M/s. Dr. Chaurasia Nursing Home, Meerut V. ITO, Meerut

ITA 436/DEL/2015

• Counselvise Citation: 43620114 RSA 2015
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SEODAN SINGH BHADDORIA
• Assessee Lawyers: RAVINDRA AGARWAL
• Keywords: Bonafide belief; Reasonable cause

Judgement Text

ITA NO 436 DEL2015 DR CHAURASIA NURSING HOME A Y 2005 - 06 1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ES, NEW DELHI (CIRCUIT BENCH AT MEERUT) BEFORE SHRII.C . SUDHIR , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI , ACCOUNTANT MEMBER ITA NO. 436/DEL./2015 ASSTT. YEAR: 2005 - 06 DR CHAURASIA NURSING HOME VS. INCOME - TAX OFFICER, CHIPI , MEERUT. WARD 1(2), MEERUT. [PAN: AABFD 7159G] (APPELLANT) (RESPONDENT) APPELLANT BY : CA RAVINDRA AGARWAL AND ROHIT AGARWAL RE VENUE BY : SH . SEODAN SINGH BHADDORIA, SR. DR DATE OF HEARING : 17.12.2015 DATE OF PRONOUNCEMENT : 22 .12.2015 ORDER PER PRASHANT MAHARISHI , ACCOUNTANT MEMBER: 1 . THIS APPEAL IS DIRECTED AGAINST THE ORDER OF CIT (A), MEERUT DATED 09 - 12 - 2014 AGAINST CONFIRMATION OF PENALTY U/S 271B OF RS. 14404/ - . 2 . B RIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN CARRYING ON BUSINESS AS NURSING HOME. FOR A Y 2005 - 06 IT HAS GROSS RECEIPT/ TURNOVER AS DEFINED U/S 44AB OF THE ACT WAS RS. 28,80,836/ - . IT ITA NO. PAGE | 2 2 DID NOT GET ITS ACCOUNTS AUDITED U/S 44AB OF THE I NCOME T AX A CT AND THEREFORE AO LE VIED PENALTY U/S 271B OF THE ACT OF RS 14404/ - HOLDING THAT ASSESSEE FIRM IS CARRYING ON PROFESSION AND ITS TURNOVER IS MORE THAN RS 10 LAKHS. ASSESSEE PREFERRED APPEAL BEFORE CIT (A ) WHO CONFIRMED THE PENALTY AND THEREFORE ASSESSEE IS IN APPEAL BEFORE US. 3 . LD. AR OF THE APPELLANT SUBMITTED THAT ASSESSEE WAS UNDER BONAFIDE BELIEF THAT THE NURSING HOME BUSINESS CARRIED ON BY THE ASSESSEE IS NOT A PROFESSION BUT A BUSINESS AND THEREFORE THE LIMIT APPLICABLE FOR GETTING ACCOUNTS AUDITED FOR BUSINESS IS RS 40,00,000/ - AND NOT RS 10,00,000/ - . THEREFORE IT DID NOT GET ITS ACCOUNTS AUDITED. FOR THIS BONA FIDE BELIEF APPELLANT RELIED ON THE GUIDANCE NOTE ISSUED BY ICA I U/S 44AB OF THE INCOME TAX A CT WHERE IN EXPLAI NING WHAT IS PROFESSION AND WHAT IS BUSIN ESS IT IS MENTIONED THAT NURSING HOME ACTIVITIES ARE BUSINESS. HE SUBMITTED THAT THEREFORE THERE IS A BONA FIDE BELIEF AND HENCE PENALTY SHOULD NOT HAVE BEEN LEVIED U/S 271B OF THE INCOME TAX ACT . 4 . LD. DR RELIED ON THE ORDERS OF AO AS WELL AS CIT (A). 5 . WE HAVE CAREFULLYCONSIDERED THE RIVAL CONTENTIONS . IT IS ADMITTED FACT THAT ASSESSEE IS ENGAGED IN RUNNING NURSING HOME ACTIVITIES. IT IS NOT IMPORTANT TO DETERMINE WHETHER THE ASSESSEE ISCARRYING ON BUSINESS OR PROFESSION BUT IT IS IMPORTANT TO DETERMINE T HAT WHEN ASSESSEE HAS ITA NO. PAGE | 3 3 TAKEN A VIEW ONE WAY OR OTHER WHETHER THEREIS A REASONABLE CAUSE FOR TAKING SUCH A VIEW. IN THIS CASE ASSESSEE HAS RELIED ON THE GUIDANCE NOTE ISSUED BY ICAI WHERE IN IT IS MENTIONED THAT THE ACTIVITY OF NURSING HOME IS A BUSINESS ACTIVITY. THIS IS MENTIONED BECAUSE OF A DECISION OF COORDINATE BENCH IN CASE OF SHALINI HOSPITALS LIMITED V ACIT 108 ITD 534 ( HYD) WHERE IN DELETING PENALTY U/S 271B OF THE ACT ON IDENTICAL FACTS IT WAS HEELD THAT NURSING HOME ACTIVI TIES CARRIED ON BY A FIRM IS DIFFERENT FROM THE PROFESSIONAL WHO RUN IT AND IT IS BUSINESS AND NOT PROFESSION AND ASSESSEE CARRYING ON BUSINESS OF NURSING HOME IS NOT OBLIGED TO GET ITS ACCOUNTS AUDITED U/S 44AB TILL IT TURNOVER CROSSES THE PRESCR IBED LIMIT APPLICABLE FOR BUSINESS. IT WAS AS HELD THAT : - 5.8 CONSIDERING THE TOTALITY OF FACTS AND ENTIRETY OF THE CIRCUMSTANCES OF THE INSTANT CASE IN THE LIGHT OF THE ABOVE DISCUSSION, WE FIND MERIT IN THE ABOVE CONTENTIONS OF THE ASSESSEE. ONE I MPORTANT ASPECT TO BE REMEMBERED IS THAT WHAT IS ASSESSED HERE IS A NURSING HOME, A PARTNERSHIP FIRM, WHICH IS A DISTINCT ASSESSABLE ENTITY DISTINCT FROM THE PROFESSIONALS WHO RUN IT OR ENGAGED BY IT. ADDED TO IT, IT IS THE CONTENTION OF THE ASSESSEE, UN CONTROVERTED BY THE DEPARTMENT, THAT IT IS ONLY THE ROOM RENT, OPERATION THEATRE RENT AND NURSING CHARGES THAT ARE ACCOUNTED FOR IN THE BOOKS OF THE ASSESSEE, WHEREAS THE FEE FOR THE PROFESSIONAL SERVICES RENDERED BY THE SURGEONS AND DOCTORS, ARE DIRECTLY RECEIVED BY THEM FROM THE PATIENTS. THEREFORE, WHAT IS EARNED BY THE ASSESSEE - FIRM IN THE COURSE OF BUSINESS IS FOR LETTING OUT THE FACILITIES POSSESSED BY IT AS A NURSING HOME AND FOR PROVISION OF NURSING AND OTHER SUPPORTIVE SERVICES PROVIDED BY IT TO TH E PATIENTS WHO TAKE TREATMENT FROM THE DOCTORS IN THE NURSING HOME. THEREFORE, THE ACTIVITIES OF A NURSING HOME CONSTITUTE BUSINESS AND NOT PROFESSION. 5.9 WE ARE FORTIFIED IN THIS BEHALF BY THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF DR. P. VADAMALAYAN V. CIT [1969] 74 ITR 94 , WHEREIN CONSIDERING THE CASE OF AN ASSESSEE, WHO IS A DOCTOR BY PROFESSION MAINTAINING AND RUNNING A NURSING HOME, IN WHICH HE INSTALLED CERTAIN MEDICAL EQUIPMENT AND CLAIMED DEVELOPMENT REBATE ON THE VALUE THEREOF, IT WAS HELD AS FOLLOWS ' HELD , THE CARRYING ON OF THE NURSING HOME BY THE ASSESSEE AS PART OF THE PROFESSION WAS OF A COMMERCIAL NATURE AND THE COMBINED AC TIVITIES OF THE ASSESSEE CONSTITUTED 'BUSINESS' AND THE ASSESSEE WAS ENTITLED TO THE DEVELOPMENT REBATE. IF AN ASSESSEE, WHO IS A PROFESSIONAL AND AN EXPERT, CONTEMPORANEOUSLY CARRIES ON A TRADE WHICH IS ANNEXED TO THE EXERCISE OF SUCH A PROFESSION AND IF, BY DOING SO, HE CAN TAKE ITA NO. PAGE | 4 4 ADVANTAGE OF A PROVISION IN THE FISCAL ACT BY CLAIMING AN ALLOWANCE OR REBATE, AND IF SUCH A CLAIM CARRIES A LIGHTER BURDEN OF TAX, THEN HE HAS THE RIGHT TO TAKE ADVANTAGE OF THE SAME. THE DEFINITION OF BUSINESS, BEING AN INCLUS IVE DEFINITION AND NOT BEING EXHAUSTIVE, IS INDICATIVE OF EXTENSION AND EXPANSION AND NOT RESTRICTION.' 5.10 SIMILARLY, IN THE CASE OF CIT V. DR. V.K. RAMACHANDRAN [1981] 128 ITR 727 1 . HONBLE MADRAS HIGH COURT HELD AS FOLLOWS : ' HELD THAT EVEN A PROFESSIONAL ACTIVITY COULD BE TINGED WITH A COMMERCIAL CHARACTER, IF THE INDICIA OF COMMERCE ARE MANIFEST IN IT. THE WAY IN WHICH THE ASSESSEE CARRIED ON THE X - RAY ACTIVITY WAS IN NO WAY DIFFERENT FROM A NON - QUALIFIED PERSON CARRYING ON A RADIOLOGICAL INSTITUTE. THE MERE FACT THAT A PROFESSIONAL MAN HAD AS AN ADJUNCT TO HIS PROFESSION AL ACTIVITIES, SUCH AN INSTITUTE DID NOT DISABLE HIM FROM RUNNING IT AS A COMMERCIAL VENTURE AND EARNING INCOME THEREFROM.' 5.11 SIMILARLY IN THE CASE OF NATVARLAL AMBALAL DAVE V. CIT [1997] 225 ITR 936 (GUJ.), CONSIDERING ADMISSIBILITY OF INVESTMENT ALLOWANCE ON X - RAY MACHINES, HONBLE GUJARAT HIGH COURT HELD THAT MERELY BECAUSE A PERSON HAPPENS TO BE A PROFESSIONALLY QUALIFIED DOCTOR, IT CANNOT BE SAID TH AT SUCH PERSONS ACTIVITY CANNOT BE TREATED AS AN ACTIVITY OF CARRYING ON BUSINESS. A PROFESSIONAL ACTIVITY CAN ALSO BE CHARACTERIZED AS AN ACTIVITY OF CARRYING ON BUSINESS IF IT IS CARRIED ON LIKE A COMMERCIAL ACTIVITY. 5.12 IN THE LIGHT OF THE ABOVE DISC USSION, WE HOLD THAT THE ACTIVITIES OF THE NURSING HOME IN THE INSTANT CASE CONSTITUTE BUSINESS ACTIVITY, AND SINCE THE TURNOVER OF THE ASSESSEE DURING THE YEARS UNDER APPEAL WAS BELOW THE LIMIT OF RS. 40 LAKHS PRESCRIBED IN CLAUSE ( A ) OF SECTION 44AB, ASS ESSEE WAS NOT REQUIRED FOR THE YEARS UNDER APPEAL, TO GET ITS ACCOUNTS AUDITED IN TERMS OF SECTION 44AB. 5.13 IN ANY EVENT, THERE IS ALSO A REASONABLE CAUSE FOR THE DEFAULT ON THE PART OF THE ASSESSEE IN COMPLYING WITH THE PROVISIONS OF SECTION 44AB INASMUCH AS IT WAS UNDER A BONA FIDE BELIEF THAT ITS ACTIVITIES AMOUNT TO BUSINESS UNDER CLAUSE ( A ) AND DID NOT C ONSTITUTE PROFESSION UNDER CLAUSE ( B ) OF SECTION 44AB. THE BONA FIDE NATURE OF THE ASSESSEES DEFAULT IS EVIDENT FROM THE CONSISTENT STAND OF THE ASSESSEE RIGHT FROM THE BEGINNING IN RESPECT OF THE ASSESSMENT YEAR 1998 - 99; AND THE ACT OF THE ASSESSEE IN CAUSING BELATED COMPLIANCE WITH SECTION 44AB BY GETTING ITS ACCOUNTS AUDITED, THOUGH BELATEDLY, IN RESPECT OF ASSESSMENT YEAR 1999 - 2000 NOTWITHSTANDING ITS STAND THAT ITS ACTIVITIES CONSTITUTE BUSINESS AND IT WAS NOT OBLIGED TO GET ITS ACCOUNTS AUDITED I N TERMS OF SECTION 44AB AS ITS TURNOVER WAS LESS THAN RS. 40 LAKHS. THAT BEING SO, EVEN ON THAT COUNT, AS THERE WAS A REASONABLE CAUSE FOR THE DEFAULT ON THE PART OF THE ASSESSEE, IN THE FORM OF BONA FIDE BELIEF NURSED BY IT THAT IT WAS NOT COVERED BY THE PROVISIONS OF SECTION 44AB, IT IS NOT A FIT CASE FOR THE LEVY OF PENALTY UNDER SECTION 271B OF THE ACT. 5.14 FOR THE FOREGOING REASONS, PENALTIES LEVIED UNDER SECTION 271B OF THE ACT FOR THE ASSESSMENT YEARS 1998 - 99 AND 1999 - 2000 ARE CANCELLED. 6 . THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH IN SHALINI HOSPITAL VS ACIT 108 ITD 534 (HYD) WEARE OF THE VIEW THATASSESSEE HAD REASONABLE CAUSE IN NOT GETTING THE BOOKS OF ACCOUNTS AUDITED U /S 44AB OF THE INCOME TAX ACT, IF AT ALL REQUI RED AS ITS TURNOVER ITA NO. PAGE | 5 5 IS RS 28,80,836/ - FOR THE YEAR . THEREFORE WE REVERSE THE ORDER OF CIT (A) IN CONFIRMING PENALTY U/S 271B OF RS 14,404/ - AND DELETE THE PENALTY. 7 . IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. O R D E R P R O N O U N C E D I N T H E O P E N C O U R T O N 2 2 . 1 2 . 2 0 1 5 . - S D / - - S D / - ( I.C. SUDHIR ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 . 1 2 . 2 0 1 5 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT (A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI