The Deputi Commissioner of Income Tax, Visakhapatnam V. M/s. Seven Hills Healthcare Pvt. Ltd, Visakhapatnam

ITA 18/VIZ/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8691 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 11-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T SATYANANDAM
• Keywords: Depreciation; Bonafide belief; Wrong claim
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE SHRI V. DURGA RAO , HONBLE JUDICIAL MEMBER & SHRI D.S. SUNDER SINGH , HONBLE ACCOUNTANT MEMBER ITA NO. 1 8 / VIZ /201 7 (ASST. YEAR : 20 12 - 13 ) DCIT, CIRCLE - 4(1), VISAKHAPATNAM. V S . M/S. SEVEN HILLS HEALTHCARE PVT. LTD., D.NO. 11 - 4 - 4/A, ROCKDALE LAYOUT, RAMNAGAR, VISAKHAPATNAM. PAN NO. AAICS 2229 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.V.N. HARI ADV OCATE . DEPARTMENT BY : SHRI T. SATYANANDAM SR. DR DATE OF HEARING : 06 / 0 3 /201 8 . DATE OF PRONOUNCEMENT : 14 / 03 /201 8 . O R D E R PER V. DURGA RAO, JUDICIAL MEMBER TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) - 2 , VISAKHAPATNAM , DATED 19 / 1 0/201 6 FOR THE ASSESSMENT YEAR 20 12 - 13 . 2. FACTS OF THE CASE, IN BRIEF, ARE THAT ASSESSEE IS A PRIVATE LIMITED COMPANY CARRYING ON THE BUSINESS OF HEALTHCARE SERVICES, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 ON 29/ 12/2012 , ADMITTING TOTAL LOSS OF RS. 137,42,79,478/ - . THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 2 ITA NO. 18 /VIZ/2017 ( M/S. SEVEN HILLS HEALTHCARE PVT. LTD. ) 143(3) BY ASSESSING T OTAL LOSS OF RS. 137,53,16, 240 ON THE GROUND THAT DEPRECIATION IS CLAIMED ON THE RESIDENTIAL BUILDING AT 10% INSTEAD OF 5%. THEREAFTER, THE ASSESSING OFFICER HAS INITIATED PENALTY PROCEEDINGS AND IMPOSED PENALTY OF RS. 84,23,772/ - UNDER SECTION 271(1)(C) OF THE ACT. DURING THE COURSE OF PENALTY PROCEEDINGS, ASSESSEE HAS SUBMITTED THE FOLLOWING EXPLANATION : - DEPRECIATION OF RESIDENTIAL BUILDINGS RS.2,59,63240 / - : THIS DISALLOWANCE WAS MADE ON THE GROUND THAT SOME OF THE BUILDINGS FOR WHICH WE HAVE CLAIMED DEPRECIATION @ 10% ARE ELIGIBLE FOR DEPRECIATION @ 5% ONLY. THE DISALLOWANCE WAS MADE ON THE PREMISES THAT ANY BUILDING USED AS A RESIDE N CE WILL NOT QUALIFY F OR DEPRECIATION @ 10%. HOWEVER, WE HAVE CLAIMED DEPRECIATION @10% AS WE WERE UNDER THE BONA - FIDE BELIEF THAT THESE BUILDINGS ARE E LIGIBLE FOR DEPRECIATION AT SUCH RATE. THESE RESIDENTIAL BUILDINGS ARE MEANT FOR THE ACCOMMODATION OF DOCTORS, NURSING STAFF, PARA - MEDICAL STAFF AND FOR THE EMPLOYEES WORKING IN THE OTHER EMERGENCY SERVICES. OUR HOSPITAL, FOR THAT MATTER ANY HOSPITAL, IS REQUIRED TO OPERATE 24 HOURS * 365 DAY S . ONCE WE ADMIT A PATIENT AS IN - PATIENT WE HAVE TO EXTEND SERVICE ALL THE TIME HE OCCUPI ES THE BED IN OUR HOSPITAL. IN A PLACE LIKE MUMBA I , UNLESS WE CAN PROVIDE RESIDENTIAL, QUARTERS WITHIN THE PREMISES OF THE HOSPITAL IT WOULD NOT BE POSSIBLE T O EXTEND THE EMERGENCY SERVICES PARTICULARLY AT NIGHT TIME. THEREFORE, THESE STAFF QUARTERS ARE VE RY ESSENTIAL TO MAINTAIN THE UNINTERRUPTED PATIENT SERVICES. THEREFORE, WE HAVE CLAIMED DEPRECIATION CONSIDERING THESE RESIDENTIAL QUARTERS AS ART OF THE HOSPITAL BUILDING. HOWEVER, WHEN THE ASSESSING OFFICER PROPOSED THE DISALLOWANCE WE HAVE AGREED FOR THE DISALLOWANCE AS THIS DISALLOWANCE GETS NETURALIZED OVER A PERIOD OF TIME AND WHAT IS DISALLOWED IN THIS YEAR IN ANY CASE WILL BE ALLOWED AS DEDUCTION IN THE SUBSEQUENT YEARS AS THE WDV FOR THE SUBSEQUENT YEARS WOULD INCREA S E BY THE AMOUNT OF DISALLOWANCE. HENCE, WE RESPECTF U LLY SUBMIT THAT WITH REGARD TO THIS DISALLOWANCE WE HAVE NEITHER CONCEALED ANY PARTICULARS OF OUR INCOME NOR FURNISHED INACCURATE PARTICULARS. THE PENALTY PROPOS ED IN RESPECT OF THE DISALLOWANCE MAY KINDLY BE DROPPED.' 3 ITA NO. 18 /VIZ/2017 ( M/S. SEVEN HILLS HEALTHCARE PVT. LTD. ) THE ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE OBSERVED THAT ASSESSEE S CONTENTION IS NOT ACCEPTABLE THAT THEY ARE IN A BONAFIDE BELIEF THAT THE DEPRECIATION ON RESIDENTIAL BUILDINGS ARE PROVIDED TO THE STAFF ARE AT 10% INSTEAD OF 5%. THE BOOKS OF ACCOUNT ARE AUDITED REGULARLY AND IT IS NOT RIGHT TO SAY THAT THEY ARE NOT AWARE OF THE INCOME TAX PROVISIONS. ACCORDINGLY, PENALTY IS LEVIED UNDER SEC TION 271(1)(C) OF THE ACT. 3 . ON APPEAL , LD. CIT(A) DELETED THE PENALTY MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - 7. I HAVE CONSIDERED THE, SUBMISSIONS AND DETAILS ON RECORD. I FIND THAT THE ASSESSEE'S CLAIM OF DEPREDATION AT 10% IS UNDER THE BONAFIDE BELIEF THAT AS THE RESIDENTIAL QUARTERS WERE UTILIZED FOR THE HOSPITAL PURPOSE AND FORMED PART AND PARCEL OF HOSPITAL PREMISES, THE SAME WOULD BE ELIGIBLE DEPRECIATION AS HOSPITAL BUILDING. FURTHER, THE ASSESSEE HAS HUGE LOSS AND THEREFORE THERE C ANNOT BE MALA FIDE INTENTION' TO MAKE SUCH EXCESS CLAIM TO EVADE TAX. BESIDES THE ASSESSEE HAD NOT FURNISHED ANY MATERIAL PARTICULARS OF INCOME WHICH COULD BE SAID TO BE INACCURATE. IT IS WELL SETTLED PRIN CIPLE THAT A MERE MAKING OF A B ONAFIDE CLAIM WOULD NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. THEREFORE, I AM OF THE VIEW THAT THE LEVY OF IMPUGNED PENALTY IS NOT JUSTIFIED. ACCORDINGLY, THE AO IS DIRECTED TO CANCEL THE IMPUGNED PENALTY. 4 . ON BEING AGGRIEVED, REVENUE CARRIED THE MATTE R IN APPEAL BEFORE THE TRIBUNAL. 5. LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE PENALTY ORDER PASSED BY THE ASSESSING OFFICER AND SUBMITTED THAT 4 ITA NO. 18 /VIZ/2017 ( M/S. SEVEN HILLS HEALTHCARE PVT. LTD. ) THE CLAIM MADE BY THE ASSESSEE IS A WRONGFUL CLAIM AND THEREFORE, PENALTY HAS TO BE SUSTAINED. 6 . ON THE OTHER HAND, LD. C OUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE HAS CONSTRUCTED RESIDENTIAL QUARTERS FOR RESIDENT DOCTORS AND IS BONAFIDE BELIEF THAT RESIDENTIAL QUARTERS ARE PART AND PARCEL OF THE HOSPITAL . ACCORDINGLY, THE ASSESSEE HAS CLAIMED DEPRECIATION AT 10% AND AS IT IS BONAFIDE CLAIM, SECTION 271(1)(C) IS NOT ATTRACTED AND PRAYED THAT PENALTY MAY BE DELETED. 7 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND ORDERS OF THE AUTHORITIES BELOW. 8 . THE ONLY GROUND, ON WHICH PENALTY LEVIED BY THE ASSESSING OFFICER IN THIS CASE IS ON ACCOUNT OF DEPRECIATION CLAIMED BY THE ASSESSEE AT 10% INSTEAD OF 5% . THE CASE OF THE ASSESSING OFFICER IS THAT ASSESSEE HAS CONSTRUCTED RESIDENTIAL BUILDINGS AND IS ENTITLED ONLY 5% OF DEPRECIATION. WHEN ASSESSING OFFICER CALLED EXPLANATION, THE ASSESSEE WAS SUB MITTED THAT THE RESIDENTIAL FLATS WERE BUILT FOR THE PURPOSE OF FULL TIME DOCTORS AND EMERGENCY STAFF WHOSE SERVICES ARE REQUIRED 24 X 7 , HENCE, IT WAS T R EATED AS PART AND PARCEL OF THE HOSPITAL AND CLAIM ED DEPRECIATION AT 10%. H OWEVER, THE ASSESSING OFFICER IS NOT AGREE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND IS ALLOWED DEPRECIATION AT 5% ONLY. 5 ITA NO. 18 /VIZ/2017 ( M/S. SEVEN HILLS HEALTHCARE PVT. LTD. ) SUBSEQUENTLY, PENALTY WAS LEVIED. ON APPEAL, LD. CIT(A) IS OF THE OPINION THAT MERE MAKING CLAIM UNDER BONAFIDE BELIEF WOULD NOT AMOUNT TO FURNISHING INACCURATE PARTICULA R S OF INCOME AND CANCELLED THE PENALTY . 9. WE HAVE CONSIDERED THE PENALTY ORDER AND ALSO THE ORDER OF LD. CIT(A). A FTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE CLAIM OF DEPRECIATION MADE BY THE ASSESSEE ON RESIDENTIAL QUARTERS CONSTRUCTED FOR RESIDENT DOCTORS AT 10% , THOUGH ELIGIBLE AT 5% , I S ONLY A WRONG CLAIM BY DISCLOSING ALL MATERIAL FACTS BEFORE THE ASSESSING OFFICER. WE FIND THAT ASSESSEE HAS CONSTRUCTED THE RESIDENTIAL QUARTERS WITHIN THE PREMISES OF THE HOSPITAL AND IS OF THE BONAFIDE BELIEF THAT CLAIM OF DEPRECIATION AT 10% IS ENTITLED . ACCORDINGLY, CLAIM WAS MADE AT 10% INSTEAD OF 5%. IN OUR OPINION , THE CLAIM MADE BY THE ASSESSEE IS A WRONG CLAIM . THE ASSESSING OFFICER NOWHERE EITHER IN THE ASSESSMENT ORDER OR PENALTY ORDER HAS STATED THAT ASSESSEE EITHER CONCEALED INCO ME OR FILED INACCURATE PARTICULARS. THEREFORE, IN OUR OPINION, THIS IS NOT A FIT CASE TO IMPOSE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. 10 . IN THIS CONTEXT, T HE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (322 ITR 158) HAS HELD AS UNDER: - 6 ITA NO. 18 /VIZ/2017 ( M/S. SEVEN HILLS HEALTHCARE PVT. LTD. ) A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCU RATE PARTICULARS . 11. IN THE PRESENT CASE , THE ASSESSEE NEITHER CONCEALED THE INCOME NOR FILED INACCURATE PARTICULARS, THEREFORE, R ESPECTFULLY FOLLOWING THE ABOVE REFERRED TO JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD . (SUPRA) , WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LD. CIT(A). THUS, THIS APPEAL FILED BY THE REVENUE IS DISMISSED. 1 2 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON TH IS 1 4 T H DAY OF MARCH , 201 8 . S D / - S D / - ( D.S. SUNDER SINGH ) ( V. DURGA RAO ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 1 4 T H MARCH , 201 8 . VR/ - COPY TO: 1. THE ASSESSEE - M/S. SEVEN HILLS HEALTHCARE PVT. LTD., D.NO. 11 - 4 - 4/A, ROCKDALE LAYOUT, RAMNAGAR, VISAKHAPATNAM. 2. THE REVENUE DCIT, CIRCLE - 4(1), VISAKHAPATNAM. 3. THE CIT - 2, VISAKHAPATNAM. 4. THE CIT(A) - 2, VISAKHAPATNAM. 5. THE D.R . , VISAKHAPATNAM. 6. GUARD FILE. BY ORDER (VUKKEM RAMBABU) SR. PRIVATE SECRETARY, ITAT, VISAKHAPATNAM.