Addl. CIT, New Delhi V. M/s. Global Health (P) Ltd., New Delhi

ITA 3769/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0195 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 09-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 27

Judgement Text

ITA NO. 3769/DEL/2017 GLOBAL HEALTH (P) LTD. 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI G.S. PANNU, HONBLE VICE PRESIDENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-3769/DEL/2017 (ASSESSMENT YEAR:2012-13) ADDL. CIT SPECIAL RANGE-4 NEW DELHI. VS. GLOBAL HEALTH (P) LTD. E-18, DEFENCE COLONY NEW DLEHI. PAN NO. AACCG2681C APPELLANT RESPONDENT REVENUE BY SH. GAURAV DUDEJA, SR. DR ASSESSEE BY SH. RAHUL KHARE, ADV. DATE OF HEARING: 30 .12.2020 DATE OF PRONOUNCEMENT : 30 .12.2020 ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 15/2/2017 IN APPEAL NO. 256/2016-17 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-39, NEW DELHI (LD. CIT(A)) IN THE CASE OF M/S GLOBAL HEALTH PRI VATE LIMITED (THE ASSESSEE) FOR THE ASSESSMENT YEAR 2012-13, REVENUE PREFERRED THIS APPEAL STATING THAT THE EXPENSES TOWARDS FEES TO HUDA IS A ONE-TIME EXPENDITURE AND THE BENEFIT ARISING OUT OF THIS EXPENDITURE IS OF ENDURING IN NATURE, AND THEREFORE IT IS NOT REVENUE EXPENDITURE IN ITS NATU RE. 2. ASSESSEE IS A PRIVATE LIMITED COMPANY INCORPORAT ED ON 30/08/2004 WITH AN AIM TO ESTABLISH AND MANAGE MEDANTA THE MED ICITY TO PROVIDE ALL ITA NO. 3769/DEL/2017 GLOBAL HEALTH (P) LTD. 2 TYPES OF HEALTH, PATHOLOGY AND MEDICAL FACILITIES. FOR THE ASSESSMENT YEAR 2012-13 THEY HAVE FILED THEIR RETURN OF INCOME ON 3 0/9/2011 DECLARING NIL INCOME AFTER SETTING OF BROUGHT FORWARD LOSSES TO T HE TUNE OF RS. 48, 89, 23, 321/-UNDER NORMAL PROVISIONS AND INCOME OF RS. 72, 28, 29, 359/-UNDER SECTION 115 JB OF THE INCOME TAX ACT, 1961 (FOR SHO RT THE ACT). DURING THE ASSESSMENT PROCEEDINGS, LEARNED ASSESSING OFFICER N OTICED THAT THE ASSESSEE HAS DEBITED RS. 3, 48, 02, 652/-FROM THE P &L ACCOUNT ON ACCOUNT OF LEASING FEE PAID TO HUDA AND STATED THAT SUCH FEE W AS PAID TOWARDS CHARGES FOR OBTAINING ADMISSION TO LEASE OUT TO BUILD A PRO PERTY CONSTRUCTED ON LAND ALLOTTED BY HUDA, ACCORDING TO THE NORMS THE PROPER TY OWNER CAN GIVE THE PROPERTY ON RENT AFTER MAKING PAYMENT OF RS. 400 PE R SQUARE METERS. BASING ON THAT LEARNED ASSESSING OFFICER INFERRED THAT THE ASSESSEE COMPANY HAS ITSELF ADMITTED THAT IT IS ONE-TIME PAYMENT TO HUDA , A CHARGE FOR OBTAINING PERMISSION FOR RENTING OUT A PORTION OF THE PROPERT Y AND THEREFORE, IN TERMS OF THE JUDGEMENT OF THE HONBLE APEX COURT IN ARVIN D MILLS LTD VS. CIT 197 ITR 422 (SC) SUCH CAPITAL EXPENDITURE WOULD NOT BEC OME REVENUE EXPENDITURE MERELY BY REASON THAT IT WAS INCURRED I N CONNECTION WITH THE ILLNESS ACTIVITIES WHICH ULTIMATELY RESULTED IN EFF ICIENTLY CARRYING ON DAY-TO- DAY BUSINESS. ON THIS PREMISE LEARNED ASSESSING OFF ICER BROUGHT THE SAID AMOUNT OF RS. 2, 22, 77, 740/-TO TAX, AFTER ALLOWIN G 5% THEREOF TOWARDS DEPRECIATION. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL, LD. CIT(A) APPRISED THE ENTIRE MATERIAL BEFORE HIM IN THE LIGHT OF THE LAW LAID DOWN BY THE HIGH COURTS AND FOUND THAT IN ARVIND MILLS LTD (SUPRA) H AS NO APPLICATION TO THE FACTS OF THE CASE AND ON THE OTHER HAND THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF EMPIRE JUTE COMPANY LIMITED VS . CIT (1980) 5 TMI 1 (SC) ITA NO. 3769/DEL/2017 GLOBAL HEALTH (P) LTD. 3 IS APPLICABLE TO THE FACTS OF THE CASE. BASING ON S UCH LEGAL POSITION, LD. CIT(A) REACHED A CONCLUSION THAT THE PAYMENT MADE BY THE A SSESSEE TO HUDA IS REVENUE EXPENSE IN NATURE AND ALLOWABLE TOWARDS DED UCTION. 4. IT IS THE ARGUMENT OF THE LD. DR THAT THE ONE-T IME EXPENDITURE MADE BY THE ASSESSEE TO HUDA USE ENDURING BENEFIT TO THE ASSESSEE OVER A PERIOD OF TIME AND THEREFORE IT HAS TO BE CLASSIFIED AS CA PITAL EXPENDITURE AND NOT ALLOWABLE AS REVENUE EXPENDITURE AND ON THAT SCORE THE FINDING OF THE LD. CIT(A) SUFFERS LEGAL INFIRMITY; WHEREAS IT IS THE S UBMISSION ON BEHALF OF THE ASSESSEE BY THE LD. AR THAT THE FACTS OF ARAVIND MI LLS LTD ((SUPRA) ARE COMPLETELY DIFFERENT FROM THE FACTS INVOLVED IN THI S CASE AND THE LD. CIT(A) RIGHTLY FOLLOWED THE DECISION OF THE HONBLE APEX C OURT IN THE CASE OF EMPIRE JUTE COMPANY LIMITED (SUPRA), AND THEREFORE THE SAME CANNOT BE DISTURBED. 5. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. IT WAS THE SUBMISSION OF THE A SSESSEE BEFORE THE ASSESSING OFFICER THAT THE ONE-TIME PAYMENT TO HUDA AS CHARGE FOR OBTAINING PERMISSION FOR RENTING OUT THE PROPERTY W AS MADE AND THIS IS A CHARGE ON THE INCOME LEVIED BY HUDA IN THE FORM OF LEASING FEE WHICH IS ON THE LINES OF CESS OR TAX COLLECTED BY THE GOVERNMEN T; AND THAT THE FEES CHARGED BY THE GOVERNMENT WHETHER ONE-TIME OUR YEAR LY GRANTING PERMISSION TO AN INCOME IS AN ALLOWABLE DEDUCTION U NDER SECTION 27 (VI) OF THE ACT.ITS NOT THE CASE OF THE REVENUE THAT THE O NE-TIME PAYMENT MADE TO HUDA WOULD IN ANY WAY INCREASE THE VALUE OF THE LAN D, BUT ON THE OTHER HAND IT IS ONLY FOR THE PURPOSE OF IMPROVEMENTS EFF ECTED ON THE LAND. LD. CIT(A) ALSO FOUND THAT THE FEE PAID TO HUDA IS TO S ECURE PERMISSION TO LEASE A PART OF THE AREA FOR A FOOD COURT, A PHARMACY AND PARKING AREA, WHICH ITA NO. 3769/DEL/2017 GLOBAL HEALTH (P) LTD. 4 CLEARLY INDICATES THAT THE GOVERNMENTS PERMISSION IS REQUIRED AS THE HOSPITAL IS ON A LEASEHOLD LAND AND THE ASSESSEE DO ES NOT HAVE THE RIGHT TO ALIENATE, WHICH IS THE ULTIMATE TEST FOR OWNERSHIP. LD. CIT(A) FURTHER FOUND THAT THIS EXPENDITURE IS DIRECTLY RELATED TO THE DA Y-TO-DAY RUNNING OF THE BUSINESS OF THE ASSESSEE IN CONNECTION WITH THE RUN NING OF THE HOSPITAL BECAUSE THE PATIENTS AND DOCTORS AS WELL AS THE PAR AMEDICAL AND ADMINISTRATIVE STAFF FROM THE VERTEX AROUND WHICH T HE ACTIVITIES/BUSINESS OF THE HOSPITAL OPERATES. 6. IN ARVIND MILLS LTD (SUPRA), AS RIGHTLY CULLED O UT BY THE LD. CIT(A), THE HONBLE COURT HELD THAT IN DECIDING WHETHER AN EXPE NDITURE IS A CAPITAL ARE REVENUE EXPENDITURE, THE QUESTION OF VOLUNTARY AND/ OR INVOLUNTARY PAYMENT BECOMES IMMATERIAL AND IT IS ONLY THE NATUR E OF EXPENDITURE THAT DETERMINES THE ISSUE, AND IN SUCH CASE THE OWNER GO T THE ADVANTAGE OF BETTERMENT OF LAND IN QUESTION AND THERE WAS NO MAN NER OF DOUBT THAT THE VALUATION OF THE LAND HAD INCREASED BECAUSE OF THE IMPROVEMENTS EFFECTED ON THE LAND, BUT SUCH PAYMENTS HAD NO DIRECT NEXUS WITH THE DAY-TO-DAY RUNNING OF THE BUSINESS. HOWEVER INSOFAR AS THE CAS E ON HAND ARE CONCERNED, THERE IS NO DISPUTE AS TO THE FACTS RECO RDED BY THE LD. CIT(A) THAT IT IS ONLY TO LEASE OUT A PART OF THE AREA IN WHICH THE HOSPITAL IS RUN, FOR RUNNING A FOOD COURT, A PHARMACY AND PARKING AREA T HE FEES PAID AND SUCH PAYMENT IS DIRECTLY RELATED TO THE DAY-TO-DAY RUNNI NG OF THE BUSINESS OF HOSPITAL BY THE ASSESSEE.INASMUCH AS THE ASSESSEE I S NOT THE OWNER OF THE LAND, THE QUESTION OF ASSESSEE GETTING THE BENEFIT OF ENHANCEMENT OF VALUE OF THE PROPERTY DOES NOT ARISE. LD. CIT(A) RIGHTLY APPLIED THE RATIO OF THE DECISION RENDERED BY THE HONBLE APEX COURT IN THE CASE OF EMPIRE JUTE COMPANY LIMITED (SUPRA) TO THE FACTS OF THIS CASE. ITA NO. 3769/DEL/2017 GLOBAL HEALTH (P) LTD. 5 7. SINCE THE LD. CIT(A) RIGHTLY APPRECIATED THE FAC TS IN THE LIGHT OF THE CORRECTIVE POSITION OF LAW LAID DOWN BY THE HONBLE APEX COURT IN THE CASE OF EMPIRE JUTE COMPANY LIMITED (SUPRA), WHERE OF TH E CONSIDERED OPINION THAT THE IMPUGNED ORDER DOES NOT SUFFER ANY LEGAL I NFIRMITY NOR DOES IT INVITE ANY INTERFERENCE IN THIS APPEAL. WE, THEREFORE, UPH OLD THE FINDINGS OF THE LD. CIT(A) AND DISMISS THE GROUNDS OF APPEAL OF THE REV ENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTE R THE CONCLUSION OF THE HEARING IN THE VIRTUAL COURT ON 3 0/12/2020. SD/- SD/- (G.S. PANNU) (K. NARSIMHA CHA RY) VICE PRESIDENT JUDICIAL MEMBER DATED: 30.12.2020 *KAVITA ARORA, SR. PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI