PRAKASH S PATIL, PANVEL V. ASST CIT PANVEL CIRCLE, PANVEL

ITA 7285/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5743 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 27-11-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 37(1); 32

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO.7285/MUM/2019 (ASSESSMENT YEAR 2011-12) PRAKASH S PATIL C/O LIFE LINE HOSPITAL SAI ARCADE, OPP S.T STAND PANVEL-410 206 PAN : ABUPP8615P VS. ACIT PANVEL CIRCLE AAYKAR BHAWAN, KHANDA COLONY NEW PANVEL-410 206 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY MS. SHREEKALA PARDESHI DATE OF HEARING 3 1 .08 .2021 DATE OF PRONOUNCEMENT 06 .0 9 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-2 DATED 01.10.2019 AND PERTAINS TO ASSESSMEN T YEAR 2011-12. 2. THE GROUNDS OF APPEAL READ AS UNDER : (1) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW THE LEARNED ASSESSING OFFICER HAS ERRED IN TREATING REVENUE EXP ENDITURE ON REPAIRS AND MAINTENANCE RS. 1340678/- , LICENSE FEES SOFTWARE R S. 497000/- AND REGISTRATION FEES OF RS. 815000/-AS CAPITAL EXPENDI TURE AND MAKING A ADDITION OF RS. 2652678/- TO THE INCOME OF THE APPE LLANT (2) 'ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE & IN LAW THE LEARNED CIT(A)-2 , NASIK HAS ERRED IN NOT ADJUDICATING GOA NO.L RAISED BY THE APPELLANT RELATING TO TREATMENT OF REVENUE EXPENDITURE AMOUNT ING TO RS. 2652658/- AS CAPITAL EXPENDITURE BY THE AO. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS RU NNING A SPECIALTY HOSPITAL UNDER THE NAME LIFE LINE HOSPITAL AT PANVEL. ITA NO.7285/MUM/2019 2 4. DURING THE COURSE OF ASSESSMENT THE AO MADE VA RIOUS DISALLOWANCES AS UNDER:- 3. DURING THE YEAR THE ASSESSEE HAS DEBITED AN AMOU NT OF RS. 28,87,076/-. ON PERUSAL OF THE DETAILS IT IS SEEN THAT ASSESSEE HAS PAID RS . 1340678/- TO VARIOUS PARTIES. ON VERIFICATION OF THESE EXPENSES IT IS SEEN THAT THEY ARE IN THE NATURE OF CAPITAL EXPENDITURE AND NOT A REVENUE. EXPENDITURE WHICH CA N BE DEBITED TO PROFIT AND LOSS ACCOUNT . THEREFORE THE SAME IS DISALLOWED AND ADDE D TO THE INCOME OF THE ASSESSEE. 4. IT IS SEEN FROM THE PROFIT AND LOSS ACCOUNT THA T THE ASSESSEE HAS DEBITED AN AMOUNT OF RS 4,62,000 AS SOFTWARE EXPENSES WHICH WERE PAID FOR IMPLEMENTATION OF PALASH SOFTWARE FOR MANAGEMENT OF MEDICAL RECORDS AND HOSP ITAL OPERATIONS . ASSESSEE HAS ALSO PAID AN AMOUNT OF RS 35,000/TO THE SOFTWARE CO MPANY FOR IMPLEMENTATION OF SQL. THESE EXPENSES ARE INCURRED FOR ACQUIRING A CA PITAL ASSET WHICH OFFERS AN ENDURING BENEFIT TO THE ASSESSEE . THEREFORE THE SA ME IS ADDED TO THE INCOME OF THE ASSESSEE BEING EXPENSES IN CAPITAL NATURE AND NOT A LLOWABLE AS REVENUE EXPENDITURE WHICH HAS BEEN DEBITED BY THE ASSESSEE IN HIS PROFI T AND LOSS ACCOUNT . I MAY CITE THE DECISION OF THE HONOURABLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS ARAWALI CONSTRUCTIONS (P)LTD (RAJ) 259ITR 30,ITAT DELHI BEN CH DECISION IN THE CASE OF ESCORTS LTD VS ACIT (ITAT DEL) 104ITD 427 AND THE D ECISION OF PUNE BENCH OF ITAT IN THE CASE OF SUDARSHAN CHEMICALS INDUSTRIES LTD VS ACIT (ITAT PUNE 110 ITD 171. THEREFORE THESE AMOUNTS ARE ADDED TO THE I NCOME OF THE ASSESSEE. 5. ASSESSEE HAS DEBITED AN AMOUNT OF RS 815000/. AS SESSEE HAS BEEN ASKED TO SUBMIT THE DETAILS OF THESE EXPENSES . DURING THE ASSESSME NT PROCEEDINGS ASSESSEE HAS SUBMITTED THAT THESE EXPENSES INCLUDE AN AMOUNT OF RS 248700 PAID TO HDFC BANK FOR SANCTION OF FACILITIES WHICH WERE AVAILED FOR R EPAYMENT OF EARLIER CREDIT FACILITIES OBTAINED FROM RELIANCE CAPITAL LTD . THIS BEING AN EXPENSES IN THE NATURE OF CAPITAL ,THE SAME IS ADDED TO THE INCOME OF THE ASSESSEE. ASSESSEE ALSO PAID RS 80000 PAID FOR APPROVAL OF DI PLOMA OF NATIONAL BOARD WHICH IS A POST GRADUATE COURSE AND ALSO RS 4,68,000 WERE PA ID TO COLLEAGUE OF PHYSICIANS AND SURGEONS FOR PERMISSION FOR STUDENTS FOR CPS COURSE . THESE TWO EXPENSES AR E ALSO IN THE NATURE OF CAPITAL EXPENDITURE WHICH GIVES ENDUR ING BENEFITS FOR THE ASSESSEE .THEREFORE THE SAME IS ADDED TO THE INCOME OF THE A SSESSEE. 6. DURING THE YEAR THE ASSESEE HAS DEBITED AN AMO UNT OF RS.22000/- AS DONATIONS. THE SAME IS NOT AN ALLOWABLE AS A DEDUCTION UNDER S ECTION 37(1) OF THE I T ACT THEREFORE THE SAME IS ADDED TO THE INCOME OF THE AS SESSEE. 5. ASSESSEE RAISED FOLLOWING GROUNDS BEFORE LD.CIT (A). ITA NO.7285/MUM/2019 3 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE & IN LAW THE LD.A.O. HAS ERRED IN TREATING REVENUE EXPENDITURE INCURRED BY THE APP ELLANT F RS.2674678/- AS CAPITAL EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E & IN LAW THE LD.AO HAS ERRED IN NOT ALLOWING DEPRECIATION U/S. 32 OF THE ACT ON RS. 2674678/- TREATED AS CAPITAL EXPENDITURE BY HIM. 6. LD.CIT(A) WHILE ADJUDICATING FAILED TO APPLY H IS MIND. HE ALLOWED THE GROUND NO.2 WHICH WAS WITHOUT PREJUDICE TO GROUND N O.1 AND HELD THAT SINCE, HE HAS ALLOWED GROUND NO.2, HE IS NOT ADJUDICATING THIS GROUND. 7. WE MAY REFER TO THE LD.CIT(A)S ORDER AS UNDER: - 5.0 GROUND NO.2 IS DECIDED BEFORE GROUND NO.1 AND IT HAS BEEN DIRECTE D AGAINST THE ASSESSMENT ORDER OF THE AO FOR NOT ALLOWING DEP RECIATION U/S. 32 OF THE ACT ON THE ADDITION OF RS.26,74,678/- 5.1 ON PERUSAL OF THE ASSESSMENT ORDER AND SUBMISSION O F THE APPELLANT, IT IS SEEN THAT, THE AO HAS TREATED THE FOLLOWING EXPENSES AS CAPITA L EXPENDITURE AS AGAINST THE CLAIM OF THE APPELLANT AS REVENUE EXPENSES. THE BREAK UP IS AS UNDER:- I) OUT OF REPAIRS AND MAINTENANCE RS.13,40,678/- II) OUT OF SOFTWARE EXPENSES RS. 4,97, 000/- III) OUT OF REGISTRATION FEES RS. 8,15,000/- TOTAL RS. 26,52,678 THE BALANCE AMOUNT OF 722,000/- IS DISALLOWED ON AC COUNT OF DONATION U/S.37(I) OF THE ACT. THE DISPUTE IN GROUND NO.2 OF THE APPELLANT IS THAT , ON THE FACTS AND CIRCUMSTANCES IN LAW, THE ASSESSING OFFICER HAS ERR ED IN NOT ALLOWING DEPRECIATION U/S.32 OF THE ACT ON THE ADDITION OF RS. 26,52,678 /- ( ADDITION OF RS.22,000/- ON ACCOUNT OF DONATION IS EXCLUDED FOR THE PURPOSE OF DEPRECIATION). IN FACT, THE AO SHOULD HAVE ALLOWED DEPRECIATION AS THE CLAIM OF RE VENUE EXPENSES BY THE APPELLANT HAS BEEN DISALLOWED AS CAPITAL EXPENSES AND NOT AS BOGUS EXPENDITURE. THEREFORE, THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE CLAIM DE PRECIATION AT THE APPLICABLE RATES U/S.32 OF THE ACT. IN VIEW OF THE ABOVE STATED FACTS, THE APPEAL OF TH E APPELLANT ON THIS GROUND IS ALLOWED. GROUND NO.2 IS ALLOWED. 6.0 GROUND NO.1 IS DIRECTED AGAINST THE ADDITION OF RS.26,74,678/- ON ACCOUNT OF EXPENSES AS AGAINST THE CLAIM OF REVENUE EXPENDI TURE BY THE APPELLANT. ITA NO.7285/MUM/2019 4 6.1 THIS GROUND IS NOT ADJUDICATED, SINCE THE APPEA L HAS BEEN DECIDED IN FAVOUR OF THE GROUND NO.2 AND THE AO HAS BEEN DIRECTED TO ALLOW D EPRECIATION AT THE APPLICABLE RATES U/S.32 OF THE ACT. OUT OF RS. 26,74,678/-, AN AMOUNT OF RS.22,000/- IS DISALLOWED ON ACCOUNT OF DONATION U/S.37(1) OF THE ACT. IN THIS REGARD, THE APPELLANT HAS NOT DISPUTED IN THE APPELLATE PROCEEDINGS, THEREFORE, THE ADDITION MADE BY THE AO IS CONFIRMED AND THE SAME IS ADDED TO THE TOTAL INCOME OF THE APPELLANT. 8. AS NOTED ABOVE, WE FIND THAT LD.CIT(A) HAS FAIL ED TO ADJUDICATE THE MAIN GROUND BEFORE HIM, WHICH WAS WITH RELATION TO THE T REATMENT OF EXPENDITURE CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE, BUT WERE DISALLOWED BY THE AO HOLDING THAT THERE WERE CAPITAL EXPENDITURE LD.C IT(A) ADJUDICATED THE WITHOUT PREJUDICE GROUND IN AFFIRMATIVE WHICH CLAIM ED THAT DEPRECIATION SHOULD BE PROVIDED IF THE EXPENDITURE IS CAPITALIZE D. THE MAIN GROUNDS NEEDS TO BE ADJUDICATED. HENCE, IN THE INTEREST OF JUSTIC E, THIS MATTER IS REMITTED TO LD.CIT(A) FOR FRESH ADJUDICATION IN ORDER TO MAKE H IS ORDER COMPLETE. 9. NEEDLES TO ADD, ASSESSEE SHOULD BE GRANTED ADEQ UATE OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT, ASSESSEES APPEAL ALLOWED FOR S TATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 06.09.2021. SD/- SD/- (RAVISH SOOD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTAN T MEMBER MUMBAI; DATED : 06 /09/2021 THIRUMALESH, SR.PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT ITA NO.7285/MUM/2019 5 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI