RULE OF STATION HEADQUART ER THAT ONLY THOSE BILLS WHICH ARE CLEARED BY POLYCLINICS A RE ELIGIBLE FOR PAYMENT AND NOT THE BILLS WHICH ARE RETURNED BY THEM. FROM THE ABOVE STATED FACTS, SUBMISSIONS AND EVIDEN CE ON RECORD IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE HAD DISCHARGED ITS ONUS TO PROVE ITS THE CLAIM THAT TH E BILLS IN RESPECT OF AMOUNT WRITTEN OFF WERE NOT ACCEPTED BY ECHS POLYCLINIC. THE ASSESSEE HAD ALSO PROVED THE FACT T HAT ECHS POLYCLINIC HAD NOT ACCEPTED THE LEGITIMATE BILLS SU BMITTED BY THE ASSESSEE. LASTLY, IT IS A FACT THAT THE AMOUNT WAS SHOWN AS DEBT AND SUBSEQUENTLY WRITTEN OFF. 10. RELIANCE WAS AGAIN PLACED ON THE DECISION OF DR F LTD (SUPRA) AND 342 ITR 285. 11. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION S ALLOWED THE RELIEF TO THE ASSESSEE VIDE PARAS 2.3 TO 2.3.1 WHICH ARE AS UNDER . 2.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL . THE APPELLANT HAS WRITTEN OFF THE DEBT PERTAINING TO EC HS POLYCLINIC, WHICH, ACCORDING TO THE APPELLANT, HAD BECOME IRRECOVERABLE. THE VIEW OF THE ASSESSING OFFICER TH AT ECHS WAS NOT UNDER ANY OBLIGATION TO PAY ANYTHING IN RES PECT OF THE BILLS, WHICH WERE NOT ACCEPTED BY IT AND IN THA T SITUATION, THE APPELLANT WAS NOT ENTITLED TO WRITE OFF THE AMO UNT AS BAD DEBT, SINCE IT WAS NOT EVEN DEBT; IS NOT CORRECT, S INCE THE AMOUNT BECOMES A DEBT AT THE MOMENT, THE BILL IS RA ISED AND IT IS NOT NECESSARY FOR THE OTHER PARTY TO ACCEPT T HE BILL. THE OTHER REASONS GIVEN FOR DISALLOWING THE AMOUNT ARE THAT ECHS HAVE NEVER REFUSED TO ACCEPT THE BILLS AND IT WAS NOT UNDER ANY OBLIGATION TO PAY ANY AMOUNT FOR BILLS NO T ACCEPTED BY IT, LEGAL ACTION WAS NOT TAKEN, THERE I S NO EVIDENCE THAT ANY EFFORT WAS MADE BY THE APPELLANT AND THAT ECHS POLYCLINIC IS STILL A MAJOR CUSTOMER; BUT ALL THESE REASONS GIVEN BY THE ASSESSING OFFICER ARE NOT RELE VANT IN 9 VIEW OF THE JUDGMENT OF HONBLE SUPREME COURT IN TH E CASE OF M/S T.R.F. LTD. (SUPRA), IN WHICH IT WAS HELD: THIS POSITION IN LAW IS WELL-SETTLED. AFTER 1 ST APRIL,1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOWEVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS, IN FACT, BEEN WR ITTEN OFF IN ACCOUNTS OF THE ASSESSEE. WHEN BAD DEBT OCCU RS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUSTOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF T HE CUSTOMER. IN THE CASE OF COMPANIES, THE PROVISION I S DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER, IN FACT , THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACC OUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTA KEN BY THE AO. HENCE, THE MATTER IS REMITTED TO THE AO FOR DE NOVO CONSIDERATION OF THE ABOVE-MENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE O FF. 2.3.1 IN EFFECT, AFTER AMENDMENT TO SECTION 36(1)(V II) W.E.F 01.01.1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT DEBT HAS BECOME IRRECOVERABLE AND IT IS SUFFIC IENT IF THE DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS O F ACCOUNTS. THE CASE OF THE APPELLANT IS SQUARELY COVERED BY TH E JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF M/S T.R.F. LTD.(SUPRA). THE DISALLOWANCE MADE IS ACCORDINGLY D ELETED. GROUND OF APPEAL NO. 1 IS ALLOWED. 12. BEFORE US, LD. DR SUBMITTED THAT IT WAS CONTEND ED BEFORE CIT(A) THAT CERTAIN PATIENTS WERE ADMITTED WITHOUT A REFERENCE SLIP IN EMERGENCY CASES I.E. WHY BILLS WERE NOT ACCEPTED BY ECHS. IN THIS CONNE CTION SHE REFERRED TO THE MEMORANDUM OF AGREEMENT ENTERED INTO BY THE ASSESSE E WITH THE STATION COMMANDER, AMBALA CANATT, WHICH IS PLACED AT PAGES 205 TO 210 OF THE PAPER BOOK. SHE REFERRED TO CLAUSE 6 WHICH CLEARLY ALLOW ED THE ASSESSEE TO SUBMIT THE 10 BILLS IN SUCH CASES WHERE THE PATIENTS WERE ADMITTE D IN EMERGENCY WITHOUT A REFERENCE SLIP. FURTHER CLAUSE 24 CLEARLY PROVIDES THAT IF THERE WAS ANY DISPUTE THEN THE SAME WAS REQUIRED TO BE REFERRED TO THE AR BITRATOR BUT THE ASSESSEE HAVE NEVER APPROACHED FOR ARBITRATION. SHE SUBMITTED TH AT EVEN AFTER THE CHANGE IN LAW IN RESPECT OF BAD DEBTS, IT HAS BEEN HELD THAT WHAT CAN BE WRITTEN OFF IS A BAD DEBT AND NOT A GOOD DEBT AND IN THIS REGARD SHE REFERRED TO DELHI BENCH OF THE TRIBUNAL IN THE CASE OF DCIT V INDIA THERMIT CO RPORATION LTD 56 ITD 307. THE BANGALORE BENCH IN THE CASE OF EMBASSY CLASSIC (P) LTD & ANR V ACIT 7 ITR (TRIB) 287 (BANG) HAS CLEARLY HELD THAT A LIVE AMOUNT CANNOT BE CONVERTED INTO A BAD DEBT. 13. SHE FURTHER CONTENDED THAT EVEN AFTER THE CHANG E OF LAW THE ASSESSEE IS EXPECTED TO EXERCISE A HONEST JUDGEMENT TO WRITE OF F A DEBT. IN THE ABSENCE OF SUCH HONEST JUDGMENT, A GOOD DEBT CANNOT BE CONVERT ED INTO A BAD DEBT. IN THIS REGARD SHE PLACED RELIANCE ON THE DECISION OF HON' BLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL COMPANY LIMITED VS. AC IT 287 ITR 62 (MAD.) WH EREIN AGAIN ASSESSEE WAS TO RECEIVE CERTAIN PAYMEN TS FROM A HOSPITAL WHICH WERE NOT PAID IMMEDIATELY AND THE DEBT WAS WRITTEN OFF AND IT WAS HELD THAT IN SUCH CIRCUMSTANCES THE SAME COULD NOT HAVE BEEN WRI TTEN OFF. 14. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT ASSESSEE WAS NEW TO THE BUSINESS AS THE HOSPITAL WA S ESTABLISHED IN 2007. THEREFORE, ALL THE PATIENTS COMING TO THE HOSPITAL TROUGH ECHS WERE GIVEN MEDICINES DURING OPERATIONS AS PRESCRIBED BY THE DO CTORS WITHOUT LOOKING INTO THE ASPECT THAT APPROVAL FOR THE SAME NEEDS TO BE T AKEN AND WHEN SUCH BILLS WERE SUBMITTED, THE SAME WERE NOT ACCEPTED IN THE ABSENC E OF APPROVALS I.E. REFERRAL SLIPS. HE ADMITTED THAT NO DOUBT CLAUSE 6 OF THE AGREEMENT ITSELF PROVIDES THAT PATIENTS COULD BE ADMITTED IN THE HOSPITAL WITHOUT REFERRAL SLIPS BUT IN SUCH CASES, THE 11 REFERRAL SLIP WAS REQUIRED TO BE SUBMITTED WITHIN 2 4 HOURS FROM THE TIME OF ADMISSION BUT BECAUSE OF THE ADMINISTRATIVE PRESSUR ES IN MANY CASES SUCH SLIPS COULD NOT BE SUBMITTED IN 24 HOURS AND WHEN THE HIG HER AUTHORITIES WERE CONTACTED, THEY RATHER SUGGESTED NOT TO PRESS THESE BILLS AND I.E WHY ASSESSEE DID NOT GO FOR ARBITRATION ALSO. OTHERWISE ASSESSE E COULD HAVE LOST THE BUSINESS. 15. LD. COUNSEL FURTHER CONTENDED THAT NO DOUBT THA T ASSESSEE WAS EXPECTED TO EXERCISE A HONEST JUDGMENT WHILE WRITING OFF A DEBT BUT IN THE PRESENT CASE ONLY AN HONEST JUDGEMENT HAS BEEN EXERCISED. THE BONAF IDE OF THE ASSESSEE CAN BE GAUGED FROM THE FACT THAT IF BILLS WHICH WERE NOT A CCEPTED COULD HAVE BEEN SIMPLY NOT ENTERED IN THE BOOKS, COPIES OF THE ORIG INAL BILLS WHICH WERE NOT ACCEPTED BY THE AUTHORITIES WERE PRODUCED BEFORE US AND PHOTOCOPY OF 17 CASES HAVE BEEN FILED DURING THE HEARING BEFORE US. THE ASSESSING OFFICER HIMSELF OBSERVED THAT IF BILLS WERE NOT ACCEPTED THAN NO DE BT WAS INCURRED BUT IN THAT CASE IT BECOMES A SIMPLE CASE OF REBATE AND DISCOUN T OR BUSINESS LOSS, WHICH IS OTHERWISE ALLOWABLE. A DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL COMPANY LIMITED VS. ACIT (SUPRA) IS DISTINGUISHABLE BECAUSE IN THAT CASE THE CLAIM WAS DISALLOWED BECAUSE PAYMENT WAS NOT MADE B ECAUSE OF PAUCITY IN ALLOCATION OF BUDGET TO THE HOSPITAL WHEREAS IN THE PRESENT CASE, THESE BILLS HAVE NOT BEEN ACCEPTED BECAUSE THE REFERRAL SLIPS COULD NOT BE SUBMITTED WITHIN 24 HOURS. THE DECISION OF MADRAS HIGH COURT IN THE CA SE OF SOUTH INDIA SURGICAL COMPANY LTD V ACIT (SUPRA) LATER ON WAS DISTINGUISHED BY THE MADRAS BENCH OF THE TRIBUNAL IN THE CASE OF IN BRILLIANT TUTORIALS P. LTD VS. CIT BY REFERRING TO THE CIRCULAR OF THE BOARD AND THAT DECISION WAS CON FIRMED BY THE HON'BLE MADRAS HIGH COURT IN THE CASE OF BRILLIANT TUTORIAL S P. LTD 292 ITR 399. IN ANY CASE NOW THE ISSUE IS COVERED BY THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF T.T.F. LTD VS. CIT (SUPRA). 12 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. THE ASSESSEE HOSPITAL HAS BEEN ESTABLISHED IN 2007. THE ASSESSE E HAS ENTERED INTO AN AGREEMENT WITH PRESIDENT OF INDIA, THROUGH STATION COMMANDER, AMABLA CANTT FOR PROVISION OF EX-SERVICEMEN CONTRIBUTORY HEALTH SCHEME. THE HOSPITAL WAS ALLOWED TO PROVIDE SERVICES ONLY IN REFERRED CASES WHICH BECOME CLEAR FROM CLAUSES 2 & 3, WHICH READS AS UNDER:- 2. THE HOSPITAL SHALL PROVIDE THE AGREED UPON SERV ICES TO REFERRED CASES ONLY. THESE CASES WOULD BE REFERRED BY DIRECTORS FROM ECHS POLYCLINIC. THE REFERRED CASES WOULD BE ISSUE D REFERABLE SLIP DULY SIGNED BY DOCTORS UNDER HIS SEAL AND SIGNATURE BEARING NAME ALSO. 3. THE SERVICES WOULD BE EXTENDED ON BILLING SYSTEM TO REFERRED CASES FOR AGREED UPON PERIOD. CHARGES WOUL D BE CHARGED AS PER APPROVED LIST PROVIDED BY THE HOSPIT AL AND APPROVED BY ECHS. 17. CLAUSE 6 PROVIDES FOR ADMISSION OF EMERGENCY PA TIENTS AND READS AS UNDER:- 6. IN GRAVE EMERGENCY, PATIENT SHALL BE ADMITTED A ND LIFE SAVING TREATMENT BE GIVEN ON PRODUCTION OF ECHS CAR D BY MEMBERS, EVEN IN THE ABSENCE OF REFERRAL SLIP. THE REFERRAL SLIP BE ALLOWED TO BE SUBMITTED WITHIN 24 HOURS FRO M ADMISSION IN SUCH CASES. 18. THIS C LAUSE CLEARLY SHOWS THAT THOUGH ASSESSEE HOSPITAL W AS ALLOWED TO ADMIT THE EMERGENCY PATIENTS EVEN WITHOUT REFERRAL SLIPS BUT EVEN IN THIS SITUATION REFERRAL SLIPS WERE REQUIRED TO BE SUBMIT TED WITHIN 24 HOURS. CLAUSE 24 RELIED UPON BY THE REVENUE READS AS UNDER:- 24. ANY DISPUTE ON DIFFERENCE WHATSOEVER ARISING B ETWEEN THE PATIENTS TO THIS AGREEMENT OUT OF OUR RELATING TO THE CONSTRUCTION, MEANING , SCOPE OPERATION OR EFFECT O F THIS 13 AGREEMENT OR THE VALIDITY OF THE BREACH THEREOF SHA LL BE REFERRED TO AN ARBITRATOR TO BE APPOINTED BY MUTUAL CONSENT OF BOTH PARTIES HEREIN. IF THE PARTIES CANNOT AGREE ON THE APPOINTMENT OF THE ARBITRATOR WITHIN A PERIOD OF ON E MONTH FORM THE NOTIFICATION BY ONE PARTY TO THE OTHER OF THE EXISTENCE OF SUCH DISPUTE, THEN THE ARBITRATOR SHALL BE NOMIN ATED BY SECRETARY, DEPARTMENT OF LEGAL AFFAIRS, MINISTRY OF LAW & JUSTICE. THE PROVISIONS OF THE ARBITRATION AND CONC ILIATION ACT, 1996 WILL BE APPLICABLE AND THE AWARD MADE THE RE UNDER SHALL BE FINAL AND BINDING UPON THE PARTIES HERETO SUBJECT TO LEGAL REMEDIES AVAILABLE UNDER THE LAW. SUCH DIFFE RENCE SHALL BE DEEMED TO BE A SUBMISSION TO ARBITRATION UNDER T HE INDIAN ARBITRATION &CONCILIATION ACT 19. NOW THE CONTENTION OF THE ASSESSEE REMAINS THAT ASSESSEE WAS NEW TO THE BUSINESS AND TAKING THE HUMANITARIAN CONSIDERATION IN MANY CASES EMERGENCY PATIENTS WERE ADMITTED WHO WERE PROVIDED EVEN MEDIC INES AND ADMISSIONS WITHOUT REFERRAL SLIPS. FURTHER BECAUSE OF ADMINIST RATIVE CONSTRAINTS IN MAY CASES REFERRAL SLIPS COULD NOT BE SUBMITTED WITHIN 24 HOURS AS REQUIRED BY CLAUSE 6. BOTH THESE CONTENTIONS WERE QUITE PLAUSIBLE. BE FORE US ORIGINAL BILLS IN MANY CASES WERE PRODUCED WHICH HAD BEEN SIMPLY RETURNED BY THE STATION COMMANDER. NOW THE POINT IS IF ASSESSEE WANTED TO MANIPULATE H E WOULD NOT HAVE SIMPLY NOT ENTERED THESE BILLS IN THE RECEIPT REGISTER. AS OB SERVED BY THE ASSESSING OFFICER IN THAT CASE THE SALES WOULD HAVE BEEN DOWN BUT ASS ESSING OFFICER FORGOT TO VISUALIZE THAT IF THESE BILLS WERE NOT ENTERED AND NO VALID DEBTS WERE CREATED THEN ASSESSEE WAS NOT REQUIRED TO MAKE A CLAIM FOR BAD DEBT BECAUSE PROFIT ITSELF WOULD HAVE REDUCED AUTOMATICALLY. WHEN A QUERY WAS RAISED BY THE BENCH WHETHER THESE AMOUNTS WERE EVER RECEIVED, LATER ON A CATEGORICAL STATEMENT WAS MADE AT BAR THAT NO SUCH PAYMENT WAS RECEIVED AND A N AFFIDAVIT TO THIS EFFECT SIGNED BY DR. SACHI RAM KRISHNA DIRECTOR OF THE ASS ESSEE COMPANY WAS FILED BEFORE US. ALL THESE FACTS CLEARLY SHOW THAT IT IS A CASE OF HONEST JUDGEMET OF 14 WRITING OFF OF THE DEBTS. THE HON'BLE SUPREME COUR T IN THE CASE OF TRF (SUPRA) HAS CLEARLY HELD AS UNDER:- AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECES SARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE; IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 20 IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY ALLO WED THE CLAIM. WE FIND NOTHING WRONG IN HIS ORDER AND CONFIRM THE SAME. 21. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAS CLAIMED DEPRECIATION AMOUNTING TO RS. 26,16,143/- WITH RESP ECT TO FIXED ASSETS / MEDICAL EQUIPMENT WHICH WAS TRANSFERRED TO IT BY THE SISTER CONCERN M/S GRS HEALTH CARE PRIVATE LIMITED. SINCE NO PAYMENT HAS BEEN MA DE BY THE ASSESSEE AND THEREFORE, AMOUNT WAS SHOWN UNDER THE HEAD SUNDRY CREDITOR. THE ASSESSING OFFICER WAS OF THE OPINION THAT THESE ASSETS WERE A CQUIRED AT A NIL COST. THE ASSESSEE WAS ASKED TO EXPLAIN WHY DEPRECIATION SHOU LD BE ALLOWED. IN RESPONSE, IT WAS STATED VIDE LETTER DATED 14.1.2012 AS UNDER: - IN REGARD TO TRANSFER OF ASSETS FROM GRS HEALTHCARE PVT. LTD: GRS HEALTHCARE PVT. LTD. WAS RUNNING 40 BEDDED HEAR T & CANCER HOSPITAL FROM A LEASED BUILDING I.E. 1 ST AND 2 ND FLOOR OF THE BUILDING. APART FROM THIS THE OWNER OF THE B UILDING WAS RUNNING HIS OWN RADIOLOGY AND PATHOLOGY CENTRE FROM THE GROUND FLOOR OF THE EXISTING BUILDING IN THE NAME A ND STYLE OF EII ESS DIAGNOSCAN IMAGING AND RESEARCH CENTRE PVT. LTD. THE ABOVE MENTIONED PREMISES WHICH WAS TAKEN ON LEA SE FOR 15 YEARS BY GRS HEALTHCARE PVT. LTD. WAS PROVIDED E LECTRICITY 15 CONNECTION THROUGH SUB METER BY THE LAND LORD AS AG REED IN THE LEASE DEED BUT THE SAME WAS DISCONNECTED ON THE PRETEXT THAT THE PENALTY IMPOSED BY THE PUNJAB STATE ELECTR ICITY BOARD TO THE OWNER OF THE BUILDING WAS DUE TO THE EXTRA L OAD OF THE HEART & CANCER HOSPITAL BEING RUN BY OUR COMPANY. LATER ON WE MANAGED TO RUN OUR HEART & CANCER HOSPI TAL ON GENERATOR SET FOR FEW DAYS BUT THE SAME DID NOT WOR KED FOR LONG TIME AS THE OWNER OF THE BUILDING CREATED DISP UTE ON THE PENALTY BEING CHARGED BY P.S.E.B AND FILED VARIOUS LITIGATIONS/CASES TO GET THE BUILDING EVICTED. MORE OVER THE OWNER DID NOT ALLOW US TO FUNCTION PROPERLY EVEN WH EN WE GOT ORDER FROM THE HIGH COURT FOR GETTING A SEPARATE EL ECTRICITY CONNECTION AS THE OWNER OF THE BUILDING REFUSED FRO M PROVIDING RADIOLOGY AND PATHOLOGY SERVICE TO OUR HE ART & CANCER HOSPITAL WHICH WAS EARLIER AGREED AS PER LEA SE AGREEMENT SIGNED BETWEEN BOTH THE PARTIES. IT IS IMPORTANT TO MENTION HERE THAT HEART & CANCER HOSPITAL CANNOT FUNCTION WITHOUT RADIOLOGY AND PATHOLOGY DEP ARTMENT BECAUSE IT HAS NUMBER OF EMERGENCY AND CRITICAL PAT IENTS ROUND THE CLOCK. FINALLY THE PROMOTERS / DIRECTORS OF THE COMPANY T OOK DECISION TO EVICT THE BUILDING BECAUSE IT WAS NOT M AKING ANY SENSE TO PAY THE RENT OF THE NON-OPERATIONAL HEART & CANCER HOSPITAL WHEN THERE IS NO REVENUE GENERATION AND CO MPANY IS ALREADY UNDER LOSSES. THE MEDICAL EQUIPMENT AND OTHER ASSETS WERE TRANSFE RRED FROM GRS HEALTHCARE PVT. LTD. TO RGS HEALTHCARE PVT . LTD. BEING A SISTER CONCERN AND AS SUCH GRS HEALTHCARE P VT. LTD. WAS NOT HAVING ANY PROPERTY/STORE OF THE COMPANY WH ERE ALL THE ASSETS COULD BE KEPT/STORED. IT IS PERTINENT TO MENTION HERE THAT RGS HEALTHCARE PVT LTD. HAS GIVEN CORPORATE GUARANTEE FOR THE TERM LOAN SAN CTIONED BY CANARA BANK TO GRS HEALTHCARE PVT. LTD. 16 THE EQUIPMENT TRANSFERRED TO RGS HEALTHCARE PVT. LT D. IS BEING USED BY IT AS THE COMPANY WAS IN NEED OF THES E EQUIPMENTS AND IF THESE EQUIPMENTS WERE NOT PROCURE D FROM THE SISTER CONCERN THEN THE SAME WOULD HAVE BEEN PU RCHASED FROM THE MARKET. GRS HEALTHCARE PVT. LTD. IS A SISTER CONCERN OF RGS HEALTHCARE PVT. LTD. AND PROMOTERS / DIRECTORS FIR BOTH THE COMPANIES ARE SAME. THE ASSETS HAVE BEEN TRANSFERRE D FROM GRS HEALTHCARE PVT. LTD. TO RGS HEALTHCARE PVT. LTD . BY PASSING A SPECIAL RESOLUTION. ALL THE ASSETS HAVE BEEN TRANSFERRED ON VALUE ARRIV ED AFTER DEPRECIATION. IT IS PERTINENT TO MENTION THAT ALL T HE ASSETS WHICH ARE BEING ACQUIRED BY RGS HEALTHCARE PVT. LTD . ARE ON THE VALUE AFTER DEPRECIATION AND THE SAME STANDS OU TSTANDING UNDER THE HEAD SUNDRY CREDITORS (FIXED ASSETS) IN T HE BOOKS OF RGS HEALTHCARE PVT. LTD. TO GRS HEALTHCARE PVT. LTD. AS THE AMOUNT IS PAYABLE BY RGS HEALTHCARE PVT. LTD . TO GRS HEALTHCARE PVT. LTD. WHICH SHOWS THAT THE COST OF A CQUIRING THESE ASSETS IS TAKEN INTO CONSIDERATION BY BOTH TH E COMPANIES. MOREOVER, CANARA BANK HAS ALREADY FILED RECOVERY SU IT AGAINST GRS HEALTHCARE PVT. LTD. IN THE DEBT RECOVE RY TRIBUNAL, CHANDIGARH FOR WHICH THE PROMOTERS/DIRECT ORS ARE STILL REQUESTING THE BANK AUTHORITIES FOR PROVIDING TIME TO REPAY ITS DEBT. WE WOULD ALSO LIKE TO INFORM YOU THAT NO INTEREST I S BEING CHARGED BY GRS HEALTHCARE PVT. LTD. ON THE AMOUNT O F ASSETS TRANSFERRED (AT DEPRECIATED AMOUNT ) TO RGS HEALTHC ARE PVT. LTD. 22. THE ASSESSING OFFICER DID NOT FIND FORCE IN THE ABOVE SUBMISSIONS AND OBSERVED THAT ASSESSEE HAS TAKEN M/S GRS HEALTH SE RVICE CARE PRIVATE LIMITED AS SUNDRY CREDITOR IN ITS BOOKS BUT NO PAYMENT HAS BEEN MADE TILL DATE, 17 THEREFORE, COST OF ASSETS WAS NIL. IN THIS BACKGROU ND, DEPRECIATION WAS DISALLOWED. 23. ON APPEAL THE SUBMISSIONS MADE BEFORE ASSESSING OFFICER WERE REITERATED AND LD. CIT(A) AFTER CONSIDERING THE SAME HELD THAT DEPRECIATION WAS ALLOWABLE. 24. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER O F ASSESSING OFFICER. 25. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE ASSESSING OFFICER. HE ALSO REFERRED TO COPIES OF THE RESOLUTION PASSED BY BOTH THE COMPANIES WHICH CLEARLY SHOWS TH AT ASSETS WERE ACQUIRED IN TERMS OF THE RESOLUTION. HE ALSO SUBMITTED THAT FUL L DETAILS OF THE ASSETS WERE GIVEN TO THE ASSESSING OFFICER, COPY OF WHICH IS AV AILABLE AT PAGE 178 OF THE PAPER BOOK. 26. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT LD. CIT(A) HAS DECIDED THIS ISSUE VIDE PARA 3.3, WHICH IS AS UNDER :- 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. CO UNSEL. THE ASSETS WERE TRANSFERRED TO THE APPELLANT COMPAN Y AT WRITTEN DOWN VALUES IN THE BOOKS OF M/S GRS HEALTHC ARE (P)LTD. THE AMOUNT AT WHICH THESE WERE TRANSFERRED APPEARS AS PAYABLE AGAINST THE NAME OF M/S GRS HEALTHCARE (P) LTD IN THE BOOKS OF ACCOUNT OF THE APPELLANT. FOR THE P URPOSES OF CLAIMING DEPRECIATION, THE ONLY CONDITION WHICH IS TO BE SATISFIED IS THAT THE ASSET MUST HAVE BEEN PUT TO U SE. PAYMENT IS NOT THE CRITERIA FOR CLAIMING DEPRECIATION AND S O WHETHER PAYMENT HAS BEEN MADE OR NOT, IT CANNOT BE A DETERM INATIVE FACTOR FOR DISALLOWING DEPRECIATION. IT IS NOT THE CASE OF THE DEPARTMENT THAT THE ASSETS WERE VALUED AT A VALUE H IGHER THAN THE WRITTEN DOWN VALUE IN THE HANDS OF THE EARLIER OWNER. IT IS ALSO NOT THE CASE OF THE DEPARTMENT THAT THE ASSETS WERE NOT PUT TO USE. HENCE, THE APPELLANT IS DULY ENTITLED T O THE CLAIM OF 18 DEPRECIATION AND IT IS HELD THAT THE ASSESSING OFFI CER WAS NOT RIGHT IN DISALLOWING THE SAME. GROUND OF APPEAL NO. 2 IS ALLOWED . 27. IN OUR OPINION THE LD. CIT(A) HAS CORRECTLY DEC IDED THE ISSUE. THE ASSESSING OFFICER HERSELF HAS ADMITTED THAT ASSESSE E HAS SHOWN THE SISTER CONCERN AS SUNDRY CREDITORS. MERELY BECAUSE PAYMENT HAS NOT BEEN MADE DURING THE YEAR DOES NOT MEAN THAT ASSETS HAVE NOT BEEN AC QUIRED BY THE ASSESSEE OR THE COST OF ASSETS IS NIL. FURTHER THE RESOLUTION PASSE D BY M/S RGS HEALTHCARE PRIVATE LIMITED ON 11.9.2009 READS AS UNDER:- RESOLVED THAT CONSENT OF BOARD OF DIRECTORS OF THE COMPANY BE AND HEREBY GIVEN FOR SALE OF ALL THE MOV ABLE ASSETS WHICH INCLUDES MEDICAL EQUIPMENTS. ELECTRICA L EQUIPMENTS AND OTHER EQUIPMENTS TO M/S R.G.S. HEALT HCARE PRIVATE LIMITED AT AS CONSOLIDATED PRICE OF RS. 3,5 7,16,733) RS. THREE CRORES FIFTY SEVEN LAC SIXTEEN THOUSAND S EVEN HUNDRED THIRTY THREE ONLY) WHICH IS THE WRITTEN DOW N VALUE OF THE MOVABLE ASSETS OF COMPANY AS PER COMPANIES A CT 1956 BY 22 ND SEPTEMBER 2009 . 28. THE ABOVE CLEARLY SHOWS THAT ASSETS WERE DULY TRANSFERRED BY THE SISTER CONCERN OF THE ASSESSEE COMPANY. IN VIEW OF THE ABO VE FACTS WE ARE OF THE OPINION THAT LD. CIT(A) HAS CORRECTLY DECIDED THE I SSUE AND WE UPHOLD HIS ORDER. 29. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.11.2014 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH NOV., 2014 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR 19