2011 (5) TMI 31 - HC - Income Tax

Expenses for Coronary Surgery Not Deductible under Income Tax Act Sections

SHANTI BHUSHAN Versus COMMISSIONER OF INCOME TAX

The High Court held that expenses for coronary surgery were not deductible under Section 31 or Section 37 of the Income Tax Act. The court ruled that the ... Disallowance - expenditure on coronary by-pass operation - assessee had claimed as expense a sum of Rs. 1,74,000/- incurred evidently by him, on coronary surgery performed on him, in Houston in USA. He claimed waiver under Section 31 of the I.T. Act which, inter-alia permits deduction of expenditure incurred on current repairs of plant. - The assessee submitted that he agreed to undergo a bypass surgery on the advice of his doctors. It was thus argued that the repair of this vital organ i.e., the heart had directly impacted his professional competence. The assessee demonstrated this, by adverting to the rapid increase in his professional income in the period ensuing the surgery. - Held that: - It would not necessarily lead to the conclusion that the heart is used by, a human being, as a tool of his trade or professional activity. General well being of the heart and its functionality cannot be equated with using the heart as a tool for engaging in trade or professional activity. Atleast the facts in this case do not demonstrate the same. Hence, the petitioner‟s claim for allowing deduction of the expenses incurred by him on his coronary surgery under section 31 of the IT Act, is rejected.Regarding deduction u/s 37 - held that: - an impaired heart would handicap functionality of a human being irrespective of his position, status or vocation in life. Expenses incurred to repair an impaired heart would thus add perhaps to the longevity and efficiency of a human being per se. The improvement in the efficiency of the human being would be in every activity undertaken by a person. There is thus no direct or immediate nexus between the expenses incurred by the assessee on the coronary surgery and his efficiency in the professional field per se. Therefore, to claim a deduction on account of expenses incurred by the assessee on his coronary surgery under section 37(1) of the IT Act would have to be rejected. - Decided against the assessee. Issues Involved:1. Whether the expenses incurred by the assessee on coronary by-pass operation should have been allowed as a deductible expense under Section 31 or Section 37 of the Income Tax Act, 1961.Issue-wise Detailed Analysis:1. Deduction under Section 31 of the Income Tax Act:- The assessee claimed a deduction of Rs. 1,74,000 for coronary surgery under Section 31, arguing that the heart is akin to a 'plant' and the surgery is akin to 'current repairs' of a plant.- The Assessing Officer (AO) rejected the claim, stating that the expenditure was personal and not related to business or profession. The AO argued that for an expense to be deductible under Section 31, it must relate to an asset of the business, which should be reflected in the books of accounts.- The Commissioner of Income Tax (Appeals) [CIT(A)] affirmed the AO's view, adding that a lawyer's heart cannot be exclusively used for professional purposes.- The Tribunal upheld the AO's decision, stating that a human heart does not qualify as a 'plant' under Section 31, as it is essential for the general functioning of a human being and not a specific tool for professional activity.- The High Court agreed with the Tribunal, noting that the heart cannot be considered a plant under Section 31 as it is not used as a tool of trade or professional activity. The heart's functionality is necessary for general well-being, not specifically for professional purposes.2. Deduction under Section 37 of the Income Tax Act:- The assessee alternatively claimed the deduction under Section 37, arguing that the surgery was necessary for professional efficiency and thus, a business expenditure.- The AO rejected this claim, stating that the expenditure was personal and not incurred wholly and exclusively for business purposes.- The CIT(A) and the Tribunal both upheld the AO's decision, emphasizing that the expenses were personal in nature and did not have a direct nexus with the professional activity.- The High Court agreed, stating that the expense did not fulfill the criteria under Section 37, as it was not incurred wholly and exclusively for professional purposes. The court noted that the improvement in the assessee's efficiency due to the surgery would benefit all aspects of his life, not just his profession.Judgments Cited:- The High Court discussed several judgments cited by the assessee, including Royal Calcutta Turf Club, Tata Sons Ltd., Waterfall Estates Ltd., Mehboob Productions Pvt. Ltd., Yarmouth Vs. France, Elecon Engineering Co. Ltd., and Scientific Engineering House Pvt. Ltd. Vs. CIT.- The court distinguished these cases, noting that they involved direct and immediate benefits to the business or profession, unlike the present case where the heart surgery was for general well-being.Conclusion:- The High Court concluded that the expenses incurred on coronary surgery could not be allowed as a deduction under either Section 31 or Section 37 of the Income Tax Act.- The question of law was answered in the negative and against the assessee, and the reference was disposed of with costs following the result.