DCIT, Circle - 14(2), Kolkata , Kolkata V. M/s. Navketan Nurshing Home Pvt. Ltd., , Kolkata

ITA 47/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4813 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 08-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: MANOJ K TIWARI
• Keywords: Fair market value; Assessment record; TDS
• Section: 143(3)

Judgement Text

, C , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH C KOLKATA BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 47 / KOL / 20 18 ASSESSMENT YEAR :2012-13 DCIT, CIRCLE-14(2), AAYAKAR BHAWANA, PORBA, 6 TH FLOOR, 110, SHANTIPALLY, KOLKATA-107 V/S . M/S NAVKETAN NURSHING HOME PVT. LTD., 1B, PLOT NO.193 SECTOR-III, SALT LAKE CITY, KOLKATKA-91 [ PAN NO.AABCN 9379 F ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI ROBIN CHOUDHURY, ADDL CIT-DR /BY RESPONDENT SHRI MANOJ K. TIWARI, FCA /DATE OF HEARING 25-04-2019 /DATE OF PRONOUNCEMENT 17-05-2019 / O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2012-13 A RISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-5, KOLKATAS O RDER DATED 18.10.2017 PASSED IN CASE NO.A.NO.120/CIT(A)-5/CIR-14(2)/15-16 , INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE REVENUES IDENTICAL BOTH SUBSTANTIVE GROUNDS SEEK TO REVERSE THE CIT(A)S FINDINGS REVERSING THE ASSESSING OFFICERS ACTION INVOKING SEC. 40A(2) DISALLOWANCE OF 10 LAC AND 1,70,63,423/- REPRESENTING DIRECTORS SALARY AND OPERATION AND MANAGEMENT SERVICES PAID TO HOLDING C OMPANY M/S COLUMBIA ASIA HOSPITAL PVT. LTD.; RESPECTIVELY. THE CIT(A)S DETAILED DISCUSSION REVERSING ASSESSING OFFICERS ACTION READS AS UNDER :- 4.2. THE A/R OF THE APPELLANT IN HIS SUBMISSION STA TED THAT 'COLUMBIA ASIA IS AN INTERNATIONAL HEALTHCARE GROUP OPERATING A CHAIN OF MODEM HOSPITA LS ACROSS ASIA. COLUMBIA ASIA HOSPITALS ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 2 PVT. LTD. IS ONE OF THE FIRST HEALTHCARE COMPANIES TO ENTER INDIA THROUGH 100% FOREIGN DIRECT INVESTMENT (FDI) ROUTE. THE COLUMBIA ASIA GROUP IS OWNED BY MORE THAN 150 PRIVATE EQUITY COMPANIES, FUND MANAGEMENT ORGANIZATIONS AND INDIV IDUAL INVESTORS. COLUMBIA ASIA HOSPITALS ARE CLEAN, EFFICIENT, EXCEL LENT CUSTOMER CARE, AFFORDABLE AND ACCESSIBLE. THE INNOVATIVE DESIGN OF THE HOSPITALS, FROM THEIR MANAGEABLE SIZE TO THEIR ADVANCED TECHNOLOGY, IS FOCUSED ON CREATING POSITIV E EXPERIENCE FOR PATIENTS, . THE FIRST HOSPITAL IN INDIA COMMENCED OPERATIONS IN 2005 IN HEBBAL - BANGALORE AND CURRENTLY COLUMBIA ASIA OPERATES ELEVEN FACILITIES. THE GROUP HAS PRESENCE IN AHMEDABAD, BANGALORE, MYSORE, KOLKATA, GURGAON, GHAZIABAD, PATIALA AND PU NE. THE APPELLANT HAS ENTERED INTO AN AGREEMENT V IZ.. ORGANISATION & MANAGEMENT (O&M) AGREEMENT WITH ITS HOLDING COMPANY TO OBTAIN CERTAI N SERVICES IN RESPECT OF OPERATION AND MANAGEMENT OF THE APPELLANT. THE SCOPE OF SERVICES OF THE SAID AGREEMENT IS MENTIONED AS UNDER: MANAGEMENT AND CONSULTANCY SERVICES; PROVISION OF MEDICAL PROTOCOLS; PROVISION OF OPERATING PROTOCOLS; PROVISION OF ACCOUNT PROTOCOLS; PROVISION OF MARKETING AND ADVERTISING PROTOCOLS ; LICENSE OF COLUMBIA ASIA LOGO, BRAND NAME AND TR ADEMARK; PAN-INDIA PARTICIPATION IN: O MEDICAL PROGRAMMES; O PURCHASING PROGRAMMES; O ADVERTISING PROGRAMMES; O THIRD PARTY ADMINISTRATORS; MANPOWER SELECTION AND MANAGEMENT; LICENSE, MAINTENANCE, IMPLEMENTATION AND UPGRADE S OF THE FOLLOWING SOFTWARE: O HOSPITAL FRONT OFFICE SOFTWARE; O MEDICAL RECORDS SOFTWARE; O PATIENT QUEUING AND SCHEDULING SOFTWARE; AND O ACCOUNTING SOFTWARE. O HUMAN RESOURCE SOFTWARE. O ANY OTHER RELEVANT SOFTWARE. WE HAVE ENTERED INTO OPERATION AND MANAGEMENT AGREE MENT (COPY ENCLOSED AS ANNEXURE 1 FOR READY REFERENCE) AS PER WHICH MANAGEMENT AND CO NSULTANCY SERVICES ARE BEING PROVIDED BY COLUMBIA ASIA HOSPITALS PVT LTD (CAHPL) TO THE A SSESSEE. THE SAID SERVICE INTER ALIA INCLUDES THE FOLLOWING: PROVISION OF MEDICAL PROTOCOLS; ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 3 PROVISION OF OPERATING PROTOCOLS; PROVISION OF ACCOUNT PROTOCOLS; PROVISION OF MARKETING AND ADVERTISING PROTOCOLS; LICENSE OF COLUMBIA ASIA LOGO, BRAND NAME AND TRA DEMARK; PAN-INDIA PARTICIPATION IN: O MEDICAL PROGRAMMES: O PURCHASING PROGRAMMES; O ADVERTISING PROGRAMMES; O THIRD PARTY ADMINISTRATORS; MANPOWER SELECTION AND MANAGEMENT; LICENSE, MAINTENANCE, IMPLEMENTATION AND UPGRADES OF THE FOLLOWING SOFTWARE: O HOSPITAL FRONT OFFICE SOFTWARE; O MEDICAL RECORDS SOFTWARE; O PATIENT QUEUING AND SCHEDULING SOFTWARE; AND O ACCOUNTING SOFTWARE. O HUMAN RESOURCE SOFTWARE. O ANY OTHER RELEVANT SOFTWARE. A. PROVIDING GUIDANCE AND ADVISE TO THE GENERAL MA NAGER OF THE COMPANY: THE GENERAL MANAGER OF THE COMPANY IS RESPONSIBLE F OR ALL THE OPERATIONS AND DAY TO DAY ACTIVITIES OF THE COMPANY. IN THIS REGARD, THE GENE RAL MANAGER OF THE COMPANY VIZ., MR. ARINDAM BANERJEE REGULARLY USED TO SEEK ADVICE AND GUIDANCE AND ALSO CONTINUES TO SEEK ADVICE AND GUIDANCE FROM THE NOMINEE DIRECTORS OF T HE COMPANY APPOINTED BY CAHPL VIZ., MR. TUFAN GHOSH, DR. NANDAKUMAR JAIRAM AND MR. JAGA NNATH MS. SOME OF THE KEY AREAS IN WHICH THE GENERAL MANAGER SEEKS ADVICE FROM OFFICIA LS OF CAHP L ARE AS UNDER: I. MONTHLY, QUARTERLY AND YEARLY PERFORMANCE OF THE COMPANY II. ADVICE ON STRATEGIC MATTERS SUCH AS WAYS AND ME ANS TO IMPROVE THE PERFORMANCE OF THE COMPANY, CREATE AWARENESS ABOUT THE COMPANY AMONGST THE PUBLIC, CREATE AWARENESS ON THE VARIOUS HEALTHCARE SERVICES THE HO SPITAL RENDERS, ETC III. ADVICE ON IMPROVING OPERATIONAL EFFICIENCY OF THE COMPANY IV. OPERATIONAL MATTERS OF THE COMPANY IN THE ARE AS OF HR, FINANCE, IT, ETC B. FINANCE: PRACTICALLY, THE ENTIRE FINANCE DEPARTMENT ACTIVITI ES IS TAKEN CARE BY CAHPL BECAUSE THE FINANCE PERSONNEL OF OUR COMPANY TAKE CARE OF ONLY PATIENT'S BILLING ACTIVITIES, PETTY CASH ACTIVITIES INCLUDING DEPOSITING OF CASH RECEIVED FR OM THE PATIENTS INTO THE BANK ACCOUNT. THE OTHER MAIN ACTIVITIES OF THE FINANCE DEPARTMENT ARE PROVIDED BY CAHPL , WHICH ARE AS UNDER: I. MANAGING THE FUNDS OF THE COMPANY, II, ORGANIZING LOANS FROM BANKS AND FINANCIAL INSTI TUTIONS, III. VENDOR PAYMENTS - WHICH COULD BE MORE THAN I 0,000 VENDOR PAYMENTS DURING THE YEAR, IV. PAYROLL PROCESSING, V. MONITORING THE FOLLOW-UP OF RECEIVABLES IN RESP ECT PATIENT'S DUES FROM INSURANCE COMPANIES (IPAS) AND CORPORATE CUSTOMERS, VI. REVIEW AND REMITTANCE OF MONTHLY STATUTORY PAYM ENTS SUCH AS SERVICE TAX, TDS, ETC, VII. FINALIZATION OF ANNUAL FINANCIAL STATEMENTS VIII. COORDINATION OF AUDITS INCLUDING TAX AUDIT IX. PREPARATION, REVIEW AND FILING OF RETURN OF IN COME X. ASSISTING IN FURNISHING DETAILS TO INCOME TAX DE PARTMENT IN CONNECTION WITH ASSESSMENT PROCEEDINGS XI. REVIEW OF BUDGETS PERIODICALLY AND REVIEW OF MO NTHLY MIS REPORTS XII. HANDLING OF INSURANCE RELATED ACTIVITIES SUCH AS PROVIDING ADVICE ON INSURANCE COVERS, LIAISING WITH INSURERS AND BROKERS IN THIS REGARD. EXAMPLES OF SOME OF THE POLICIES OBTAINED BY THE COMPANY ARE PROFESSIONAL INDEMNITY INSURANCE CO VER, MONEY POLICY, FIRE POLICY, BURGLARY COVER, CGL POLICIES, HOSPITAL E&O POLICIES, D&O POL ICIES, GROUP HEALTH INSURANCE, MEDI- CLAIM POLICY, ETC. ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 4 ALSO, PLEASE NOTE THAT THE AUTHORIZED SIGNATORIES F OR CARRYING OUT THE BANKING TRANSACTIONS OF THE COMPANY ARE THE FOLLOWING CAHPL OFFICIALS VIZ., I. DR. NANDAKUMAR JAIRAM II . MR. TUFAN GHOSH III . MR. JAGANNATH MS IV. MR. NAVEEN MANTHA V. MR. ANUNAY KUMAR SINHA VI. MR. BABU SHENOY VII. MR. SHANKAR RANGANATHAN C. HUMAN RESOURCE: NOMINEE DIRECTORS OF THE COMPANY FROM CAHPL VIZ., M R. TUFAN GHOSH, DR. NANDAKUMAR JAIRAM AND MR. JAGANNATH MS HAVE REGULARLY PROVIDED GUIDANCE A ND ADVISE TO HR MANAGER MR. ANIRUDDHA BANERJEE OF OUR COMPANY AND HAVE ALSO SUPERVISED HI S ACTIVITIES ON A REGULAR BASIS. APART FROM ABOVE, THE NOMINEE DIRECTORS AND ALSO THE VP HR OF CAHPL M R. KALAPPA AND OTHER OFFICIALS OF HR DEPARTMENT OF CAHPL HAVE REGULARLY SUPPORTED THE HR FUNCTION OF THE COMPANY AND A BRIEF OF THE ACTIVITIES INVOLVED ARE AS UNDER: I. RECRUITMENT OF NEW EMPLOYEES VIZ., DOCTORS, NUR SING STAFF, HR STAFF, ETC OF THE COMPANY II. SUPPORT IN RESOLVING HR PROBLEMS OF THE STAFF O F THE COMPANY III. INTRODUCTION OF NEW HR POLICIES AND REVISION AND UPDATE OF EXISTING HR POLICIES IV. TRAINING OF NEW RECRUITS OF THE COMPANY V. SUPPORT IN REVIEWING PERFORMANCE AND CONDUCTING PERFORMANCE APPRAISALS OF EMPLOYEES OF THE COMPANY. D. LEGAL: THE LEGAL HEAD OF CAHPL MR. SREEVASTHA AND HIS TEAM AT CAHPL REGULARLY PROVIDE SUPPORT AND ADVISE ON LEGAL ACTIVITIES AND ALSO HAVE REGULARLY SUPPORTED IN AND CARRIED OUT LEGAL COMPLIANCES FOR THE COMPANY. WE GIVE BELOW A BRIEF ON THE VARIOUS A CTIVITIES FOR WHICH LEGAL TEAM OF CAH HAS SUPPORTED THE COMPANY: I. ADVISE ON LEGAL MATTERS OF THE COMPANY II SUPPORT AND ADVISE IN MEETING STATUTORY COMPLIAN CES SUCH AS CONDUCTING BOARD MEETINGS AND DRAFTING OF MINUTES THEREOF III. SUPPORT AND ADVISE IN CONDUCTING SHAREHOLDER M EETINGS AND DRAFTING OF MINUTES THEREOF IV. FILING OF STATUTORY RETURNS AND FORMS UNDER COM PANIES ACT AND VARIOUS OTHER ACTS V. DRAFTING AND REVIEW OF VARIOUS CUSTOMER AND VENDOR CONTRACTS VI. FILING OF PETITIONS BEFORE COURTS AND APPELLATE FORUMS ON BEHALF OF THE COMPANY IN CASE OF LEGAL ISSUES E. INFORMATION TECHNOLOGY: THE IT TEAM OF CAHPL REGULARLY SUPPORTS AND ADVISES IN VARIOUS IT RELATED ACTIVITIES. WE LIST BELOW SOME OF THE KEY ACTIVITIES THAT IT TEAM OF CA HPL VIZ., MR. ASHOKKAN V R AND OTHERS HAVE HELPED THE IT TEAM OF THE COMPANY VIZ., MR. AR NAB AND HIS TEAM DURING FY 2011-12: I. ROLLING OUT AND IMPLEMENTATION OF NEW PATCHES AN D IMPROVEMENTS OF ERP PACKAGES VIZ., CARE21. II. IMPLEMENTATION AND ROLL OUT OF SAS SOFTWARE BE ING A BUDGET TOOL/MODULE III. CAHPL HAS