Shri Ram Krupa Medicare Pvt. Ltd., Baroda V. The Asstt. Commissioner of Income Tax, Circel-2(1)(1), Baroda

ITA 2863/AHD/2016

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 7750 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-10-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN SR DR ITA NO AHD
• Assessee Lawyers: SANKET BAKSHI
• Keywords: Gift; Business income; Depreciation; Business expenditure; Retrospective amendment; Tax effect; Capital expenditure
• Section: 37(1); 37

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.3461/AHD/2014 / ASSTT. YEAR: 2011-2012 SHRI RAM KRUPA MEDICARE P.LTD. 44, HARIBHAKTI COLONY OLD PADRA ROAD BARODA 390 007. PAN : AAECS 3818 F VS. ITO, WARD-4(3) BARODA. ./ ITA NO.2863/AHD/2016 / ASSTT. YEAR: 2012-2013 SHRI RAM KRUPA MEDICARE P.LTD. 44, HARIBHAKTI COLONY OLD PADRA ROAD BARODA 390 007. PAN : AAECS 3818 F VS. ACIT, CIR.2(1)(1) BARODA. ./ ITA NO.2888/AHD/2016 / ASSTT. YEAR: 2012-2013 ACIT, CIR.2(1)(1) BARODA. VS. SHRI RAM KRUPA MEDICARE P.LTD. 44, HARIBHAKTI COLONY OLD PADRA ROAD BARODA 390 007. PAN : AAECS 3818 F / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI SANKET BAKSHI, CA REVENUE BY : SHRI LALIT P. JAIN, SR.DR ITA NO.3461 /AHD/2014 AND 2 OTHERS 2 / DATE OF HEARING : 25/09/2018 / DATE OF PRONOUNCEMENT: 27/09/2018 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE AND REVENUE ARE IN CROSS APPEALS AGAINST O RDER OF LD.CIT(A)-2, VADODARA DATED 30.8.2016 PASSED IN ASS TT.YEAR 2012-13. IN ASSTT.YEAR 2011-12 ASSESSEE ALONE IS CHALLENGING THE ORDER OF LD.CIT(A).-II, BARODA DATED 9.10.2014. 2. SO FAR AS APPEAL OF THE REVENUE IS CONCERNED, IT HAS BEEN POINTED OUT THAT TAX EFFECT BY VIRTUE OF RELIEF GIVEN BY TH E LD.CIT(A) IS CONCERNED, IT IS BELOW RS.20 LAKHS, AND THEREFORE, THE PRESENT APPEAL OF THE REVENUE IS NOT MAINTAINABLE IN VIEW OF CBDT CIR CULAR NO.3 OF 2018 DATED 11.7.2018 WHICH IS MADE APPLICABLE ON PENDING APPEAL ALSO. THE LD.DR HAS NOT CONTROVERTED TO THIS FACTUAL POSITION . 3. WE FIND THAT THE APPEAL OF THE REVENUE IS PRESEN TED ON 4.11.2016. ON 11.7.2018 THE CBDT HAS ISSUED INSTRUCTIONS BEARI NG NO. 3 OF 2018 PROHIBITING ITS SUBORDINATE AUTHORITIES FROM FILING OF THE APPEAL TO THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) WHERE THE TAX EFFECT BY VIRTUE OF THE RELIEF GIVEN BY THE CIT(A) IS LESS THAN RS.20 L AKHS. THE INSTRUCTIONS HAVE BEEN MADE APPLICABLE WITH RETROSPECTIVE EFFECT , MEANING THEREBY, THESE INSTRUCTIONS ARE APPLICABLE ON PENDING APPEAL S ALSO. IN THE PRESENT CASE, THE DISPUTED ADDITION IS OF RS.45 LAKHS, AND THEREFORE, THE TAX EFFECT AS PER CBDT CIRCULAR IS TAX ON THE TOTAL IN COME ASSESSED MINUS THE TAX THAT WOULD HAVE BEEN CHARGEABLE HAD SUCH TO TAL INCOME BEEN ITA NO.3461 /AHD/2014 AND 2 OTHERS 3 REDUCED BY THE AMOUNT OF INCOME IN RESPECT OF THE I SSUE AGAINST WHICH APPEAL IS FILED, WOULD BE LESS THAN RS.20 LAKHS. TH EREFORE, THE PRESENT APPEAL OF THE REVENUE IS HIT BY THE CBDT CIRCULAR A ND HENCE NOT MAINTAINABLE. FURTHER, LD.DR HAS NOT POINTED OUT W HETHER THE CASE OF THE REVENUE FALL WITHIN THE AMBIT OF EXCEPTIONS PROVIDE D IN THE CIRCULAR OR NOT. THUS, KEEPING IN VIEW THE ABOVE CBDT CIRCULAR AND PROVISIONS OF SECTION 268A OF THE INCOME TAX ACT, WE ARE OF THE V IEW THAT THE PRESENT APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. IT IS ACCORDINGLY DISMISSED. HOWEVER, IT IS OBSERVED THAT IN CASE ON RE-VERIFICA TION AT THE END OF THE AO IT COMES TO THE NOTICE THAT THE TAX EFFECT I S MORE OR REVENUES CASE FALLS WITHIN THE AMBIT OF EXCEPTIONS PROVIDED IN THE CIRCULAR, THEN THE DEPARTMENT WILL BE AT LIBERTY TO APPROACH THE T RIBUNAL FOR RECALL OF THIS ORDER. SUCH APPLICATION SHOULD BE FILED WITHI N THE TIME PERIOD PRESCRIBED IN THE ACT. IN VIEW OF THE ABOVE, THE A PPEAL OF THE REVENUE IS DISMISSED DUE TO LOW TAX EFFECT. 4. NOW WE TAKE BOTH APPEALS OF THE ASSESSEE. FIRST COMMON ISSUE AGITATED BY THE ASSESSEE IN ASSTT.YEAR 2011-12 (GRO UND NO.1 AND 2) AND IN ASSTT YEAR 2012-13 (GROUND NO.1, 2 AND 3) IS THA T, WHETHER THE LD.CIT(A) HAS RIGHTLY CONFIRMED PARTIAL DISALLOWANC E OF EXPENDITURE INCURRED BY THE ASSESSEE TOWARDS GIFT EXPENSES, BUS INESS PROMOTION EXPENSES AND ENTERTAINMENT IN BOTH YEARS. FACTS ON ALL VITAL POINTS ARE COMMON IN BOTH YEARS THEREFORE, FOR FACILITY OF REF ERENCE, WE TAKE THE FACTS FROM THE ASSESSMENT YEAR 2011-12. ITA NO.3461 /AHD/2014 AND 2 OTHERS 4 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 ASSTT.YEAR 2011-12 ON 28.9.2011 DECLARING LOSS AT RS.1,49,536/-. IN THE ASSTT.YEAR 2012-13 I T HAS FILED RETURN OF INCOME ON 27.9.2012 DECLARING TOTAL INCOME OF RS.63 ,96,030/-. AT THE RELEVANT TIME THE ASSESSEE WAS RUNNING THREE DIVISI ONS VIZ. BARODA HEART INSTITUTE & RESEARCH INSTITUTE, BARODA HEART INSTIT UTE & CRITICAL CARE CENTRE AND INDRAPURI DIAGNOSTIC CENTRE. AT THE REL EVANT TIME, IT WAS RUNNING THESE THREE DIVISIONS AND THE DETAILS OF DI VISIONS 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 PROFIT & L OSS 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 ITA NO.3461 /AHD/2014 AND 2 OTHERS 5 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.11,57,514/- AS AGA INST RS.17,99,461/- DEBITED BY THE ASSESSEE IN THE ASSTT.YEAR 2012-13. IN THE ASSTT.YEAR 2011-12, THE LD.CIT(A) HAS CONFIRMED THE DISALLOWAN CE OF RS.21,72,749/- AS AGAINST EXPENDITURE DEBITED AT RS .26,89,430/-. AS OBSERVED EARLIER, THERE IS NO DISPARITY OF FACTS AB OUT THE NATURE OF EXPENDITURE AS WELL AS BUSINESS CARRIED OUT BY THE ASSESSEE. WE FIND THAT THE LD.CIT(A) HAS EXAMINED EACH EXPENDITURE ANALYTI CALLY AND EXHAUSTIVELY. THE FINDING OF THE LD.CIT(A) RECORDE D IN THE ASSTT.YEAR 2011-12 IS WORTH 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 EXP ENSES DISALLOWED BY THE AO IN THE FORM OF GIFT EXPENSES, BUSINESS, PROMOTION EXPENSES AND ENTERTAINMENT EXPENSES CONSI STS OF SEVERAL SUB-HEADS OF SUCH EXPENSES. THE ALLOWABILIT Y OF THE SAME IS BEING DISCUSSED 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 ALLOWABLE BY ME IN ORDER DATED 16/06/2014 IN APPELLANT'S OWN CASE FOR AY 201 0-11 IN APPEAL NO.CAB/III-032/2013-14. FOLLOWING THE SAME, THE EXPENSES ARE DIRECTED TO BE ALLOWED IN THE 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 DECISIONS IN APPELLANT'S OW N CASE FOR AY 2010-11. BESIDES, THE DISCUSSIONS MADE IN THE APPEL LATE ORDER FOR AY 2010-11, THERE IS ONE MORE REASON DUE TO WHICH S UCH 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 ITA NO.3461 /AHD/2014 AND 2 OTHERS 6 OF ITS STATUTORY POWER VESTED IN IT UNDER THE INDIA N MEDICAL COUNCIL (PROFESSIONAL CONDUCT, ETIQUETTE AND ETHICS ) REGULATIONS 2002, IMPOSED PROHIBITION ON ANY MEDICAL PRACTITION ER OR THEIR PROFESSIONAL ASSOCIATES FROM ACCEPTING GIFT, TRAVEL FACILITY AND HOSPITALITY, CASH OR MONETARY GRANT FROM ANY PHARMA CEUTICAL AND ALLIED HEALTH SECTOR INDUSTRIES ON 10.12.2009. IN ' PURSUANCE OF THIS, THE CBDT ISSUED CIRCULAR NO. 5/12 CLARIFYING THAT C LAIM OF ANY EXPENDITURE INCURRED IN PROVIDING ABOVE MENTIONED O R SIMILAR FREEBIES SHALL BE INADMISSIBLE U/S 37 OF THE INCOME TAX (ACT BEING PROHIBITED UNDER LAW. THUS, THE FACT REMAINS THAT T HE RELEVANT LAW WAS AMENDED AS ON 10/12/2009 AND HENCE DURING THE P REVIOUS YEAR 2010-11 SUCH PAYMENTS MADE BY THE APPELLANT WE RE AGAINST LAW. IT MAY BE MENTIONED HERE THAT THE CONSTITUTION AL VALIDITY OF CIRCULAR NO. 5/2012 ISSUED BY CBDT WAS CHALLENGED B EFORE 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 EXPENSES OF .THE AS SESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PROFESSION SHALL BE ALLOWED IN C OMPUTING 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 PROHIBI TED BY LAW SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR T HE PURPOSE OF BUSINESS OR PROFESSION AND NO DEDUCTION OR ALLOWANCE \SHALL BE MADE IN RESPECT OF SUCH EXPENDI TURE.)' 3. SHRI VISHAL MOHAN, ADVOCATE, ON BEHALF OF THE PE TITIONER CONTENDS THAT THE CIRCULAR GOES BEYOND THE SECTION ITSELF. WE ARE NOT IN AGREEMENT WITH THIS SUBMISSION. THE EXPL ANATION TO SECTION 37(1) MAKES IT CLEAR THAT ANY EXPENDITUR E INCURRED BY AN ASSESSEE FOR ANY PURPOSE WHICH IS PROHIBITED BY LAW ITA NO.3461 /AHD/2014 AND 2 OTHERS 7 SHALL NOT BE DEEMED TO HAVE BEEN INCURRED FOR THE P URPOSE OF BUSINESS OR PROFESSION. THE SUM [AND SUBSTANCE OF T HE CIRCULAR IS ALSO THE SAME. IN CASE THE ASSESSING AU THORITIES ARE 'NOT PROPERLY UNDERSTANDING THE CIRCULAR THEN T HE REMEDY LIES FOR EACH INDIVIDUAL ASSESSEE TO FIFE APPEALS U NDER THE INCOME-TAX ACT BUT THE CIRCULAR WHICH IS TOTALLY IN LINE WITH SECTION 37(1) CANNOT BE SAID TO BE ILLEGAL. IN FACT PARA 4 OF THE CIRCULAR QUOTED HEREINABOVE ITSELF CLARIFIES TH AT THE VALUE OF THE FREEBIES ENJOYED BY THE MEDICAL PRACTITIONER IS ALSO TAXABLE AS BUSINESS INCOME OR INCOME FROM OTHER SOU RCES 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 TH E ASSESSING OFFICER THAT THE EXPENSE IS NOT IN VIOLATION OF THE MEDICAL COUNCIL REGULATIONS REFERRED TO ABOVE.' THUS, AS PER THE DECISION OF THE COURT, AFTER THE A MENDMENT OF RELEVANT PROVISIONS BY THE MEDICAL COUNCIL OF INDIA , SECTION 37(1) AUTOMATICALLY CAME INTO PLAY EVEN WITHOUT CIRCULAR ISSUED BY THE CBDT. ACCORDINGLY THE PAYMENTS MADE BY THE APPELLAN T WERE NOT ALLOWABLE EXPENDITURE AS PER THE PROVISIONS OF SECT ION 37(1) OF THE IT ACT 1961. HENCE, THE DISALLOWANCE MADE BY THE AO IS UPHELD AND THIS GROUND ALSO. III) THE APPELLANT HAS FURTHER GIVEN RS.55,650/- TO ITS STAFF. BUT THE DETAILS OF THE RECEIPTS ARE NOT AVAILABLE ON RECORD . THE AO HAS ALSO GIVEN THIS FINDING IN THE ASSESSMENT ORDER. DU RING THE COURSE OF THE CURRENT APPELLATE PROCEEDINGS ALSO, NO SUCH DETAILS HAVE BEEN FILED. HENCE, THIS EXPENDITURE 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. F OLLOWING THE SAME, THE DISALLOWANCE OF THE SAME IS DIRECTED TO B E DELETED. SIMILARLY, THE SUM OF RS.39,974/- SPENT TOWARDS DOC TORS MEET AND ITA NO.3461 /AHD/2014 AND 2 OTHERS 8 RS.28,110/- FOR PROVIDING BOARDING AND LODGING FACI LITY TO NABH INSPECTOR ARE FOR THE BUSINESS PURPOSES OF THE APPE LLANT AND HENCE THE SAME ARE DIRECTED TO BE ALLOWED IN ITS COMPUTAT ION OF INCOME. SIMILARLY, THE INCENTIVE PAID TO MR. HARDIK MOD AMO UNTING TO RS.58,500/- IS FOR BRINGING NEW BUSINESS TO THE APP ELLANT'S 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 KHA NA CHARGES FOR THE MARATHON ;AND RS.35,545/- TOWARDS GIVING FA REWELL TO EMPLOYEES IS DIRECTED TO BE ALLOWED AS THE SAME HAS BEEN INCURRED FOR BUSINESS PURPOSES OF THE APPELLANT. THE MARATHO N EXPENSES HAVE ALSO BEEN ALLOWED 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 AR E NOT ALLOWABLE ON THE BASIS OF THE DISCUSSIONS MADE REGA RDING GIFT EXPENSE INCURRED FOR DOCTORS ABOVE. THESE EXPENSES ARE NOTHING BUT BRIBERY GIVEN TO THE DOCTORS AND HENCE THE SAME ARE ILLEGAL EXPENSES AS PER THE REGULATIONS OF MEDICAL COUNCIL OF INDIA AND HENCE ARE NOT ALLOWABLE AS PER THE PROVISIONS OF SE CTION 37 OF THE IT ACT. HOW ORGANIZING THE VIEWING OF IPL MATCHES A T FARMHOUSES RESULT INTO ADVERTISEMENT OF THE APPELLANT'S BUSINE SS HAS NOWHERE BEEN EXPLAINED BY THE APPELLANT. THE APPELLANT EARN S MONEY FROM PATIENTS AND NOT FROM .DOCTORS. IF THE APPELLANT'S CLAIM THAT THESE EXPENSES ARE IN THE NATURE OF ADVERTISEMENT EXPENSE S IS ACCEPTED, THEN IT ONLY MEANS THAT THESE ARE THE INDUCEMENTS G IVEN BY THE APPELLANT TO DOCTORS TO REFER MORE AND MORE PATIENT S TO ITS HOSPITALS AND AGAIN IT MAKES THE EXPENSES ILLEGAL A S PER THE GUIDELINES OF MCI. HENCE, DISALLOWANCE OF THESE EXP ENSES 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 ITA NO.3461 /AHD/2014 AND 2 OTHERS 9 AND THAT DISALLOWANCE WAS UPHELD UPTO THE TRIBUNAL. HOWEVER, HE CONTENDED THAT ASSESSEE IS IN THE BUSINESS OF PROVI DING MEDICAL FACILITIES TO THE PUBLIC AT LARGE, AND THEREFORE, IT HAS TO KE EP GOOD RELATION WITH DOCTORS AS WELL AS WITH THE STAFF. THUS, IN ORDINA RY COURSE OF BUSINESS IT HAS INCURRED THE ABOVE EXPENDITURE. THIS EXPENDITU RE IS ALLOWABLE UNDER SECTION 37 OF THE INCOME TAX ACT. ON THE STRENGTH OF CBDT CIRCULAR THIS EXPENDITURE CANNOT BE DISALLOWED TO THE ASSESS EE. HE FURTHER CONTENDED THAT ON ACCOUNT OF CORPORATE MORALITY IN GIVING GIFTS TO THE DOCTORS, THE BUSINESS EXPENDITURE CANNOT BE DISALLO WED. INCOME FROM THE ACTIVITIES OF THE ASSESSEE IS ASSESSED UNDER TH E 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 EXPENDITURE IN THE NATURE DESCRIBED IN SECTION 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXP ENDITURE OR PERSONAL EXPENDITURE OF THE ASSESSEE, LAID OUT OR EXPENDED W HOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROVISION, SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION. THE EXPRESSION WHOLLY AND EXCLUSIVEL Y IN THE SECTION WOULD PROVIDE THAT EXPENDITURE SHOULD BE LAID OUT F OR THE PURPOSE OF BUSINESS ONLY. THE STAND OF THE ASSESSEE WAS THAT EXPENDITURE MUST HAVE BEEN INCURRED BY THE ASSESSEE VOLUNTARILY EVEN WITH OUT NECESSITY. BUT IF IT IS FOR THE PROMOTION OF BUSINESS, THE DEDUCTION WOULD BE ADMISSIBLE. HOWEVER, LOOKING TO THE NATURE OF EXPENDITURE AND N ATURE OF BUSINESS ITA NO.3461 /AHD/2014 AND 2 OTHERS 10 ACTIVITY OF THE ASSESSEE, IT WOULD REVEAL THAT THES E EXPENDITURES WERE NOT WHOLLY REQUIRED, IN A SENSE, FOR THE PURPOSE OF BUS INESS OR COULD IT BE TERMED THAT THESE EXPENSES WERE EXCLUSIVELY INCURRE D FOR THE PURPOSE OF BUSINESS. THE LD.CIT(A) HAS EXAMINED THIS ASPECT IN DETAILS AND MADE REFERENCE TO THE DECISION OF HONBLE HIMACHAL PRADE SH HIGH COURT, AND THEREAFTER HELD THAT THESE EXPENSES WERE NOT INCURR ED FOR THE PROMOTION OF THE BUSINESS. AS POINTED OUT BY THE LD.COUNSEL FOR THE ASSESSEE, SIMILAR EXPENSES WERE DISALLOWED TO IT IN EARLIER A SSESSMENT YEARS UPTO THE LEVEL OF THE TRIBUNAL, THOUGH ORDER OF THE TRIB UNAL HAS NOT BEEN PLACED ON RECORD BY EITHER PARTIES. BUT STATEMENT MADE AT THE BAR IS SUFFICIENT FOR HOLDING THAT SUCH EXPENDITURE HAS BE EN DISALLOWED IN THE PAST ALSO. THUS, IN ORDER TO MAINTAIN CONSISTENCY, THESE GROUNDS OF APPEALS ARE REJECTED IN BOTH THE ASSESSMENT YEARS. 10. NEXT COMMON ISSUE AGITATED BY THE ASSESSEE IN B OTH THE YEAR IS WITH RESPECT TO DEPRECIATION REQUIRED TO BE GRANTED TO THE ASSESSEE ON THE ALLEGED LIFE SAVING EQUIPMENTS. IN THE DETAILS OF ASSETS, ON WHICH DEPRECIATION HAS BEEN CLAIMED, THE ASSESSEE HAS SHO WN THE FOLLOWING MACHINERIES: 1. STRESS TEST MACHINE 2. TMT MACHINE, TMT MACHINE WITH PC PRINTER/ACCESS ORIES 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 ITA NO.3461 /AHD/2014 AND 2 OTHERS 11 10.HEAT EXCHANGER AND LITHIUM BROMIDE 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 LIFE SAVING EQU IPMENTS. THEREFORE, IT CLAIMED DEPRECIATION AT THE RATE OF 40%. ON THE OTHER HAND, THE LD.AO HAS GRANTED DEPRECIATION AT THE RATE OF 15%. ON AP PEAL, THE LD.CIT(A) CONFIRMED THIS STAND OF THE AO BY RECORDING FOLLOWI NG 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 ASSETS/ LIST OF WHICH HAS BEEN G IVEN IN THE ASSESSMENT ORDER, ARE NOT ELIGIBLE FOR DEPRECIATION @ 40% AS PER NEW APPENDIX L(III)(3)(XIA) OF THE IT ACT 1962. TH E ONLY SUBMISSION 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. O NE FAILS TO UNDERSTAND AS TO HOW STRESS TEST MACHINES, TMT MACH INES, TRADE MILLS ETC. CAN BE HELD TO BE .AUXILIARY EQUIPMENT O F THE LIFE SAVING EQUIPMENTS. THE LIST GIVEN IN APPENDIX L(III)(3)(XI A) OF THE IT RULES 1962 IS VERY SPECIFIC AND NAMES OF THE MACHINES LIS TED IN THIS APPENDIX ARE QUITE CLEAR. THE LIST NOWHERE SAYS THA T THE AUXILIARY EQUIPMENT 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 APPE NDIX, AND THE APPELLANT HAS FAILED TO FILE ANY EXPLANATION AS TO HOW THESE ITA NO.3461 /AHD/2014 AND 2 OTHERS 12 MATCHES CAN BE HELD TO BE PART OF THE LIFE SAVING E QUIPMENT LISTED IN THIS APPENDIX, THE DISALLOWANCE MADE BY THE 'AO IS UPHELD AND THIS GROUND OF APPEAL IS DISMISSED. 12. WITH THE ASSISTANCE OF HE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. WE HAVE PERUSED APPENDIX I(I II(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 EQUIPMENTS HAS BEEN GIVEN IN THIS AP PENDIX ON WHICH DEPRECATION AT THE RATE OF 40% IS PERMISSIBLE. WHER E RATE OF DEPRECIATION HAS BEEN PROVIDED ON SPECIFIC MACHINERY, IT IS NOT TO BE GRANTED ON EACH AND EVERY MACHINERY INSTALLED AT THE HOSPITAL. THU S, 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 DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE AT 40% IS NOT BEING PROVIDED IN THE AP PENDIX. THEREFORE, THE DEPRECIATION ON SUCH MACHINERY IS AT 15% WHICH HAS RIGHTLY BEEN UPHELD BY THE LD.CIT(A). THIS GROUND OF APPEAL IS REJECTED IN BOTH YEARS. 13. IN THE NEXT GROUND O0F APPEAL, THE ASSESSEE HAS CLAIMED DEPRECIATION ON CERTAIN ELECTRICAL INSTALLATION AT 15% WHICH HAS BEEN RESTRICTED BY THE AO TO 10%. WHILE DEALING WITH TH IS ISSUE IN THE ASSTT.YEAR 2011-12, THE LD.CIT(A) HAS TAKEN NOTE 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:- ITA NO.3461 /AHD/2014 AND 2 OTHERS 13 '3. THE ID. AO ERRED IN FACT AND IN LAW IN RESTRICT ING THE CLAIM OF DEPRECIATION ON ELECTRICAL INSTALLATION TO 10% INST EAD OF 15% CLAIMED BY THE APPELLANT AND THEREBY DISALLOWING DE PRECIATION 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 COM PANY HAS CLAIMED DEPRECIATION OF @ 15% ON ITS ELECTRICAL INS TALLATION HAVING W.D.V AS ON 01.04.2010 OF RS.39,30,030/- AND ADDITION MADE DURING THE YEARS OF RS.2,49,000/- ON 24.06.201 0. HOWEVER, AS PER ,NEW APPENDIX I OF THE INCOME TAX RULES, THE RATE OF ALLOWABLE DEPRECIATION ON ELECTRICAL INSTALLATION I S 10%, WORKED OUT TO RS.4,17,903/- DEPRECIATION ON ELECTRICAL INS TALLATION IS 10%, WORKED OUT TO RS.6,26,855/-. THUS, AS PER THE PROVI SIONS OF INCOME TAX RULE, 1962, THE ASSESSEE COMPANY CLAIMED EXCESS DEPRECIATION EXCEEDED BY 2,08,952/~. ACCORDINGLY, THE EXCESS CLA IM OF DEPRECIATION ON ELECTRICAL INSTALLATION 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 DEPRECIATION ON E LECTRICAL INSTALLATION TO 10% INSTEAD OF 15% CLAIMED BY THE A PPELLANT AND THEREBY MAKING ADDITION OF RS. 2,08,952/- TO THE IN COME OF THE APPELLANT. 2. IT MAY BE MENTIONED THAT THE APPELLANT HAS P URCHASED THE ELECTRICAL ITEMS LIKE LDB PANEL, BOX FOR X-RAY MACH INE, INDUSTRIAL CABLE OF VARIOUS SIZE FOR RUNNING THE MEDICAL EQUIP MENTS, PCC PANELS ETC. THE PURCHASE OF ELECTRICAL ITEMS WAS MA DE AT BARODA HEART & MULTI SPECIALITY HOSPITAL, BHARUCH. THE EQU IPMENTS ITA NO.3461 /AHD/2014 AND 2 OTHERS 14 PURCHASED WERE USED TO RUN THE MEDICAL EQUIPMENTS. THE ELECTRICAL FITTINGS FORM PART AND PARCEL OF THE MEDICAL EQUIPM ENTS. THEREFORE, DEPRECIATION ON THE SAME HAS TO BE ALLOWED @ 15% BE ING PART OF PLANT & MACHINERY. FURTHER, THE APPELLANT HAS CLAIM ED THE DEPRECIATION BASED ON THE RATES MENTIONED IN THE IN COME TAX RULES, 1962. 3. WE MAY ALSO LIKE TO CLARIFY THAT THE ELECT RICAL INSTALLATIONS IN THE CASE OF THE APPELLANT DO NOT FORM PART OF 'FURN ITURE AND FITTINGS INCLUDING ELECTRICAL FITTINGS'. NOTE 5 UNDER THE APPENDIX DEFINES 'ELECTRICAL FITTINGS' INCLUDE ELECTRICAL WI RING, SWITCHES, SOCKETS, OTHER FITTINGS AND FANS ETC. WE SUBMIT THAT THE ELECTRICAL INSTALLATIONS REFERRED TO ABOVE FORM PART OF MACHIN ERY AND NOT FURNITURE & FIXTURES. THESE ARE NOT IN THE FORM O F 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 ALLO WED. 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% A S 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. AGA IN, THE APPELLANT HAS FAILED TO EXPLAIN WITH SUPPORTING EVI DENCES 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 MEDICAL EQUIPMENTS, PCC PENAL ETC. ARE IN THE NATURE OF ELECTRICAL WIRING AND OTHER FITTINGS ONLY. HENCE , THE DISALLOWANCE MADE BY THE AO IS UPHELD AND THIS GROU ND OF APPEAL IS DISMISSED. 14. WITH THE ASSISTANCE OF THE LD.REPRESENTTIVES, W E HAVE GONE THROUGH THE RECORD. WE FIND THAT DEPRECIATION HAS BEEN RES TRICTED AT THE RATE OF 10% BY THE LD.AO BECAUSE THE ASSESSEE FAILED TO DEM ONSTRATE THAT ELECTRICAL PANEL INSTALLED BY IT WAS PART OF THE MA CHINERY. HE CONSIDERED ITA NO.3461 /AHD/2014 AND 2 OTHERS 15 ELECTRICAL INSTALLATION AS INDEPENDENT ASSET THAN T HE MEDICAL EQUIPMENTS. THE LD.CIT(A) HAS CONSIDERED ALL THESE ASPECTS IN R IGHT PERSPECTIVE AND NO INTERFERENCE IS CALLED ON THIS ISSUE. HENCE, TH IS GROUND OF APPEAL IS ALSO REJECTED. 15. IN THE RESULT, ALL APPEALS OF THE ASSESSEE ARE DISMISSED. APPEAL OF THE REVENUE IS DISMISSED DUE TO LOW TAX EFFECT. ORDER PRONOUNCED IN THE COURT ON 27 TH SEPTEMBER, 2018 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER