NUECLEAR HEALTHCARE LTD., Mumbai V. A.C.I.T. - 16(3), Mumbai

ITA 661/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5661 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 02-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA P KAUSHIKLD
• Assessee Lawyers: DINKLE HARIYA LD
• Keywords: Depreciation; Rule of consistency; Cost of acquisition; Revenue expenditure
• Section: 143(3)

Judgement Text

M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI SAKTIJIT DEY, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.661/MUM/2018 ( / ASSESSMENT YEAR: 2012-13) M/S NUCLEAR HEALTHCARE LIMITED D-37/3, TTC INDUSTRIAL AREA, MIDC TURBHE, NAVI MUMBAI 400 703 / VS. ACIT 1 6(3) AAYKAR BHAVAN, MK ROAD, CHURCHGATE, MUMBAI 400 020 PAN/GIR NO. AADCN - 5392 - G ( '# /APPELLANT ) : ( $%'# / RESPONDENT ) ASSESSEE BY : MS. DINKLE HARIYA LD. AR REVENUE BY : MS. KAVITA P. KAUSHIK-LD. DR / DATE OF HEARING : 19/08/2020 / DATE OF PRONOUNCEMENT : 05/10/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-7, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT-7/IT-55/2015-16 DATED 14/11/2017 ON FOLLOWING GROUNDS OF APPEAL: - M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 2 GROUND NO.1 1.1 THE LEARNED ACIT ERRED IN DISALLOWING A SUM OF RS.28,14,500/- ON ACCOUNT OF LEASE RENT. 1.2 THE APPELLANT CONTEND THAT THE SAME IS A REVENU E EXPENDITURE INCURRED DURING THE YEAR AND OUGHT TO BE ALLOWED AS EXPENSE. GROUND NO.2 2.1 THE LEARNED ACIT ERRED IN DISALLOWING SUM OF RS .43,69,322/- CLAIMED AS EXPENDITURE BUT IN BOOKS TREATED AS DEFERRED REVENU E EXPENDITURE. 2.2 THE LEARNED ACIT FAILED TO APPRECIATE THAT THE EXPENSE IS INCURRED AFTER THE BUSINESS IS SET UP AND BASED ON VARIOUS DECIDED CAS ES, THE EXPENSE INCURRED AFTER THE BUSINESS IS SET UP OUGHT TO BE ALLOWED. 2.3 THE APPELLANT PRAYS THAT THE DISALLOWANCE OUGHT TO BE DELETED AND EXPENSE BE ALLOWED AS CLAIMED. AS EVIDENT THE ASSESSEE IS AGGRIEVED BY DISALLOWANC E OF LEASE RENT OF RS.28.14 LACS AND ANOTHER DISALLOWANCE OF RS.43.69 LACS WHICH WAS CLAIMED BY THE ASSESSEE IN ITS COMPUTATION OF INCOM E, THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUN TS. 2. WE HAVE CAREFULLY HEARD THE ARGUMENTS ADVANCED B Y BOTH THE SIDES. WE HAVE ALSO PERUSED RELEVANT MATERIAL ON RE CORD INCLUDING DOCUMENTS PLACED IN THE PAPER-BOOK. OUR ADJUDICATIO N TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PA RAGRAPHS. 3. THE MATERIAL ON RECORD WOULD SHOW THAT AN ASSESS MENT WAS FRAMED AGAINST THE ASSESSEE FOR THE YEAR UNDER CONS IDERATION U/S 143(3) ON 23/03/2015 WHEREIN THE RETURNED LOSS OF RS.172.1 7 LACS WAS REDUCED TO RS.100.33 LACS AFTER DISALLOWANCE OF RS.28.14 LA CS REPRESENTING LEASE RENT PAID BY THE ASSESSEE AND ANOTHER DISALLO WANCE OF RS.43.69 LACS WHICH WAS CLAIMED AS REVENUE EXPENDITURE IN TH E COMPUTATION OF INCOME. THE ASSESSEE BEING RESIDENT CORPORATE ASSES SEE IS STATED TO BE ENGAGED IN THE BUSINESS OF PROVIDING HEALTHCARE SER VICES. M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 3 DISALLOWANCE OF LEASE RENT 4.1 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE CLAIMED DEDUCTION OF RS.28.14 LACS, BEING LEASE REN TAL PREMIUM PAID FOR LEASEHOLD LAND SITUATED AT D-37/3, TTC, MIDC AREA, TURBHE, MUMBAI. THE SAID SUM WAS STATED TO BE PAID TO MIDC TOWARDS DIFFERENTIAL PREMIUM OF RS.27 LACS AND TRANSFER FEES OF RS.1.14 LACS. HOWEVER, IT WAS NOTED BY LD. AO THAT THE EXPENDITURE PERTAINED TO FINANCIAL YEAR 2010-11 AND FURTHER, AS PER THE MIDC ORDER, THE LIA BILITY TO PAY THE PREMIUM WAS ON THE FIRST TRANSFEREE I.E. DYNAMIC RE ALITY PRIVATE LIMITED AND NOT ON THE ASSESSEE. THEREFORE, THE DEDUCTION O F THE SAME WAS DENIED TO THE ASSESSEE. DISALLOWANCE OF DEFERRED REVENUE EXPENDITURE 4.2 THE SECOND DISALLOWANCE OF RS.43.69 LACS WAS RE LATED WITH REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE IN ITS COMPUTATION OF INCOME, THOUGH THE SAME WAS CLAIMED AS DEFERRED REV ENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS. IN SUPPORT, THE ASSESSEE EXPLAINED THAT THE COMMERCIAL OPERATIONS WERE STARTED ONLY DURING THE FINANCIAL YEAR UNDER CONSIDERATION. THE EXPENDITURE OF EARLIER YEARS AS WELL CURRENT YEAR WAS DEBITED AS PRE-OPERATIVE EXPENDITURE AND THE SAME W ERE TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUN TS. NEVERTHELESS, THE DEDUCTION IN FULL WAS CLAIMED IN THE COMPUTATIO N OF INCOME IN TERMS OF SEC.37(1) OF THE ACT. HOWEVER, LD. AO OPINED THA T MOST OF THE EXPENDITURE WAS INCURRED BEFORE THE COMMENCEMENT OF THE BUSINESS. THESE EXPENSES COULD BE CAPITALIZED BY THE ASSESSEE BUT THE SAME HAS NOT BEEN DONE AND FULL DEDUCTION HAS BEEN CLAIMED. THE INCOME TAX ACT M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 4 WOULD NOT HAVE THE CONCEPT OF DEFERRED REVENUE EXPE NDITURE AND THE EXPENDITURE THUS CLAIMED DO NOT STAND THE PRINCIPLE OF MATCHING. THEREFORE, THE SAID EXPENDITURE WAS ALSO DISALLOWED . BOTH THE DISALLOWANCE, UPON CONFIRMATION BY LD. CIT (A), ARE UNDER CHALLENGE BEFORE US. OUR ADJUDICATION 5.1 WE HAVE CAREFULLY CONSIDERED THE DOCUMENTS PLAC ED BEFORE US IN SUPPORT OF THE GROUNDS OF APPEAL. UPON PERUSAL OF D OCUMENTS, WE FIND THAT M/S THYROCARE TECHNOLOGIES LIMITED (THYROCARE) , AS A ASSIGNEE ENTERED INTO A MEMORANDUM OF UNDERSTANDING (MOU) ON 28/01/2011 WITH M/S DYNAMIC REALTY PRIVATE LIMITED WHEREIN M/S THYR OCARE AGREED TO ACQUIRE AND PURCHASE CERTAIN LEASEHOLD PROPERTY SIT UATED AT D-37/3, TTC, MIDC AREA, TURBHE, MUMBAI FOR A CONSIDERATION OF RS.43 CRORES PAYABLE IN MANNER AS SPECIFIED THEREIN. AS PER CLAU SE-16 OF THE MOU, ALL OUT OF POCKET EXPENSES INCLUDING STAMP DUTY CHARGES , REGISTRATION CHARGES AND TRANSFER CHARGES PAYABLE TO MIDC WERE T O BE PAID BY THE ASSIGNEE ALONE. 5.2 HOWEVER, SUBSEQUENTLY VIDE LETTER DATED 08/03/2 011 TO ASSIGNOR & CONFIRMING PARTY, M/S THYROCARE EXPRESSED INTENTION TO BUY THE PREMISES IN THE NAME OF ITS ASSOCIATE ENTITY I.E. THE ASSESS EE. ON 09/03/2011, A PAYMENT OF RS.28.14 LACS HAS BEEN MADE TO MIDC VIDE RECEIPT NO. 251856, A COPY OF WHICH IS ON RECORD. THE SAID PAYM ENT COMPRISES-OFF OF RS.27 LACS AS DIFFERENTIAL PREMIUM AND BALANCE AMOU NT OF RS.1.14 LACS AS PROCESSING FEES. THE RECEIPT IS IN THE NAME OF M /S DYNAMIC REALTY PRIVATE LIMITED. THE SAID PAYMENT HAS BEEN MADE PUR SUANT TO MIDC M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 5 LETTER NO.1805 DATED 10/03/2011, A COPY OF WHICH IS ON RECORD WHEREIN M/S DYNAMIC REALTY PRIVATE LIMITED HAS BEEN DIRECTE D TO PAY THE AFORESAID PAYMENT AS CONDITION OF TRANSFER AND ASSI GNMENT. THE SAID LETTER ALSO ACKNOWLEDGES THE RECEIPT OF THE PAYMENT FROM M/S DYNAMIC REALTY PRIVATE LIMITED. FINALLY, THE DEED OF ASSIGN MENT HAS BEEN EXECUTED IN ASSESSEES FAVOR ON 18/05/2011. ACCORDI NGLY, THE PURCHASE OF SAID PREMISES HAS DULY BEEN REFLECTED AS FIXED A SSETS IN ASSESSEES BOOKS AND DEPRECIATION, AS ADMISSIBLE, HAS BEEN CLA IMED AGAINST THE SAME. 5.3 BY ENUMERATION OF CHRONOLOGY OF EVENTS AS ABOVE , IT IS QUITE CLEAR THAT THE SAID PREMISE WAS ACQUIRED BY THE ASSESSEE ITSELF AND AS PER THE TERMS OF MOU, OUT OF POCKET EXPENSES INCLUDING STAM P DUTY CHARGES, REGISTRATION CHARGES AND TRANSFER CHARGES PAYABLE T O MIDC WERE TO BE BORNE BY THE ASSESSEE ALONE. HAVING HELD SO, WE ARE OF THE CONSIDERED OPINION THAT THE PAYMENT OF RS.28.14 LACS REPRESENT ING DIFFERENTIAL LEASE PREMIUM AND PROCESSING FEES WAS INCURRED IN THE PRO CESS OF ACQUISITION OF A FIXED ASSET AND THE SAME CONSTITUTE PART AND P ARCEL OF THE ACQUISITION PROCESS. THEREFORE, THE SAME COULD NOT BE CONSIDERED TO BE REVENUE EXPENDITURE INCURRED IN THE COURSE OF BUSIN ESS BUT THE SAID AMOUNT WAS TO BE CAPITALIZED ALONG WITH ACQUISITION COST OF LAND & BUILDING. CONSEQUENTIALLY, THE ASSESSEE WOULD BE EN TITLED FOR DEPRECIATION AGAINST THE SAME. ACCORDINGLY, ON THE FACTS AND CIRCUMSTANCES, LD. AO IS DIRECTED TO VERIFY THAT TH E PAYMENT OF RS.28.14 LACS HAS ACTUALLY BEEN MADE BY THE ASSESSEE. IF SO, THE SAID AMOUNT WOULD BE ALLOWED TO BE CAPITALIZED AND THE ASSESSEE WOULD BE ELIGIBLE M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 6 FOR DEPRECIATION AGAINST THE SAME. FOR THE SAID LIM ITED PURPOSE AND TO ENABLE RE-COMPUTATION OF ASSESSEES INCOME, THE MAT TER STAND RESTORED BACK TO THE FILE OF LD.AO. THE GROUND STAND PARTLY ALLOWED TO THAT EXTENT. 6.1 COMING TO THE ISSUE OF DEFERRED REVENUE EXPENDI TURE, UPON PERUSAL OF LEDGER EXTRACT OF MISC. EXPENDITURE (ASSET) AS P LACED ON RECORD, WE FIND THAT THE ASSESSEE HAS OPENING BALANCE OF RS.8. 88 LACS IN THE SAID ACCOUNT. THE OPENING BALANCE CONSTITUTE COMPANY FOR MATION EXPENSES, SHARE ISSUE EXPENSES AND PRE-OPERATIVE EXPENSES. AG AINST THIS OPENING BALANCE, THE ASSESSEE HAS CLAIMED SEPARATE DEDUCTIO N U/S 35D @20% AS AMORTIZATION OF PRELIMINARY EXPENSES WHICH COMES TO RS.1,77,600/-. THE SAME HAS BEEN CLAIMED AS WELL AS ALLOWED TO THE ASSESSEE. 6.2 THE ASSESSEE HAS INCURRED FRESH EXPENDITURE UND ER THE SAME 3 HEADS WHICH ARE ON ACCOUNT OF STAMP DUTY, ADVERTISI NG / MARKETING EXPENSES, BANK CHARGES, BUSINESS PROMOTION, OFFICE, PRINTING & STATIONERY, PROFESSIONAL CHARGES, REGISTRATION CHAR GES, REPAIRS, SECURITIES, TRAVELLING ETC. WHICH ARE STATED TO BE PRE-OPERATIV E EXPENSES UP-TO THE COMMENCEMENT OF COMMERCIAL OPERATIONS OF THE COMPAN Y. FURTHER, THE ASSESSEE HAS ALLOCATED PRE-OPERATIVE EXPENSES AT YE AR END WHICH ARE ESTIMATED @80% WITH REFERENCE TO PRE-OPERATIVE PERI OD. 6.3 THUS, IT COULD BE SEEN THAT THE ASSESSEE ITSELF HAS ALLOCATED PRE- OPERATIVE EXPENDITURE IN THE BOOKS OF ACCOUNTS AND A PART OF THE SAME IS WRITTEN-OFF IN ITS BOOKS OF ACCOUNTS. HOWEVER, WHI LE COMPUTING THE INCOME, IT HAS CLAIMED FULL DEDUCTION OF FRESH EXPE NDITURE INCURRED DURING THE YEAR AS AGAINST THE FACT THAT IT HAS CLAIMED DE DUCTION @20% ON OPENING BALANCE OF SIMILAR EXPENDITURE. THEREFORE, THERE WAS M/S NUCLEAR HEALTHCARE LIMITED ITA NO.661/MUM/2018 ASSESSMENT YEAR : 2012-13 7 INCONSISTENCY IN THE MANNER OF CLAIMING THE EXPENDI TURE. THE NATURE OF EXPENDITURE REMAINING THE SAME, THE DEDUCTION WOULD BE ALLOWABLE AS PER SEC. 35D ONLY. THE RULE OF CONSISTENCY WOULD DE BAR THE ASSESSEE TO MAKE CLAIM IN DIFFERENT MANNER. THEREFORE, WE ARE O F THE CONSIDERED OPINION THAT THE DEDUCTION OF THE FRESH EXPENDITURE INCURRED DURING THE YEAR WAS ALLOWABLE IN TERMS OF SEC.35D ONLY. WE ORD ER SO. THE LD. AO IS DIRECTED TO RE-COMPUTE THE INCOME OF THE ASSESSEE A FTER GRANTING DEDUCTION SEC. 35D @20%. THIS GROUND STANDS PARTLY ALLOWED. 7. THE APPEAL STANDS PARTLY ALLOWED IN TERMS OF OU R ABOVE ORDER. ORDER PRONOUNCED ON 05 TH OCTOBER, 2020. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 05/10/2020 SR.PS, JAISY VARGHESE !' # $ # / COPY OF THE ORDER FORWARDED TO : 1. '# / THE APPELLANT 2. $%'# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. + ,$- , - , / DR, ITAT, MUMBAI 6. , ./ / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.