DCIT (E) 1(1), MUMBAI V. JASLOK HOSPITAL AND RESEARCH CENTRE, MUMBAI

ITA 6702/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7352 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 15-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AARJU GARODIA
• Assessee Lawyers: INDRA G ANAND
• Keywords: Business income; Depreciation; Charitable institution; Tax effect; Capital expenditure
• Section: 143(3); 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J , MUMBAI BE F ORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI , JUDICIAL MEMBER ITA NO. 6702 / MUM /20 1 6 (ASSESSMENT YEAR : 20 12 - 13 ) THE DCIT (EXEMPTION) - 1(1), ROOM NO.506,5 TH FLOOR, PIRAMAL CHAMBER, LALBAUG, MUMBAI 400 012. ...... APPELLANT VS. JASLOK HOSPITAL AND RESEARCH CENTRE, JASLOK HOSPITAL, 15, DR. G.DESHMUKH MARG, MUMBAI 400 026. PAN: AAAAJ 0028Q .... RESPONDENT A PPELLANT BY : MS AARJU GARODIA RE SPONDENT BY : MS INDRA G. ANAND DATE OF HEARING : 17/04/2018 DATE OF PRONOUNCEMENT : 27 /04/2018 O RD ER PER G.S.PANNU,A.M: T HE CAPTIONED APPEAL FILED BY THE REVENUE PERTAINING TO ASSESSMENT YEAR 2012 - 13 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A) - 1 MUMBAI DATED 16/08/2016, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UND ER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 30/03/2015 . 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: - 2 ITA NO. 6702/MUM/2016 (ASSESSMENT YEAR : 2012 - 13) 1. 'W HETHER ON THE FACTS OF THE CASE AND IN LAW THE ID.CIT(A) ERRED IN ALLOWING THE APPEAL OF THE ASSESSEE ON ACCOUNT OF DISALLOWING DEPRECIATION ON FIXED ASSETS OF RS. 17,75,76,609/ - IN CONTRAVENTION OF THE DECISION OF ESCORTS LTD. VS. UOI 199 ITR 43 WHEREIN IT WAS HELD THAT SINCE SECTION 11 OF THE INCOME TAX ACT PROVIDES FOR DEDUCTION CAPITAL EXPENDI TURE INCURRED ON ASSETS ACQUIRED FOR THE OBJECTS OF THE TRUST AS APPLICATION AND DOES NOT SPECIFICALLY & EXPRESSLY PROVIDE FOR DOUBLE DEDUCTION ON ACCOUNT OF DEPRECIATION ON THE SAME VERY ASSETS ACQUIRED FROM SUCH CAPITAL EXPENDITURE, NO DEDUCTION SHALL BE ALLOWED U/S.32 FOR THE SAME OR ANY OTHER PREVIOUS YEAR IN RESPECT OF THAT ASSET AS IT AMOUNTS TO CLAIMING A DOUBLE DEDUCTION. 2. WHETHER , ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID CT(A) ERRED IN ALLOWING THE APPEAL , WHEN THE DELHI HIGH COURT IN THE CASE OF CHARANJIV CHARITABLE TRUST AND KERALA HIGH COURT IN THE CASE OF LISSIE MEDICAL INSTITUTIONS VS C1T 76 DTR (KER) 372 HAS DECIDED THE ISSUE IN THE FAVOUR OF THE DEPARTMENT AFTER CONSIDERING THE DECISION OF HON'BLE SUPREME COUR T IN THE CASE OF ESCORTS LTD (199 ITR 43). 3. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID CIT(A) ERRED IN RELYING UPON THE JUDGMENT OF HON'BLE HIGH COURT IN THE CASE OF CIT VS. INSTITUTE OF BANKING PERSONNEL SELECTION W ITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT, BUT DUE TO SMALLNESS OF TAX EFFECT APPEAL WAS NOT FILED BEFORE HON'BLE SUPREME COURT. HOWEVER, THE ISSUE IS PENDING FOR ADJUDICATION BEFORE HON'BLE SUPREME COURT IN OTHER CASES. 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A), M U MBAI ERRED IN ALLOWING THE PHARMACY SHOP'S INCOME U/S. 11 (4A) OF THE INCOME - TAX ACT, DISALLOWED BY THE AO , HELD THAT ACTIVITY OF RUNNING A PHARMACY SHOP IS INC IDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST AS WELL AS RUNNING SHOP IS NOT A PLANNED ACTIVITY ,THOUGH ASSESSEE IS PAYING VAT ON SALES, WITH AN INTENTION OF EARNING INCOME SIDE BY SIDE '. 5. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ID C1T(A) ERRED IN RELYING UPON THE ORDER OF HIS PREDECESSOR FOR A.Y. 2010 - 11, IN ASSESSEE'S OWN CASE WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE DECISION ON MERIT AND FILED APPEAL BEFORE HON'BLE IT AT, WHICH IS PENDING. 3. IN BRIEF, THE FACTS OF THE CASE ARE TH AT ASSESSEE FILED ITS RETURN OF INCOME IN THE STATUS OF TRUST AT NIL INCOME. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT TOTAL INCOME OF RS.72,30,870/ - BY DISALLOWING DEPRECIATION OF RS.15,75,76,609 / - AND BRINGING TO TAX 3 ITA NO. 6702/MUM/2016 (ASSESSMENT YEAR : 2012 - 13) RS.72,30,868/ - RELATING TO SURPLUS OF PHARMACY RUN BY THE ASSESSEE IN THE HOSPITAL. THE ASSESSING OFFICER NOTED THAT ASSESSEE RUNS A PHARMACY STORE IN ITS HOSPITAL AND IT HAS TURNOVER OF RS.28,40,04,552/ - , WHICH REFLECTS SALE OF DRU GS AND MEDICINES TO PATIENTS IPD AND OPD. THE PHARMACY HAD EARNED A SURPLUS OF RS.72,30,868/ - ON ITS TRANSACTIONS. THE PROFIT OF PHARMACY STORE C A M E TO 2.54% OF ITS TURNOVER AND THE TURNOVER OF THE PHARMACY STORE WA S AROUND 13.85% OF THE TOTAL HOSPITAL CO LLECTIONS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SURPLUS OF PHARMACY STORE SHOULD NOT BE ASSESSED AS BUSINESS INCOME UNDER SECTION 11(4A) OF THE ACT. THE ASSESSEE SUBMITTED A LETTER DATED 18/02/2015 BEFORE THE ASSESSING OFFICE R AND IT WAS CONTENDED THAT THE TRANSACTION OF PHARMACY DO NOT HAVE ANY PROFIT MOTIVE AND ASSESSEES MAIN ACTIVITY WA S RUNNING OF A HOSPITAL, AND IN ANY CASE, THE SURPLUS OF PHARMACY WAS ALSO USED FOR THE MAIN CHARITABLE ACTIVITY OF RUNNING THE HOSPITAL . NOT BEING SATISFIED WITH THE CONTENTION OF THE ASSESSEE, THE ASSESSING OFFICER HELD THAT SURPLUS OF RS.72,30,868/ - OUT OF PHARMACY STORE IS BUSINESS INCOME UNDER SECTION 11(4A) OF THE ACT TO BE TAKEN SEPARATELY AND ACCORDINGLY TAXED THE SAME . ANOTHER DI SALLOWANCE MADE BY THE ASSESSING OFFICER WAS OF DEPRECIATION AMOUNTING TO RS.15,75,76,609/ - ON FIXED ASSETS. THE DEPRECIATION WAS DISALLOWED ON THE PLEA THAT IT WAS A DOUBLE CLAIM INASMUCH AS THE CORRESPONDING COST OF THE FIXED ASSETS WAS ALREADY ALLOWED DEDUCTION AS AN APPLICATION OF INCOME. 4. BEING AGGRIEVED BY THE ACTION OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE CIT(A). THE CIT(A) NOTED THAT ON BOTH THE ISSUE S IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 4 ITA NO. 6702/MUM/2016 (ASSESSMENT YEAR : 2012 - 13) 2010 - 11 HIS PR EDECESSOR VIDE ORDER DATED 22/08/2014 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE CIT(A) HAS ALSO NOTED THAT THE TRIBUNAL HAS ALSO DECIDED TH E S E ISSUE S FOR ASSESSMENT YEAR 2010 - 11 IN ASSESSEES OWN CASE IN FAVOUR OF THE ASSESSEE. THEREFORE, THE CIT(A) FOLLOWING HIS PREDECESSORS ORDER AS WELL AS ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2010 - 11 HAS DECIDED THE ISSUE S IN FAVOUR OF THE ASSESSEE IN THIS YEAR ALSO. AGGRIEVED, THE REVENUE IS APPEAL BEFORE THE TRIBUNAL AND HAS RAISED GROUNDS OF APPEA L NO.1 TO 5 , AS ABOVE. 5 . AT THE TIME OF HEARING , THE LD. REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 IN FAVOUR OF THE ASSESSEE VIDE OR DER IN ITA NOS.685 3 /MUM/2014 DATED 15/06/2016 AND 2138/MUM/2016 DATED 29/11/2017 RESPECTIVELY . THEREFORE, HE PLEADED THAT BASED ON THE ABOVE ORDERS, FOR THIS YEAR ALSO THE ISSUE MAY BE DECIDED IN FAVOUR OF THE ASSESSEE. 6 . THE LD. DEPARTMENTAL REPRESEN TATIVE HAS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, THOUGH HE HAS DEFENDED THE ORDER PASSED BY THE ASSESSING OFFICER. 7 . WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT IDENTICAL ISSUE S HA D COME UP BEFORE THE TRIBUNAL IN ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 AND THE TRIBUNAL HAS UPHELD THE ORDER S OF THE CIT(A) AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. INSOFAR AS THE ISSUE OF DEPRECIATION OF FIXED ASSE TS OF RS.15,75,76,609/ - (WRONGLY TYPE D IN THE GROUNDS OF APPEAL AS RS.17,75,76,609/ - ) IS CONCERNED, THE TRIBUNAL IN ASSESSMENT YEARS 2010 - 5 ITA NO. 6702/MUM/2016 (ASSESSMENT YEAR : 2012 - 13) 11 AND 2011 - 12 HAS ALLOWED THE CLAIM FOLLOWING THE RATIO OF THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF INSTITUTE OF BANKING PERSONNEL SELECTION, 264 ITR 110 (BOM) . FOLLOWING THE SAME, IN THIS YEAR TOO, THE ACTION OF CIT(A) IS AFFIRMED. IN VIEW OF THE ABOVE, FOR ASSESSMENT YEAR 2012 - 13 ALSO THE ISSUE IN GROUNDS OF APPEAL NO.1 TO 3 ABOVE ARE DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. WE HOLD SO. 8. INSOFAR AS THE ISSUE RAISED IN GROUND OF APPEAL NO. 4 RELATING TO ASSESSABILITY OF PHARMACY SHOPS INCOME U/S 11(4A) OF THE ACT IS CONCERNED, THIS HAS ALSO BEEN A SUBJECT MATTER OF CONSIDERATI ON BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2010 - 11 AND 2011 - 12 VIDE ORDERS DATED 15.06.2016 (SUPRA) AND 29. 11 .2017 (SUPRA) RESPECTIVELY. NOTABLY, IN ASSESSMENT YEAR 2010 - 11, THE TRIBUNAL BY ADVERTING TO THE JUDGMENT OF THE HON'BLE BOMB AY HIGH COURT IN THE CASE OF BAUN FOUNDATION TRUST VS CHIEF COMMISSIONER OF INCOME TAX, (2013) 33 TAXMANN.COM 677 (BOMBAY) HELD THAT THE ACTIVITY OF A CHEMIST SHOP WAS INCIDENT OR ANCILLARY TO THE DOMINANT OBJECT AND PURPOSE OF AN ENTITY WHICH WAS RUNNING A HOSPITAL FACILITY. FOLLOWING THE SAID DECISION, OUR CO - ORDINATE BENCH HELD THAT RUNNING A PHARMACY SHOP WAS A NECESSARY REQUIREMENT OF RUNNING A HOSPITAL FOR PROVIDING TIMELY MEDICAL AID TO THE PATIENTS AND IT WAS NOT ONLY INCIDENTAL, BUT ALSO INTEGRAL PART OF THE OBJECTS OF THE APPELLANT TRUST AND WAS NOT HIT BY THE PROVISIONS OF SEC. 11(4A) OF THE ACT. SIMILAR DECISION WAS ALSO TAKEN BY THE TRIBUNAL IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 2011 - 12 IN ORDER DATED 29.11.2017 (SUPRA). FOLLOWING THE A FORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED IN THE CASE OF THE ASSESSEE UNDER IDENTICAL 6 ITA NO. 6702/MUM/2016 (ASSESSMENT YEAR : 2012 - 13) CIRCUMSTANCES, WE AFFIRM THE CONCLUSION OF THE CIT(A). THUS, ON GROUNDS OF APPEAL NOS. 4 AND 5 ALSO, ORDER OF CIT(A) IS UPHELD AND REVENUE HAS TO FAIL. 9 . IN THE RE SULT, APPEAL OF THE REVENUE IS DISMISSED, AS ABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON 27 /04/2018 SD/ - SD/ - ( RAM LAL NEGI ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI , DATED 27 /04/2018 VM , SR. PS CO PY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT , MUMBAI