The DCIT, Circle-4, Baroda V. M/s. Siemens Healthcare Diagnostics Ltd., Baroda

ITA 3003/AHD/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9349 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-01-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 02-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Business expenditure; Capital expenditure; Rule 8D
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NOS.3003 & 3107/AHD/2011 ALONG WITH ITA NO.49 & 79/AHD/2012 (ASSESSMENT YEARS:2006-07 & 2007-08) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, BARODA APPELLANT VS. M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD., 589, SAYAJIPURA, AJWA ROAD, BARODA, VADODARA 390007 RESPONDENT / CROSS APPELLANT PAN: AAACB8542M /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /BY ASSESSEE : SHRI J. P. SHAH, A.R. /DATE OF HEARING : 11.01.2017 /DATE OF PRONOUNCEMENT : 20.01.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THE REVENUE AND ASSESSEE HAVE FILED THE INSTANT TWO CROSS APPEALS EACH FOR ASSESSMENT YEAR 2006-07 & 2007-08 AGAINST CIT(A )-III, BARODAS SEPARATE ORDERS DATED 14.09.2011 & 14.10.2011 IN AP PEAL NOS. CAB/III- 154/09-10 & CAB/III-239/10-11 RESPECTIVELY IN PROCE EDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 2 - 2. A COMBINED PERUSAL OF THE INSTANT CROSS APPEALS REVEALS THAT REVENUES SOLE GRIEVANCE IN ITS APPEAL ITA NO.3003/ AHD /2011 AND FIRST SUBSTANTIVE GROUND IN LATTER APPEAL ITA NO.49/AHD/2012 CHALLENG E THE CIT(A)S ORDER DELETING DISALLOWANCE OF CLAIM OF DEPRECIATION AMOU NTING TO RS.42,61,735/- AND RS.2,46,35,881/-; RESPECTIVELY ALLEGEDLY OVER L OOKING THE STATUTORY PROVISION ENSHRINED IN SECTION 32 OF THE ACT. ITS CASE IS THAT THE ASSESSEE HAD ALREADY PLACED ITS MEDICAL INSTRUMENTS WITH CUSTOME RS AND THEREFORE, THE SAME CANNOT BE HELD TO HAVE BEEN USED FOR ITS BUSIN ESS PURPOSE. THE REVENUE ACCORDINGLY SEEKS TO REVIVE ASSESSING OFFI CERS ACTION MAKING THE ABOVE IMPUGNED DISALLOWANCE IN BOTH THE ASSESSMENT YEARS BEFORE US. 3. LEARNED SENIOR DEPARTMENTAL REPRESENTATIVE SHRI JAMES KURIAN SUBMITS AT THE OUTSET THAT THE CIT(A) HAS FOLLOWED HIS ORDER IN PRECEDING ASSESSMENT YEAR ALLOWING ASSESSEES IDENTICAL CLAIM OF DEPRECIATION. HE THEN PRODUCES BEFORE US TRIBUNALS ORDER IN ASSESSEES C ASE ITSELF IN ITA NO.1842/AHD/2010 DECIDED ON 12.11.2013 RESTORING TH E VERY ISSUE BACK TO THE ASSESSING OFFICER FOR FACTUAL VERIFICATION AS T O WHETHER THE ASSESSEES ASSETS IN QUESTION STOOD TRANSFERRED TO ITS CUSTOME RS OR NOT. LEARNED CO- ORDINATE BENCH DIRECTS THE ASSESSING OFFICER TO ALL OW ASSESSEES DEPRECIATION CLAIM IN CASE IT IS NOT FOUND TO HAVE TRANSFERRED T HE MEDICAL EQUIPMENTS TO THE CONCERNED CUSTOMERS/PATIENTS. 4. SHRI SHAH SEEKS TO DISTINGUISH RELEVANT FACTS IN THE IMPUGNED ASSESSMENT YEAR VIS--VIS THOSE INVOLVED IN THE SAI D PRECEDING ASSESSMENT YEAR ON THE GROUND THAT THE ASSESSING OFFICER HEREI N HAS NOWHERE DOUBTED ASSESSEES OWNERSHIP OVER THE RELEVANT SURGICAL EQU IPMENTS. HE INVITES OUR ATTENTION TO ASSESSING OFFICERS FINDINGS IN ASSESS MENT YEAR 2006-07 STATED TO BE VERY MUCH UNAMBIGUOUS AS FOLLOWS: 5.9. I HAVE CONSIDERED THE REPLY OF THE ASSESSEE. THE SAME IS NOT ACCEPTABLE. AS DIRECTED BY THE ADDL. CIT THAT THE INSTRUMENTS PLAC ED WITH THE CUSTOMERS WERE NOT ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 3 - USED FOR THE BUSINESS PURPOSE OF THE ASSESSEE AND D EPRECIATION U/S.32 IS NOT ALLOWABLE ON THE INSTRUMENTS PLACED WITH THE CUSTOM ERS. IT IS ALSO NOTED THAT THE ASSESSEE HAS NOT CHARGED ANYTHING FROM THE CUSTOMER S FOR THE USE OF THESE EQUIPMENTS FOR THEIR BUSINESS PURPOSE. IT IS ALSO A FACT THAT BESIDES THIS PLACEMENT OF INSTRUMENTS IN PLACE OF ITS CUSTOMERS, THE ASSES SEE HAS ALSO SOLD THESE INSTRUMENTS TO THOSE CUSTOMERS WHO HAVE PURCHASED I T. THE RATE OF SALE OF PRODUCT, STRIPS, KITS, ETC. ARE ALSO THE SAME FOR BOTH THE C USTOMERS TO WHOM HE HAS SOLD THE INSTRUMENT AND TO WHOM HE HAS PLACED MACHINERY AT T HEIR PLACES WITHOUT ANY CONSIDERATION. THEREFORE, IT IS PROVED THAT THE ASS ESSEE HAS NOT DERIVED ANY EXTRA BENEFIT FOR PLACING THESE EQUIPMENTS AT THEIR PLACE S. FURTHER, THE CASE LAWS RELIED ON BY THE ASSESSEE IS RELATING TO THE OWNERSHIP OF THE ASSET WHEREAS IN THE INSTANT CASE THE OWNERSHIP OF THE ASSESSEE IS NOT IN DISPUT E. HOWEVER, THESE DOCUMENTS PLACED AT THE CUSTOMERS' PLACE WERE NOT USED DIRECT LY BY THE ASSESSEE'S BUSINESS. IT HAS BEEN USED BY THE CUSTOMERS' FOR CARRYING OUT TH EIR OWN BUSINESSES. THEREFORE, IT CAN NOT BE HELD THAT THE ASSESSEE' HAS USED THES E ASSETS FOR ITS BUSINESS. FURTHER, IN THE DECISION OF YELLAMMA DASAPPA HOSPITAL [2007] [159 TAXMAN 58], THE HON. HIGH COURT OF KARNATAKA HAS HELD THAT FOR THE PURPO SE OF CLAIMING DEPRECIATION U/S.32, THE FIXED ASSETS SHOULD BE USED FOR THE PUR POSE OF BUSINESS. FOR THE PURPOSE OF CLAIMING DEPRECIATION; WHEN THE LEGISLAT URE HAS CHOSEN TO USE THE WORD 'USED', ONE HAS TO GIVE A FULL MEANING TO IT AND AV OID READING SOMETHING NOT INTENDED BY THE LEGISLATION. AFTER ALL, THESE BENEF ITS ARE PROVIDED FOR CERTAIN PURPOSES. THAT PURPOSE IS USED IN TERMS OF THE STAT URE. IF THE MACHINERY IS NOT USED, SECTION 32 IS NOT APPLICABLE AND, HENCE, THE ASSESS EE COULD HAVE ANY BENEFITS, IF GRANTED, WOULD RESULT IN READING SOMETHING WHICH IS NOT PROVIDED IN THE STATUTE IN TERMS OF SECTION 32. HERE, IN THIS CASE, THE ASSESS EE HAS NOT AT ALL USED THE EQUIPMENTS KEPT AT THE CUSTOMERS' PREMISES. THEREFO RE, DEPRECIATION CLAIMED BY THE ASSESSEE AT RS.42,61,735 ON THESE EQUIPMENTS U/S.32 IS NOT ALLOWED. PENALTY PROCEEDINGS U/S.271(1)(C) OF THE INCOME-TAX ACT, 19 61 ARE SEPARATELY INITIATED. 5. SHRI SHAHS CASE ACCORDINGLY IS THAT THE ASSESSI NG OFFICER NOWHERE HOLDS THE ASSESSEE TO HAVE TRANSFERRED ITS SURGICAL INSTRUMENTS TO ITS CUSTOMERS. IT IS APPARENT FROM ABOVE EXTRACTED PAR A 5.9 THAT THE ASSESSING OFFICERS OBSERVATIONS ARE VERY MUCH SELF CONTRADIC TORY IF WE GO BY DIFFERENT PORTIONS THEREIN. HE IS OF THE VIEW IN FORMER PORT ION THAT THE ASSESSEE HAS ALSO SOLD ITS EQUIPMENTS TO CUSTOMERS. HE HOWEVER OPINES IN MIDDLE PORTION THAT THE ASSESSEES OWNERSHIP OVER THE EQUIPMENTS I N QUESTION IS NOT IN DISPUTE. WE THUS FEEL IT APPROPRIATE THAT THE ASSE SSING OFFICER SHALL CARRY OUT A DETAILED EXERCISE IN TUNE WITH LD. CO-ORDINATE BE NCHS DIRECTIONS (SUPRA) IN THE IMPUGNED ASSESSMENT YEAR AS WELL. HE SHALL PRE PARE A DETAILED LIST OF ASSESSEES EQUIPMENTS. IF HE FINDS IT NOT TO HAVE TRANSFERRED OWNERSHIP THEREOF TO ITS CUSTOMERS/PATIENTS, THE IMPUGNED DEP RECIATION RELIEF WOULD BE ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 4 - HELD ALLOWABLE. THE REVENUES SOLE SUBSTANTIVE GRO UND IN ITS FORMER APPEAL ITA NO.3003/AHD/2011 AS WELL AS THE MAIN CASE ARE A CCEPTED FOR STATISTICAL PURPOSES. SAME ORDER TO FOLLOW IN ITS FIRST SUBSTA NTIVE GROUND IN LATTER APPEAL ITA NO.49/AHD/2012. 6. WE NOW ADVERT TO REVENUES LATTER SUBSTANTIVE GR OUND IN ITS APPEAL ITA NO.49/AHD/2012 CHALLENGING CIT(A)S ORDER DELET ING DISALLOWANCE/ADDITION OF RS.6,28,920/- MADE TO ROYA L COLLEGE PATHOLOGIST, LONDON TOWARDS REIMBURSEMENT OF TRAVELLING EXPENSES ALLEGEDLY WITHOUT CONSIDERING THE FACT THAT THERE WAS NO CORROBORATIV E EVIDENCE TO PROVE THAT THE SAME WAS INDEED INCUR WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF THE BUSINESS. WE DEEM IT APPROPRIATE AT THIS STAGE TO REPRODUCE CIT(A)S FINDING COMPRISING OF ASSESSING OFFICERS CONCLUSION AND AS SESSEES OBSERVATIONS AS UNDER: 6. THE THIRD GROUND OF APPEAL IS REGARDING THE DISALLOWANCE OF PAYMENT MADE TO ROYAL COLLEGE PATHOLOGISTS, LONDON TOWARDS REIMB URSEMENT OF TRAVELING EXPENSES HOLDING THAT THE SUM PAID IS NOTHING BUT D ONATION IN NATURE AND HENCE NOT ALLOWABLE U/S 37(1) OF THE ACT. 6.1 WHILE MAKING THIS ADDITION THE AO HAS STATED AS FOLLOWS: 1. 'I HAVE CONSIDERED THE REPLY OF THE ASSESSEE. PE RUSAL OF THE LETTER IT WAS NOTICED THAT THE PAYMENT WAS MADE TO AIRFARE [LONDO N - DELHI- LONDON BUSINESS CLASS] OF THE TWO SPEAKERS FROM THE UK FOR THE EDUCATIONAL MEETING SCHEDULE TO BE HELD AT THE APPOLLO HOSPITAL , NEW DELHI BETWEEN FEBRUARY 2-4 2007. HOWEVER, THE ASSESSEE HAS NOT BE EN ABLE TO ESTABLISH THE BUSINESS EXPEDIENCY FOR BEARING THE AIRFARE OF TWO SPEAKERS AND THE BENEFIT DERIVED BY THE ON ACCOUNT OF REIMBURSEMENT OF AIRFARE. AS PER SECTION 37(1), ANY EXPENDITURE NOT BEING EXPENDITUR E OF THE NATURE DESCRIBED IN SECTIONS 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE, L AID OUR OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. AS PER SECTIO N 37, THE ONUS IS ON THE ASSESSEE TO PROVE THAT THE EXPENDITURE CLAIMED BY T HE ASSESSEE IS EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS CARRIED ON BY IT. HOWEVER, IN THE INSTANT CASE, THE , ASSESSEE HAS NO T BEEN ABLE ESTABLISH THE BUS/NESS EXPEDIENCY FOR BEARING THE AIRFARE OF TWO SPEAKERS. THE SUM PAID BY THE ASSESSEE IS NOTHING, BUT DONATION IN NATURE. IN THE FOLLOWING CASES, IT ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 5 - WAS HELD THAT BURDEN IS ON THE ASSESSEE TO PROVE TH AT THE EXPENSES WERE LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSIN ESS:- [A]GOOD/AS NEROLAC PAINTS LTD.[BOM] [137 ITR 58]. [B]ANDREW YULE & CO LTD. [CAT] [49 ITR 57]. [C]ASSAM PESTICIDES & AGRO CHEMICALS. [GUJ] [227 IT R 846]. [D]INDIAN EXPRESS (MADURAI) (P) LTD. [ITAT MAD] [68 ITD 374]. IN VIEW, OF ABOVE THE AIRFARE BORNE BY THE ASSESSEE IS HELD TO BE NON- BUSINESS EXPENDITURE. THE SAME IS, THEREFORE, DISAL LOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDIN GS U/S 271 (' L)(C ) OF THE I.T. ACT. 1961 ARE SEPARATELY INITIATED.' 6.2 DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT'S AR DE FOLLOWING SUBMISSIONS: 1. 'ON THE FACTS AND CIRCUMSTANCES OF YOUR APPELLAN T'S CASE AND IN LAW, THE LD. AO HAS ERRED IN DISALLOWING PAYMENTS MADE TO RO YAL COLLEGE PATHOLOGISTS, LONDON TOWARDS REIMBURSEMENT OF TRAVE LING EXPENSES ON ERRONEOUS PLEA THAT SUM PAID IS NOTHING BUT DONATIO N IN NATURE AND HENCE NOT ALLOWABLE U/S 37(1) OF THE ACT. 2. YOUR APPELLANT SUBMITS THAT FULL DETAILS WERE SU BMITTED FOR PAYMENT TOWARDS REIMBURSEMENT, OF FARE OF TWO SPEAKERS FROM ROYAL COLLEGE PATHOLOGIST, LONDON FOR THE EDUCATIONAL MEETING SCH EDULED TO BE HELD AT APOLLO HOSPITAL (COPY OF VOUCHERS AND COMMUNICATION IN THIS REGARD ATTACHED). YOUR APPELLANT FURTHER SUBMITS THAT DURI NG THE COURSE OF SUCH PAYMENT SHOULD NOT BE DISALLOWED SINCE NO TAX HAS B EEN DEDUCTED THERE FROM. HOWEVER, WHILE MAKING DISALLOWANCE, THE LD. A O HAS DEVIATED, THEREFORE AND MADE THE DISALLOWANCE U/S 37(1) OF TH E ACT ON A WRONG NOTION THAT IT IS NOTHING BUT DONATION IN NATURE. 3. YOUR APPELLANT FURTHER SUBMITS THAT IT HAS INCUR RED EXPENDITURE BY SPONSORING 2 SPEAKERS WHICH IN TURN GAVE US THE PUB LICITY FOR BUSINESS. WE ARE IN THE BUSINESS OF DIAGNOSTICS INSTRUMENTS WHIC H ARE USED BY HOSPITALS AND BY SPONSORING 2 SPEAKERS IN THE EDUCATION MEET AT THE HOSPITAL GIVES ADVANTAGES TO OUT BUS/NESS BY WAY OF PUBLICITY, YOU R HONOUR WILL APPRECIATE THAT SUCH EXPENDITURE IS FULLY AND EXCLU SIVELY FOR THE BUSINESS OF THE ASSESSES AND THEREFORE PRAYS THAT YOUR HONOUR B E PLEASED TO HOLD SO NOW AND DELETE IMPUGNED DISALLOWANCE. ' 6.3 I HAVE CONSIDERED THE ASSESSMENT ORDE R AND THE SUBMISSIONS MADE BY THE APPELLANT'S AR. I AGREE WITH THE APPELLANT'S SUBMISSION THAT THESE EXPENSES HAVE BEEN INCURRED FOR PUBLICITY PURPOSES. THE BUSI NESS OF THE APPELLANT IS CLOSELY ASSOCIATED WITH HOSPITALS. HENCE INCURRING OF EXPEN SES LIKE THIS HAS CLOSE CONNECTION WITH ITS BUSINESS. HENCE THIS ADDITION I S DIRECTED TO BE DELETED AND THIS GROUND OF APPEAL IS ALLOWED. 7. HEARD BOTH SIDES. RELEVANT FINDING PERUSED. TH ERE IS HARDLY ANY DISPUTE THAT THE ASSESSEE COMPANY MANUFACTURES AND TRADES IN DIAGNOSTICS ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 6 - REAGENT STRIPS AND KITS ALONG WITH SALE AND SERVICE OF DIAGNOSTICS INSTRUMENT. IT HAS INCURRED THE IMPUGNED EXPENDITURE IN THE NAT URE OF PAYMENT MADE TO SPONSOR AIR FARE OF LONDON DELHI LONDON BUSINESS CL ASS OF TWO SPEAKERS BASED IN ENGLAND. THE ASSESSING OFFICER IS FAIR EN OUGH IN NOT REBUTTING THE FACT THAT THE SAID SPEAKERS ATTENDED AN EDUCATIONAL MEETING AT THE APOLLO HOSPITAL, NEW DELHI IN FEBRUARY 2007. HIS ONLY CAS E IS THAT THE ASSESSEE HAS NOT PROVED ANY BUSINESS EXPEDIENCY IN THE SAID EXPE NDITURE. THE CIT(A) ON THE OTHER HAND AGREES WITH ASSESSEES CONTENTION TH AT IT HAD PAID THE IMPUGNED EXPENDITURE FOR PUBLICITY PURPOSES. WE TH US VIEW ASSESSEES EXPENSES AS VERY MUCH CONNECTED HAVING DIRECT NEXUS WITH ITS MANUFACTURE AND SALE OF DIAGNOSTICS PRODUCT WHEREIN IT IS SUPPO SED TO GARNER WIDER PUBLICITY IN ORDER TO CREATE A NICHE FOR ITSELF IN THE FIELD OF DIAGNOSTICS INSTRUMENTS MARKET. WE THUS FIND NO REASON TO INTE RFERE IN CIT(A)S ORDER UNDER CHALLENGE. REVENUES LATTER GROUND ACCORDING LY FAILS. ITS APPEAL ITA NO.49/AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL P URPOSES. 8. WE NOW COME TO ASSESSEES APPEAL ITA NO.3107/AHD /2011 IN ASSESSMENT YEAR 2006-07 RAISING SOLE SUBSTANTIVE GR OUND CHALLENGING BOTH THE LOWER AUTHORITIES ACTION IN DISALLOWING AN AMOUNT OF RS.25,04,514/- ON ACCOUNT OF RECEIVABLES WRITTEN OFF AND CLAIMED AS B USINESS LOSS. THE ASSESSING OFFICER DECLINED THE IMPUGNED RELIEF BY T REATING THE ABOVE AMOUNT AS ADVANCES ONLY AND NOT DEBTS. HE FURTHER REJECTE D ITS BUSINESS LOSS CLAIM BY TREATING IT AS A LOSS ON CAPITAL. THE CIT(A) HOWEV ER ADOPTS A DIFFERENT TUNE IN OBSERVING THAT THE ASSESSEE OUGHT TO HAVE ESTABLISH ED ITS AMOUNT IN QUESTION WITH GOVERNMENT AUTHORITIES HAS BECOME IRRECOVERABL E. 9. HEARD BOTH SIDES. THERE IS NO QUARREL BETWEEN T HE PARTIES SO FAR AS BASIC FACTS PERTAINING TO THE INSTANT ISSUE ARE CON CERN THAT THE ASSESSEE HAS CLAIMED THE LOSS IN QUESTION ON ACCOUNT OF SHORT RE COVERY OF RECEIVABLES WHEREIN MAJORITY OF THE SALE SUMS STANDS RECOVERED LEAVING BEHIND ONLY A ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 7 - PORTION OF THE AMOUNT WHICH STANDS CLAIMED AS BUSIN ESS LOSS BECAUSE OF SHORT FALL IN RECOVERY. THE ASSESSEE HAS ALREADY DECLARE D THE SUMS RECOVERED AS ITS BUSINESS INCOME. IT IS THUS CLEAR THAT THE AMOUNT NOT RECOVERED IN QUESTION DOES HAVE VERY MUCH A DIRECT AND LIVE NEXUS WITH AS SESSEES BUSINESS SO AS TO BE TREATED AS AN ALLOWABLE BUSINESS LOSS CLAIM. WE ACCEPT ASSESSEES ARGUMENT ACCORDINGLY TO DELETE THE IMPUGNED BUSINES S LOSS DISALLOWANCE AMOUNT OF RS.25,04,514/-. ITS APPEAL ITA NO.3107/A HD/2011 IS ACCEPTED. 10. THIS LEAVES US WITH ASSESSEES APPEAL ITA NO.79 /AHD/2012 FOR ASSESSMENT YEAR 2007-08. ITS FORMER GROUND THEREIN CHALLENGES BOTH THE LOWER AUTHORITIES ACTION INVOKING SECTION 14A DISA LLOWANCE/ADDITION OF RS.8,78,375/- IN THE NATURE OF ADMINISTRATIVE EXPEN SES @0.5% BY INVOKING RULE 8D IN PRINCIPLE AFTER TAKING COGNIZANCE OF THE SETTLED LAW THAT THE SAID RULE IS NOT APPLICABLE IN THE IMPUGNED ASSESSMENT Y EAR. THE ASSESSEES DIVIDEND INCOME IS RS.99,93,277/-. LEARNED DEPARTM ENTAL REPRESENTATIVE IS FAIR ENOUGH IN NOT DISPUTING THE FACT THAT RULE 8D IS ADMITTEDLY NOT APPLICABLE IN THE IMPUGNED ASSESSMENT YEAR. IT IS FURTHER EVI DENT TO US THAT THE ASSESSING OFFICER HAS MECHANICALLY RESORTED TO THE IMPUGNED COMPUTATION WITHOUT EVEN RECORDING ANY FINDING AS PER SECTION 1 4A(2) OF THE ACT AS TO WHETHER THE ASSESSEES BOOKS OF ACCOUNT NOT INDICAT ING ANY ADMINISTRATIVE EXPENSES TO HAVE BEEN INCURRED ARE CORRECT OR NOT. LD. DEPARTMENTAL REPRESENTATIVE DOES NOT PINPOINT ANY SPECIFIC EVIDE NCE OF ASSESSEE TO HAVE INCURRED THE IMPUGNED ADMINISTRATIVE EXPENSES. WE THUS FIND NO REASON TO SUSTAIN THE SAME ON THIS SCORE ALONE. THE IMPUGNED OF RS.8,78,375/- IS ACCORDINGLY DELETED. 11. WE NOW COME TO ASSESSEES LATTER SUBSTANTIVE GR OUND SEEKING TO DELETE DISALLOWANCE/ADDITION OF RS.5,14,686/- MADE BY BOTH THE LOWER AUTHORITIES TOWARDS EXPENDITURE INCURRED ON SUBSCRIPTION AND PU RCHASE OF OFFICE AND GENERAL PURPOSE BOOKS THEREBY HOLDING THE SAME TO B E IN THE NATURE OF CAPITAL ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 8 - EXPENDITURE. WE DEEM IT APPROPRIATE TO REPRODUCE C IT(A)S FINDING TAKING NOT OF ASSESSING OFFICERS OBSERVATION AS WELL ASSE SSEES ARGUMENT AS FOLLOWS: 8. THE FIFTH GROUND OF APPEAL IS REGARDING THE ADDITION OF RS. 5,14,686 /- ON ACCOUNT OF PURCHASE OF BOOKS HOLDING THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. 8.1 WHILE MAKING THIS ADDITION THE ASSESSING OFFICE R HAS MADE FOLLOWING OBSERVATIONS: 1. 'IN ITS PROFIT AND LOSS ACCOUNT, THE ASSESSEE HA S DEBITED BOOKS AND PERIODICALS AT RS. 5,14,686/-. VIDE ORDER SHEET ENT RY DATED 19.11.2010, IT WAS ASKED TO SHOW CAUSE AS TO WHY THE ABOVE SAID EX PENDITURE SHOULD NOT BE TREATED AS CAPITAL IN NATURE. HOWEVER, NO PLAUSI BLE EXPLANATIONS COULD BE GIVEN BY THE ASSESSEE IN THIS REGARD. THE BOOKS MUST HAVE BEEN USED FOR RESEARCH RELATED MATTERS. THEREFORE, THE SAME IS HE LD TO BE CAPITAL IN NATURE AND ACCORDINGLY DISALLOWANCE AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE.' 8.2 DURING THE COURSE OF APPELLATE PROCEEDINGS THE APPELLANT'S AR HAS MADE FOLLOWING SUBMISSIONS: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE ID. AO WAS NOT JUSTIFIED IN MAKING ADDITION OF RS.5 ,14,686/- ON ACCOUNT OF PURCHASE OF BOOKS ON ERRONEOUS PLEA THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE. YOUR APPELLANT SU BMITS THAT FULL DETAILS AND EXPLANATIONS WERE FURNISHED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH WAS DISREGARDED BY THE LD.AO AND PRESUMED THAT SUCH BOOKS MUST HAVE BEEN PURCHASED B Y YOUR APPELLANT FOR RESEARCH RELATED MATTERS. THE LD. AO HAS WITHOUT GIVING DUE REGARD TO THE SUBMISSIONS PLACED ON RECO RD, PRESUMED THAT THE EXPENDITURE INCURRED ON SUBSCRIPTION AND P URCHASE OF OFFICE AND GENERAL PURPOSE BOOKS IS CAPITAL IN NATURE AND MADE ARBITRARY ADDITION. IT IS, THEREFORE, PRAYED THAT YOUR HONOUR BE PLEASED TO HOLD SO NOW AND DELETE THE IMPUGNED ADDITION. 2. YOUR APPELLANT FURTHER SUBMITS THE LD.AO HAS INC ORRECTLY STATED IN THE ORDER THAT NO PLAUSIBLE EXPLANATIONS WAS GIVEN BY YOUR APPELLANT. ON THE CONTRARY WITH FULL DETAILS, EXPLA NATION THAT WHY SUCH EXPENDITURE BE CONSIDERED AS CAPITAL IN NATURE WAS FURNISHED TO LD.AO VIDE POINT 5 AND ANNEXURE-4 OF OUR REPLY L ETTER DATED 26.11.2010 (COPY ENCLOSED). IN VIEW, THEREOF YOUR H ONOUR BE PLEASED TO HOLD SO NOW. AND DIRECT LD.AO TO DELETE IMPUGNED DISALLOWANCES AS ARBITRARY AND UNWANTED.' 8.3 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION MADE BY THE APPELLANT'S AR. BOOKS HAVE BEEN HELD TO BE PLANTS E LIGIBLE FOR DEPRECIATION. APPENDIX. I TO THE INCOME TAX RULES 1962 ALSO PROVI DES FOR GRANTING DEPRECIATION ON BOOKS. THIS IS EVIDENT FROM THE FACTS THAT IT PR OVIDES FOR 109% DEPRECIATION IN ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 9 - CASE OF BOOKS OWNED BY ASSESSEE CARRYING ON A PROFE SSION AND CARRYING ON BUSINESS IN RUNNING LENDING LIBRARIES. HENCE IT IS HELD THAT AO HAS RIGHTLY TREATED THIS EXPENSES AS CAPITAL EXPENSES. AS A RESULT THI S GROUND OF APPEAL IS DISMISSED. 12. WE HAVE HEARD BOTH THE LEARNED REPRESENTATIVES REITERATING THEIR RESPECTIVE STANDS. THE ASSESSEE FIRST OF ALL REFER S TO THE NATURE OF ITS READING MATERIAL FOR BEING SUBJECT MATTER OF THE IMPUGNED I SSUE. THE SAME APPEARS TO BE MCEVOY & FARMER LITERATURE REGARDING RESEARCH WORK STATED TO BE THROWING LIGHT ON ASSESSEES BUSINESS AND LATEST DE VELOPMENTS IN THE FIELD. LEARNED CIT(A) ONLY REFERS TO DEPRECIATION SCHEDULE INCLUDING BOOKS ALSO TO CONCLUDE THAT THE ABOVE SUBSCRIBED BOOKS AMOUNT TO CAPITAL EXPENDITURE. HE HAS NOWHERE DISCUSSED ASSESSEES PECULIAR LINE OF B USINESS MANUFACTURING AND SELLING DIAGNOSTICS PRODUCTS WHEREIN THE BOOKS IN Q UESTION UPDATE IT ABOUT LATEST RESEARCH DEVELOPMENTS IN THE FIELD. WE THUS FIND FORCE IN ASSESSEES CONTENTION SEEKING TO TREAT THE IMPUGNED EXPENDITUR E AS REVENUE IN NATURE. THE ASSESSING OFFICER IS DIRECTED TO DELETE THE DIS ALLOWANCE IN QUESTION. 13. THE REVNUES FORMER APPEAL ITA NO.3003/AHD/2011 IS ACCEPTED FOR STATISTICAL PURPOSES. ITS LATTER APPEAL ITA NO.49/ AHD/2012 IS PARTLY ACCEPTED FOR STATISTICAL PURPOSES. THE ASSESSEES CROSS APP EALS ITA NO.3107/AHD/2011 AND ITA NO.79/AHD/2012 ARE ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 20 TH DAY OF JANUARY, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 20/01/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT ITA NO. 3003 & 3107/AHD/2011, 49 & 79 /AHD/2012 (M/S. SIEMENS HEALTHCARE DIAGNOSTICS LTD.) A.YS. 20 06-07 & 2007-08 - 10 - 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0