PROVIDED THE COMPANY WITH USE OF ERP AND OTHER SOFTWARE LICENSES FOR WHICH NO SEPARATE LICENSE FEES IS CHARGES AND IT IS CONSI DERED AS PART OF THE O&M AGREEMENT. IV. PROVIDING UPDATES, ENHANCEMENTS AND IMPROVING VERSION SYSTEMS OF ERP PACKAGE V. REVIEW AND SUPPORT IN PREPARATION OF IT BUDGETS ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 5 VI. PROVIDING REGULAR IT SUPPORT SUCH AS FIXING BUG S IN IT SYSTEMS, MAINTENANCE OF IT SYSTEMS, ETC VII. TRAINING IT AND FUNCTIONAL TEAMS OF COMPANY I N RESPECT USE OF ERP PACKAGE VIII. ALSO THE DOMAIN NAME USED BY THE COMPANY FOR THE EMAIL IDS ISSUED TO ITS EMPLOYEES IS THAT OF CAHPL. THIS IS EVIDENCED IN ALL THE MAIL CO NVERSATIONS OF THE EMPLOYEES OF THE COMPANY ENCLOSED WITH THIS LETTER. F PROCUREMENT: THE PURCHASES TEAM OF CAHPL HAVE REGULARLY PROVIDED SUPPORT AND ADVISE TO THE PURCHASE TEAM OF THE COMPANY IN IDENTIFYING SUITABLE VENDORS IN TERMS OF TECHNOLOGY OFFERED, QUALITY OF SERVICES PROVIDED BY THE VENDORS, NEGOTIATION WI TH VENDORS ON PRICES, ETC. IN THIS REGARD, IT MAY BE NOTED THAT THE PURCHASE TEAM OF CAHPL GENERA LLY IDENTIFIES VENDORS AND NEGOTIATES WITH THEM CENTRALLY FOR ALL COLUMBIA ASIA GROUP OF HOSPITALS IN INDIA AND THEREAFTER COMMUNICATES TO THE GROUP OF HOSPITALS WITH THE DET AILS OF VENDORS IDENTIFIED AND THE PRICES NEGOTIATED. G. MARKETING FUNCTION: THE MARKETING FUNCTION FOR THE GROUP OF COLUMBIA AS IA HOSPITALS IN INDIA IS CENTRALIZED AT COLUMBIA ASIA HOSPITALS PRIVATE LIMITED, BANGALORE. THE MARKETING TEAM IN CAHPL GUIDES AND SUPPORTS THE MARKETING ACTIVITIES OF THE ASSESS EE. AS A MATTER OF FACT, THE MARKETING ACTIVITIES AND EVENTS CARRIED OUT BY THE GROUP FOR PROMOTION OF THE COLUMBIA GROUP OF HOSPITALS, THE BENEFIT OF WHICH IS ENJOYED BY THE A SSESSEE AS WELL, IS FORMULATED AND EXECUTED BY CAHPL. H. PROCESS MANUALS: PROCESS MANUALS ARE PREPARED AND UPDATED BY CAHPL T HAT NEED TO BE FOLLOWED BY THE OPERATIONS/DEPARTMENTS OF THE COLUMBIA GROUP OF HOS PITALS INCLUDING THE HOSPITAL RUN BY THE COMPANY. CAHPL REGULARLY REVIEWS AND MONITORS THE P ROCESSES FOLLOWED BY ALL THE COLUMBIA GROUP OF HOSPITALS IN ORDER TO ENSURE UNIF ORMITY AND EFFICIENCY IN THE OPERATIONS OF THE COLUMBIA GROUP HOSPITALS IN INDIA. I: OTHER SERVICES: CAHPL ALSO HAS REGULARLY RENDERED ADVISORY SERVICES AND MONITORED THE ACTIVITIES OF THE COMPANY IN RESPECT OF MARKETING, CUSTOMER CARE, NUR SING, LABORATORY, RADIOLOGY, ENGINEERING, BIOMEDICAL, QUALITY ASSURANCE ETC. NEE DLESS TO MENTION THAT SENIOR DOCTORS OF CAHPL HAVE REGULARLY PROVIDED TECHNICAL ADVICE WHER EVER NECESSARY TO THE DOCTORS OF THE COMPANY. 4.3. THE AO IN THE ASSESSMENT ORDER HAD ALSO OBSERV ED 'ON PERUSAL OF THE P&L ACCOUNT, IT HAS BEEN OBSERVED THAT AN AMOUNT OF RS.12,00,000/- HAS BEEN DEBITED ON ACCOUNT OF PAYMENTS TO DIRECTORS. THE RELEVANT PAYMENT WAS MADE TO THE TWO DIRECTORS NAMELY, SHRI KAMAL KISHOR GANDHI AND SMT. MONALISA NIMANI GANDHI. THE ASSESSE E COMPANY IS A NURSING HOMEL HOSPITAL AND RUN BY THE NAME OF COLUMBIA ASIA HEALT HCARE SERVICE AND MEDICAL PROFESSION ARE THE BASIC ACTIVITY OF THE ASSESSEE COMPANY. M/S . COLUMBIA ASIA HOSPITAL PRIVATE LIMITED BASED IN BANGLORE IS THE HOLDING COMPANY OF THE ASS ESSEE COMPANY. THIS IS WORTHWHILE TO MENTION THAT THE ABOVE NAMED TWO DIRECTORS WHO HAVE BEEN PAID RS.12,00,000/- BY THE ASSESSEE COMPANY ARE NOT ACTIVELY RENDERING ANY MED ICAL SERVICE IN THE DAY TO DAY WORK OF THE ASSESSEE COMPANY. DURING THE COURSE OF HEARING THE AIR OF THE ASSESSEE COMPANY WAS ASKED TO JUSTIFY THE PAYMENT OF SALARY MADE TO THE TWO DI RECTORS VIS-A-VIS. THEIR ACTIVE SERVICE PROVIDED TO THE ASSESSEE COMPANY VIDE ORDER SHEET E NTRY DATED 24.03.2015 AND ALSO TO EXPLAIN AS TO WHY THE PAYMENT SHOULD NOT BE TREATED AS EXCE SSIVE U/S. 24.03.2015 AND ALSO TO EXPLAIN AS TO WHY THE PAYMENT SHOULD NOT BE TREATED AS EXCE SSIVE U/S. 40(A)(2) OF THE LT. ACT, 1961. THE ASSESSEE COMPANY COULD NOT OFFER ANY REASONABLE EXPLANATION. HOWEVER, CONSIDERING THE MINIMUM RESPONSIBILITY AS A DIRECTOR, RS1,00,000/- EACH FOR THE WHOLE YEAR IS TAKEN AS PROCESS MANUALS ARE PREPARED AND UPDATED BY CAHPL T HAT NEED TO BE FOLLOWED BY THE OPERATIONS/DEPARTMENTS OF THE COLUMBIA GROUP OF HOS PITALS INCLUDING THE HOSPITAL RUN BY THE COMPANY. CAHPL REGULARLY REVIEWS AND MONITORS THE P ROCESSES FOLLOWED BY ALL THE COLUMBIA GROUP OF HOSPITALS IN ORDER TO ENSURE UNIF ORMITY AND EFFICIENCY IN THE OPERATIONS OF ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 6 THE COLUMBIA GROUP HOSPITALS IN INDIA REASONABLE AN D RS.10,00,0001- IS DISALLOWED U/S. 40(A)(2).' 4.4. I HAVE CONSIDERED THE SUBMISSION OF THE ASSESS EE AND PERUSED THE RELEVANT ASSESSMENT RECORDS. THE AO IN HIS ORDER HAD DISALLOWED CONSULT ANCY AND PROFESSIONAL CHARGES AMOUNTING TO RS. 1,70,63,423/-PAID BY THE APPELLANT COMPANY T O M/S. COLUMBIA ASIA HOSPITAL PVT. LTD AND RS.100000/- PAID TO TWO DIRECTORS OF THE COMPAN Y ON GROUNDS THAT THE ASSESSEE COMPANY HAS PAID AT A MUCH HIGHER RATE FOR A LITTLE/ NON-SI GNIFICANT MEDICAL ADVICE BECAUSE THE ASSESSEE HAS SUFFICIENT NUMBER OF INHOUSE PROFESSIONALS/EXPE RTS TO MAINTAIN THEIR DAY TO DAY BUSINESS. THE AO HOWEVER HAS NOT SUBSTANTIATED THIS DISALLOWA NCE WITH ANY CONCRETE FINDINGS. THE DISALLOWANCE HAS BEEN MADE IN AN ARBITRARY MANNER A ND NO FACTS HAVE BEEN ADDUCED BY THE AO IN SUPPORT OF HIS FINDINGS THAT THE ASSESSEE COM PANY HAD MADE HIGHER PAYMENTS FOR LITTLE/NON-SIGNIFICANT MEDICAL ADVICE. THE IT AT, D ELHI IN THE CASE OF DY. CIT V. SPARK HOTELS (P.) LTD. ITA NO. 4631 (DEL) OF 2011 HAS QUOTED THE DECISION OF HONBLE GUJRAT HIGH COURT IN CORONATION FLOUR MILLS V. ASSTT. CIT (2009) 27 (I) ITCL 317 (GUJ-HC) : (2011) 188 TAXMAN 257 (GUJ) WHERE IT OBSERVED THAT IF THE AA IS OF TH E OPINION THAT SUCH EXPENDITURE IS EXCESSIVE OR UNREASONABLE HAVING REGARD TO (A) FAIR MARKET VA LUE OF THE GOODS, SERVICES OR FACILITIES FOR WHICH THE PAYMENT IS MADE; OR (B) THE LEGITIMATE NE EDS OF THE BUSINESS OF THE ASSESSEE; OR (C) THE BENEFITS DERIVED BY OR ACCRUING TO THE ASSESSEE ON RECEIPT OF SUCH GOODS, SERVICES OR FACILITIES, THEN THE AO SHALL NOT ALLOW AS A DEDUCT ION SO MUCH OF THE EXPENDITURE AS IS SO CONSIDERED BY THE AO TO BE EXCESSIVE OR UNREASONABL E. THEREFORE, IT BECOMES APPARENT THAT THE AO IS REQUIRED TO RECORD A FINDING AS TO WHETHE R THE EXPENDITURE IS EXCESSIVE OR UNREASONABLE IN RELATION TO ANYONE OF THE THREE SH OWN TO BE SATISFIED THE PROVISION CAN BE INVOKED AND APPLIED, IF THE FACTS SO WARRANT. THUS, ONLY SO MUCH OF THE EXPENSES, IF PAID TO A PE RSON REFERRED TO IN CLAUSE (B), ARE ALLOWABLE WHICH ARE FOUND TO BE NOT EXCESSIVE AND UNREASONABL E AND- THE EXCESSIVE OR UNREASONABLE PORTION HAS TO BE DISALLOWED. IT IS WELL SETTLED TH AT THE PROVISIONS OF SECTION. 40A(2)(A) OF THE ACT CANNOT HAVE ANY APPLICATION UNLESS IT IS FIRST CONCLUDED THAT THE EXPENDITURE WAS EXCESSIVE OR UNREASONABLE, AS HELD IN THE CASE OF UPPER INDIA PUBLISHING HOUSE (P.) LTD. V. C1T (1979) 117 ITR 569 (SC). IN THE INSTANT CASE, THERE IS NOT HING TO SUGGEST THAT THE AO FOUND THE PAYMENT OF REMUNERATION TO DIRECTOR EXCESSIVE HAVIN G REGARD TO EITHER (A) FAIR MARKET VALUE OF THE SERVICES OR FACILITIES; OR (B) THE LEGITIMATE N EEDS OF THE BUSINESS OF THE ASSESSEE; OR (C) THE BENEFITS DERIVED BY OR ACCRUING TO THE ASSESSEE ON RECEIPT OF SUCH SERVICES OR FACILITIES. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE HIS PROFIT . THE INCOME-TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN.' THE AO HAS NOT RECORDED ANY SATISFACTION IN RESPECT OF ANY OF THESE THREE INGREDIENTS IN HIS ASSESSMENT ORDER. THERE IS NOTHING TO SUGGEST THAT THE AO EVER BROUGHT ANY MATERIAL ON RECORD ON THIS ASPECT BEFORE CONCLUDING PAYMENTS OF CONSUL TANCY AND PROFESSIONAL CHARGES NEITHER WERE EXCESSIVE OR UNREASONABLE NOR EVEN CITED ANY C OMPARABLE INSTANCES IN RESPECT OF THE FAIR MARKET VALUE OF THE SERVICES RENDERED BY THE DIRECT OR. IN THIS CONNECTION, THE FACT THAT THE APPELLANT COMPANY AS WELL AS ITS HOLDING COMPANY AR E IN THE SAME TAX BRACKET AND PAY SAME RATE OF TAX IS A FACT WHICH ASSUMES IMPORTANCE. ADM ITTEDLY, IT IS NOT A CASE OF TAX EVASION INASMUCH AS IF THE PAYMENT OF CONSULTANCY AND PROFE SSIONAL CHARGES WOULD HAVE BEEN LESS, THE APPELLANT COMPANY'S PROFIT WOULD HAVE BEEN MORE BUT THE PROFITS OF THE HOLDING COMPANY WOULD HAVE BEEN LESS AND BOTH BEING TAXABLE AT THE SAME RATE, THERE WOULD BE NO DIFFERENCE IN THE AGGREGATE TAX PAYABLE BY THE ASSESSEE AND ITS H OLDING COMPANY. THE AO HAS NOT DISPUTED THAT PAYMENT MADE BY THE APPELLANT COMPANY TO M/S. COLUMBIA ASIA HOSPITAL PVT. LTD. WAS FOR THE PURPOSE OF BUSINESS. AS HELD BY THE HON 'BL E APEX COURT IN THE CASE OF S.A. BUILDERS LTD. VS. CIT [2007] 288 ITR 'WE AGREE WITH THE VIEW TAKEN BY THE DELHI HIGH COURT IN CIT VS. DALMIA CEMENT (BHART) LTD. (2002) 254 ITR 377 T HAT ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF TH E BUSINESS (WHICH NEED NOT NECESSARILY BE ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 7 THE BUSINESS OF THE ASSESSEE ITSELF), THE REVENUE C ANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM-CHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE ITS PRO FIT. THE INCOME TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN.' THE AO HAS NOT BROUGHT ANY FACTS ON RECORD TO PROVE THAT PAYMENT OF CONSULTANCY AND PROFESSIONAL CHARGES IS HIGH AND UNREASONABLE. THE AO COULD HAVE CONDUCTED MARKET SURVEYS TO ARRIVE AT COMPARABLES BASED ON ARMS LENGTHS TRAN SACTIONS BUT NO ATTEMPT WAS MADE. AS HELD IN MANY JUDICIAL DECISIONS 'NO ADDITION CAN BE MADE ON THE BASIS OF SUSPICION AND CONJUNCTURE.' ON PERUSAL OF SCHEDULE-I OF THE OPERA TION AND MANAGEMENT AGREEMENT BETWEEN THE APPELLANT COMPANY AND COLUMBIA ASIA HOSPITAL PV T. LTD. WHICH RELATES TO SCOPE OF SERVICES THE FOLLOWING ARE ENUMERATED. SCOPE OF SERVICES MANAGEMENT AND CONSULTANCY SERVICES, PROVISION OF MEDICAL PROTOCOLS, PROVISION OF OPERATING PROTOCOLS, PROVISION OF ACCOUNT PROTOCOLS, PROVISION OF MARKETING AND ADVERTISING PROTOCOLS, LICENSE OF COLUMBIA ASIA LOGO, BRAND NAME AND TRA DEMARK, PAN-INDIA PARTICIPATION IN: MEDICAL PROGRAMMES, PURCHASING PROGRAMMES, ADVERTISING PROGRAMMES, THIRD PARTY ADMINISTRATORS, MANPOWER SELECTION AND MANAGEMENT, LICENSE, MAINTENANCE, IMPLEMENTATION AND UPGRADES O F THE FOLLOWING SOFTWARE: HOSPITAL FRONT OFFICE SOFTWARE, MEDICAL RECORDS SOFTWARE, PATIENT QUEUING AND SCHEDULING SOFTWARE AND ACCOUNTING SOFTWARE. THE AO'S CONTENTION THAT SERVICES PROVIDED ARE VAGU E IN NATURE AND NO PROFESSIONAL SERVICES PROVIDED ON DAILY BASIS IS NOT BORNE BY FACTS. THE BENEFIT THAT ACCRUES TO THE APPELLANT COMPANY IS FROM THE USE OF THE COLUMBIA ASIA LOGO, BRAND NAME AND TRADE MARK, BUSINESS MODEL AND ALSO IMPLEMENTATION OF THE FRANCHISOR'S P ROTOCOLS IN RESPECT OF VARIOUS ACTIVITIES. IT IS NOT UNCOMMON FOR NEW PLAYERS IN THE MEDICAL FIEL D TO ENTER INTO A FRANCHISE WITH A REPUTED PLAYER IN ORDER TO ESTABLISH THEMSELVES IN THE BUSI NESS. THIS ARRANGEMENT IS NOT RELATED ONLY HOSPITALS, BUT ALSO EXTENDS TO HOTELS AND FRANCHISE E OF MULTINATIONAL COMPANIES IN THE FOOD AND BEVERAGES INDUSTRY. THE HIGH COST INVOLVED IS PRIMA RILY BECAUSE OF USE OF THE FRANCHISOR'S BRAND NAME AND TRADEMARK. THE AO HAS DISALLOWED RS.10,00,000/- OUT OF RS.12,0 0,000/- PAID TO TWO DIRECTORS NAMELY SRI KAMAL KISHORE GANDHI AND SRNT. MONALISA NIMANI GAND HI ON THE GROUNDS THAT THE PAYMENT WAS EXCESSIVE U/S. 40A(2) OF THE LT ACT. THE AIR EX PRESSED HIS OPINION, THAT THE DIRECTORS ARE NOT RENDERING ANY ACTIVE MEDICAL SERVICE, IN DA Y TO DAY WORK OF THE COMPANY. THE OPINION GIVEN BY THE AO IS FLAWED AS SMT. MONALISA NIMANI G ANDHI, IS NOT A MEDICAL PROFESSIONAL MOREOVER, THE AO COULD NOT ADDUCE ANY EVIDENCE OR P UT ON RECORD, ANY MATERIAL TO HOLD THE PAYMENT, MADE TO THE TWO DIRECTORS WAS EXCESSIVE. T HE PAYMENTS TO EACH OF THE TWO DIRECTORS AMOUNT TO RS.50000/- PER MONTH AND CANNOT BE CONSID ERED EXCESSIVE, CONSIDERING THE PAY PACKAGE OF MEDICAL AND MANAGEMENT PROFESSIONALS. TH E AO HAS NOT DISPUTED THE GENUINENESS OF THE PAYMENTS BUT ONLY QUESTIONED THE QUANTUM. ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 8 REFERENCE MAY BE MADE TO THE DECISION OF THE HON 'B LE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEPC INDIA LTD. [2008] 303 ITR 271 HELD THAT TH E OPINION FORMED BY THE ASSESSING OFFICER IN VIEW OF SECTION 40A(2) (A) MUST BE AN HO NEST INFORMATION HAVING BEEN FORMED BASED ON THE CIRCUMSTANCES AVAILABLE BEFORE HIM. TH ERE SHOULD BE SOME MATERIAL AVAILABLE FOR THE ASSESSING OFFICER FOR INVOKING SECTION 40(A) (2 )(A) TO INITIATE ACTION TO DISALLOW OR REFUSE TO DEDUCT THE EXCESSIVE OR UNREASONABLE EXPENDITURE MENTIONED THERE UNDER. THE DECISION OF THE ASSESSING OFFICER SHOULD BE BASED ON REASONS WE LL-FOUNDED WHICH ARE JUDICIOUSLY ACCEPTABLE, IN THE INSTANT CASE, THERE IS NO MATERI AL BEFORE THE ASSESSING OFFICER FOR DISALLOWING THE EXPENDITURE. THE ASSESSING OFFICER HAS NEVER DISPUTED THE PAYMENTS OF RS.25595135/- PAID BY THE APPELLANT COMPANY TO COLU MBIA ASIA HOSPITALS PVT.LTD AND RS.120000001- PAID TO THE TWO DIRECTORS.- HE HAS JU ST QUESTIONED THE RATE WHICH IN HIS OPINION WAS VERY HIGH FOR NON-SIGNIFICANT MEDICAL ADVICE. H E HAS NOT DISALLOWED THE PAYMENTS MADE BUT HOWEVER RESTRICTED THE DISALLOWANCE BASED ON SO ME GENERAL FINDINGS WHICH WILL NOT STAND THE TEST OF JUDICIAL SCRUTINY. 4.5 AFTER A CAREFUL CONSIDERATION OF THE RELEVANT J UDICIAL DECISIONS AS FOREGOING INCLUDING THE ASSESSMENT RECORDS, AND THE SUBMISSION OF THE APE, DISALLOWANCE OF RS.1,70,63,423/- FOR CONSULTANCY AND PROFESSIONAL CHARGES AND RS.10,-00, 000/- T TWO DIRECTORS OF THE APPELLANT COMPANY U/S. 40A(2) OF THE ACT, IS TO BE DELETED. T HE ASSESSING OFFICER IS DIRECTED ACCORDINGLY. THESE GROUNDS OF APPEAL SUCCEED AND AR E, THEREFORE, ALLOWED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAD RI GHTLY INVOKED THE IMPUGNED DISALLOWANCE ON BOTH COUNTS THAT AS THE ASSESSEE FA ILED TO PROVE THE REASONABLENESS ELEMENT IN THE TWO HEADS IN ISSUE. H E SEEKS TO BUTTRESS THE POINT THAT ASSESSEES PAYMENTS MADE TO ITS DIRECTOR AS WELL AS THE HOLDING COMPANY HAVE BEEN FOUND TO BE VERY MUCH EXCESSIVE. WE FIND NO SUBSTANCE IN ASSESSING OFFICERS ACTION SEEKING TO INVOKE THE IMPUGNED DISALLOWANCE PROVISION. THE LIMITED QUESTION HEREIN IS THAT OF R EASONABLENESS OF THE IMPUGNED TWIN PAYMENTS. THE ASSESSEE HAD CLAIMED AN AMOUNT OF 12 LAC TO ITS TWO DIRECTORS AS DEDUCTION. THE ASSESSING OFFIC ER ACCEPTED THE SAME IN PART ONLY TO THE EXTENT OF 1 LAC EACH AND DISALLOWED THE REMAINING SUM OF 10 LAC. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS T O REBUT THE CRUCIAL FACT THAT THE ASSESSING OFFICER NOWHERE MADE ANY COMPAR ATIVE ANALYSIS OF SIMILAR SERVICES PAID IN THE VERY KIND OF BUSINESS SO AS TO INVOKE THE STATUTORY PROVISION IN QUESTION. SAME APPEARS TO BE THE CASE WITH LATTER ISSUE OF PAYMENT MADE TO ASSESSEES HOLDING COMPANY (SUPRA). IT HAS FILED ON RECORD ALL RELEVANT PARTICULARS OF DETAILS OF SERVICES REN DERED BY THE PAYEE COMPANY (SUPRA). WE FIND THERE IS NO INDEPENDENT COMPARISON IN ASSESSMENT ORDER SUGGESTING ANY EXCESSIVE ELEMENT. THE CIT(A) HAS DI SCUSSED IN DETAIL A ITA NO 47/KOL/2018 A.Y. 2012-13 DCIT CIR-14(2) KOL VS. M/S NAVKETA N NURSHING HOME PAGE 9 CATENA OF CASE LAW (SUPRA) THAT IT IS THE ASSESSING OFFICERS ONUS TO COME TO THE CONCLUSION THAT THE PAYMENTS IN ISSUE SOUGHT TO BE DISALLOWED UNDER THE IMPUGNED STATUTORY PROVISION ARE EXCESSIVE. AND T HAT IT IS ONLY THE LATTER ELEMENT THAT HAS TO BE DISALLOWED. WE THEREFORE FIN D NO REASON TO INTERFERE WITH THE CIT(A)S CONCLUSION ARRIVED AFTER ANALYZIN G ALL THE RELEVANT FACTS IN THE LIGHT OF VARIOUS JUDICIAL PRECEDENTS. THE REVENUE S SOLE SUBSTANTIVE GROUND FAILS THEREFORE. 4. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 17/05/201 9 SD/- SD/- ( %) (' %) (DR.A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) KOLKATA, *DKP, SR.P.S (- 17 / 05 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CRI-14(2), AAYAKAR BHAWAN PORBA, 6 TH FLOOR, 110, SHANTIPALLY KOL-107 2. /RESPONDENT-M/S NAVKETAN NURSHING HOME PVT. LTD. 1B PLOT NO.193 SECTOR-III SALT LAKE CITY, KOLKATA-91 3. 3 4 / CONCERNED CIT KOLKATA 4. 4- / CIT (A) KOLKATA 5. 7 ''3, 3, / DR, ITAT, KOLKATA 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ 3,