1995 (4) TMI 97 - AT - Income Tax

Appeal allowed for carry forward of losses, dismissed for incentive payments to doctors.

MISRA HOSPITAL & NURSING HOME PVT. LTD. Versus ASSISTANT COMMISSIONER OF INCOME TAX.

The appeal regarding the carry forward of losses was allowed for statistical purposes, directing the Assessing Officer to verify the extension application ... - Issues Involved:1. Carry forward of losses.2. Addition of Rs. 22,955 made on account of incentive paid to doctors.Issue-wise Detailed Analysis:1. Carry forward of losses:The assessee filed a return declaring a loss of Rs. 22,138, which was accepted by the Assessing Officer (AO). However, the AO did not allow the carry forward of the loss as the return was filed late. The assessee's application under section 154 of the IT Act, 1961, claiming the carry forward of the loss, was rejected by the AO on the grounds that there was no mistake apparent from the record. The CIT(A) upheld the AO's decision, stating that the matter was debatable and not rectifiable under section 154, and should have been contested in an appeal against the order under section 143(3).The assessee argued that under section 80, the loss should be allowed to be carried forward if the return is filed within the extended time allowed by the ITO. The assessee relied on several judicial decisions, including Lachhman Chaturbhuj Jawa vs. R.G. Nitsure & Ors., where it was held that if the ITO did not respond to the extension application, the extension was deemed granted. The Departmental Representative argued that the issue was debatable and not rectifiable under section 154, citing the Supreme Court decision in T.S. Balaram, ITO vs. Volkart Bros. & Ors.The Tribunal observed that if the assessee filed an extension application within the due date and received no response from the AO, it could assume the extension was granted. The Tribunal directed the AO to rectify the assessment order under section 154, provided the return was filed within the extended period applied for by the assessee.2. Addition of Rs. 22,955 made on account of incentive paid to doctors:The AO added Rs. 22,955 to the assessee's income, noting that the vouchers for the incentive payments to doctors did not bear the recipients' signatures. The assessee argued that it was common practice to give incentives to doctors who referred patients to the nursing home, and the payments were not acknowledged due to professional reasons. The AO distinguished the case from Rajendra Tractors House and relied on the Bombay High Court decision in Goodlass Nerolac Paint Ltd. vs. CIT, which disallowed secret commission payments.The CIT(A) upheld the AO's addition, noting the lack of direct evidence for the payments and the absence of recipients' signatures on the vouchers. The assessee cited a later Bombay High Court decision in CIT vs. Goodlass Nerolac Paints Ltd., which allowed commission payments even without recipients' names and addresses, provided the payments were for business purposes.The Tribunal distinguished the facts of the present case from the later Goodlass Nerolac Paints Ltd. decision, noting that the earlier decision, which disallowed secret commission payments, was more relevant. The Tribunal upheld the CIT(A)'s order, disallowing the incentive payments to doctors.Conclusion:The appeal regarding the carry forward of losses was allowed for statistical purposes, directing the AO to verify the extension application and rectify the order under section 154 if appropriate. The appeal regarding the addition of Rs. 22,955 for incentive payments to doctors was dismissed, upholding the disallowance based on the lack of evidence and the earlier judicial precedent.