STERANCO HEALTH CARE P. LTD, MUMBAI V. ITO 8(3)(2), MUMBAI

ITA 6467/MUM/2011

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2531 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 22-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN, AM AND PAWAN SINGH, JM ./ I.T.A. NO . 5083 / MUM/20 09 ( / ASSESSMENT YEA R : 200 6 - 07 ) STERANCO HEALTH CA RE PVT LTD., A - 25, NANDDHAM INDUSTRIAL ESTAE, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI - 400059 / VS. INCOME TAX OFFICER 5(1)(4), DCIT, CC - 44, MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO .4524/ MUM/20 10 ( / ASSESSMENT YEA R : 2007 - 08 ) STERANCO HEALTH CARE PVT LTD., D - 2, MEDLEY HOUSE, MIDC AREA, ANDHERI (W), MUMBAI - 400093 / VS. DY. COMMISSIONER OF INCOME TAX OFFICER 8 (3), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO .6467/ MUM/20 11 ( / ASSESSMENT YEA R : 2008 - 09 ) STERANCO HEALTH CARE PVT LTD., D - 2, MEDLEY HOUSE, MIDC AREA, ANDHERI (W), MUMBAI - 400093 / VS. INCOME TAX OFFICE R 8 (3)(2) , MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ I.T.A. NO .7402/ MUM/20 12 ( / ASSESSMENT YEA R : 2009 - 10 ) ITA NO. ,5083/M/09,6467/MUM/2011, 4524 / MUM/20 1 0 AND 7402/MUM/201 2 2 STERANCO HEALTH CARE PVT LTD., D - 2, MEDLEY HOUSE, MIDC AREA, ANDHERI (W), MUMBAI - 400093 / VS. INCOME TAX OFFICER 8 (3)(2), MUMBAI. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN. : AABCS6144B / APPELLANT BY SHRI KISHOR PATEL / RESPONENT BY SHRI A K DHONDIAL / DATE OF HEARING : 17 .11 . 201 5 / DATE OF PRONOUNCEMENT: 17 .11. 201 5 / O R D E R P ER B ENCH : ALL THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) - 18, MUMBAI AND THEY RELATE TO THE ASSESSMEN T YEARS 2006 - 07 TO 2009 - 10. SINCE IDENTICAL ISSUE IS URGED IN ALL THESE APPEALS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE COMMON ISSUE URGED IN ALL THESE APPEALS RELATE TO THE DISALL OWANCE OF CLAIM OF DEPRECIATION ON THE SURGICAL EQUIPMENTS INSTALLED BY THE ASSESSEE FREE OF COST AT THE CLIENTS PLACES. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN HEALTH CARE, MEDICAL AND SURGICAL PRODUCTS. IT WAS SEEN THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON SURGICAL EQUIPMENTS INSTALLED IN VARIOUS HOSPITAL PREMISES. IT WAS NOTICED THAT THE ASSESSEE DID NOT OFFER ANY INCOME OUT OF THE SURGICAL EQUIPMENTS. IT WAS SUBMITTED THAT THE ASSESSEE HAS GIVEN THE ITA NO. ,5083/M/09,6467/MUM/2011, 4524 / MUM/20 1 0 AND 7402/MUM/201 2 3 EQUIPMENTS TO THE HOSPITAL S UPON THE CONDITION THAT THE RESPECTIVE HOSPITALS SHOULD MAINTAIN THEM AND PURCHASE THE SPARES FROM THE ASSESSEE AS AND WHEN REQUIRED. IT WAS SUBMITTED THAT THE USE OF EQUIPMENTS BY THE HOSPITALS SHOULD BE CONSIDERED AS THE USE BY THE ASSESSEE. HOWEVER BOTH THE AO AS WELL AS THE LD CIT(A) TOOK THE VIEW THAT THE ASSESSEE HAS NOT USED THE SURGICAL EQUIPMENTS FOR ITS OWN BUSINESS AND FURTHER HELD THAT THE USAGE BY THE HOSPITALS CANNOT BE CONSTRUED AS USAGE BY THE ASSESSEE. ACCORDINGLY, BOTH THE TAX AUTHORI TIES DISALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE. 4. THE LD A.R VEHEMENTLY ARGUED THAT THE ASSESSEES MAIN AIM IS TO SELL SPARES REQUIRED FOR THE SURGICAL EQUIPMENTS AND HENCE IT HAS INSTALLED THE EQUIPMENTS AT FREE OF COST, AS A PART OF ITS BU SINESS STRATEGY. HE FURTHER SUBMITTED THAT THE ASSESSEE IS ABLE TO SELL THE SPARES ONLY BECAUSE THE EQUIPMENTS ARE BEING USED BY THE HOSPITALS. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE SURGICAL EQUIPMENTS SHOULD BE CONSIDERED AS HAVING BEEN USED BY THE ASSESSEE, SINCE IT IS BEING USED IN FURTHERANCE OF BUSINESS INTERESTS. IN SUPPORT OF HIS CONTENTIONS, THE LD A.R PLACED RELIANCE ON HOSTS OF CASE LAWS. 5. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE ASSESSEES SPARE PARTS SALES FIGURE HAS COME DO WN YEAR AFTER YEAR AND FURTHER THE ASSESSEE HAS FAILED TO DEMONSTRATE AS TO HOW THE SURGICAL EQUIPMENTS ARE USED FOR THE PURPOSE OF ITS BUSINESS. 6. IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE ASSESSEES CLAIM OF DEPRECIATION ON SURGICAL EQUIPMENT S HAVE BEEN ALLOWED BY THE AO IN THE YEARS EARLIER TO THE ASSESSMENT YEARS UNDER CONSIDERATION. ALTERNATIVELY, THE LD A.R SUBMITTED THAT THE SURGICAL EQUIPMENTS, HAVING ENTERED THE ITA NO. ,5083/M/09,6467/MUM/2011, 4524 / MUM/20 1 0 AND 7402/MUM/201 2 4 BLOCK OF ASSETS, HAVE LOST THEIR IDENTITY AND HENCE THE QUESTION OF DISALL OWANCE OF DEPRECIATION DOES NOT ARISE. 7. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE REMAINS THE OWNER OF SURGICAL EQUIPMENTS THAT HAVE BEEN INSTALLED AT VARIOUS HOSPITAL PREMISES. THE ONLY DISPUTE IS WHETHER THE ASSESSEE CAN BE CONSIDERED TO HAVE USED THEM FOR THE PURPOSES OF ITS BUSINESS OR NOT. THE TAX AUTHORITIES HAVE TAKEN THE VIEW THAT THE ASSETS SHOULD HAVE BEEN USED BY THE ASSESSEE EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINES S. IN THE CASE OF LIQUIDATORS OF PURSA LTD VS. CIT (1954)(25 ITR 265), THE HONBLE SUPREME COURT HAS HELD THAT THE WORDS USED FOR THE PURPOSES OF THE BUSINESS OBVIOUSLY MEAN USED FOR THE PURPOSE OF ENABLING THE OWNER TO CARRY ON THE BUSINESS AND EARN PRO FITS IN THE BUSINESS. IN THE INSTANT CASE, THE SUBMISSION OF THE ASSESSEE IS THAT THE OBJECT OF INSTALLING THE SURGICAL EQUIPMENTS IN THE HOSPITAL PREMISES IS TO ENABLE TO CARRY ON THE BUSINESS OF TRADING IN SPARE PARTS. HENCE, THE INSTALLATION OF SURGIC AL EQUIPMENTS HAS ACTUALLY ENABLED THE ASSESSEE TO CARRY ON ITS SPARE PARTS BUSINESS AND ACCORDINGLY, IN OUR VIEW, THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE SAID INSTALLATION OF SURGICAL EQUIPMENTS AMOUNT TO USER OF ASSETS FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. FURTHER, IT WAS ALSO STATED THAT THE DEPRECIATION CLAIMED IN THE EARLIER YEARS HAVE BEEN ALLOWED BY THE ASSESSING OFFICER. ACCORDINGLY, WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE NOT JUSTIFIED IN REJECTING THE CLAIM OF D EPRECIATION. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) ON THIS ISSUE IN ALL THE YEARS UNDER CONSIDERATION AND DIRECT THE AO TO ALLOW THE DEPRECIATION ON SURGICAL EQUIPMENTS. ITA NO. ,5083/M/09,6467/MUM/2011, 4524 / MUM/20 1 0 AND 7402/MUM/201 2 5 8. THE NEXT ISSUE URGED IN THE APPEAL OF THE ASSESSEE FOR THE ASS ESSMENT YEAR 2006 - 07 RELATES TO DISALLOWANCE OF VEHICLE EXPENSES OF RS.1 LAKH. THE ASSESSEE CLAIMED VEHICLE EXPENSES OF RS.15.84 LAKHS IN RESPECT OF TWO VEHICLES. THE AO NOTICED THAT THE ASSESSEE WAS NOT USING ONE VEHICLE FOR SELLING COMPANYS PRODUCT AND FURTHER PERSONAL EXPENSES OF DIRECTORS ARE DEBITED IN THE COMPANYS ACCOUNT. ACCORDINGLY, HE DISALLOWED A SUM OF RS.1 LAKH OUT OF VEHICLE EXPENSES. THE LD. CIT(A) CONFIRMED THE SAME. 9. WE HAVE HEARD THE PARTIES ON THIS ISSUE. WE NOTICE THAT THE L D. CIT(A) HAS POINTED OUT THAT THE ASSESSEE DOES NOT MAINTAIN LOG BOOK FOR THE USE OF CARS IN ORDER TO SHOW THAT T HE VEHICLES WERE USED ONLY FOR OFFICIAL PURPOSES. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMATION THE DIS ALLOWANCE OF RS.1 LAKH OUT OF VEHICLE EXPENSES. 10. THE NEXT ISSUE URGED IN ASSESSMENT YEAR 2006 - 07 RELATES TO DISALLOWANCE MADE OUT OF TELEPHONES EXPENSES. THE ASSESSEE CLAIMED TELEPHONE EXPENSES OF RS.6.35 LAKHS AND THE AO DISALLOWED RS.2 LAKHS OUT OF THE SAME. THE LD. CIT(A) HOWEVER RESTRICTED THE SAME TO RS.25,000/ - . 11 . AT THE TIME OF HEARING, THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS PAID FRINGE BENEFIT TAX ON TELEPHONE EXPENSES AND HENCE THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) WAS NOT JUSTIFIED. 1 2 . WE HEARD THE LD. DR WHO STRONGLY SUPPORTED THE ORDER OF LD. CIT(A) . HAVING REGARD TO THE QUANTUM OF TELEPHONE EXPENSES, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF RS.25000/ - CONFIRMED BY THE LD. CIT(A) IS REASONABLE AND ACCORDINGLY , WE UPHOLD HIS ORDER ON THIS ISSUE. ITA NO. ,5083/M/09,6467/MUM/2011, 4524 / MUM/20 1 0 AND 7402/MUM/201 2 6 1 3 . WITH REGARD TO THE CONTENTION OF THE ASSESSEE ABOUT PAYMENT OF FRINGE BENEFIT TAX, WE ARE OF THE VIEW THAT FRINGE BENEFIT TAX IS REQUIRED TO BE PAID ON THE EXPENDITURE ULTIMATELY ALLOWED AND HENCE THE PAYMENT OF FRINGE BENEFIT TAX WILL NOT AUTOMATICALLY VALID ATE THE DEDUCTIBILITY OF EXPENDITURE. 1 4 . THE NEXT ISSUE URGED IN ASSESSMENT YEAR 2006 - 07 RELATES TO DISALLWANE OF RS.1 LAKH OUT OF COOLIE EXPENSES. THE ASSESSEE HAD CLAIMED TRAVELLING AND COOLLY CHARGES OF RS.7,92,000/ - . THE AO DISALLOWED SUM OF RS.5 LAKHS OUT OF THE SAME AND THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO RS.1 LAKH. 1 5 . WE NOTICE TH A T THE LD. CIT(A) HAS GIVEN FINDING THAT THE COOLLY CHARGES CLAIMED BY THE ASSESSEE ARE SUPPORTED BY SELF MADE VOUCHERS AND HENCE THEY ARE NOT SUSCEPTIBLE FOR CROSS VERIFICATION. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS. 1 LAKH. 1 6 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR AY 2006 - 07 IS PARTLY ALLOWED AND THE APPEAL S FOR REMAINING YEARS ARE ALLOWED. PRONOUNCED ACCORDINGLY ON 17 TH NOVEMBER , 2 015. 17 TH NOV , 2 015 SD SD ( PAWAN SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 17 TH NOV , 2 015. . . ./ SRL , SR. PS ITA NO. ,5083/M/09,6467/MUM/2011, 4524 / MUM/20 1 0 AND 7402/MUM/201 2 7 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI