TaxTMI 
TaxTMI 
2013 (6) TMI 285
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.... 4. The learned CIT(A) has erred in concluding that out of the expenditure under the head legal and professional charges a sum of Rs.15.24 lakhs is capital and is eligible for amortisation u/s.35D." 3. The assessee is a company. It is running a hospital by name M/s. Healthcare Global Enterprises Ltd. There was a sister concern by name M/s. Triesta Sciences India Pvt. Ltd. The second company was amalgamated with the first company with the approval of Hon'ble High Court of Karnataka by the order of Company Petition No. 76 of 2008 dated 05/06/2009 with effect from 01/04/2007. The assessee filed a statement of consolidated profit & loss account and balance sheet at the time of hearing before the Assessing Officer and requested that a single assessment may be made by clubbing both the proceedings. In view of the order of Hon'ble High Court, the two cases were clubbed for the purpose of assessment u/s. 143(2) and a single order of assessment was passed by the AO. 4. The assessee during the previous year set up several cancer care centres in India. The AO noticed that under the head operating and administrative expenses, a sum of Rs. 3,03,79.486 was claimed as deduction in computing....
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....212.00 lakhs The Assessee pointed out that out of the total increase of Rs.212 lakhs, the Assessing Officer has disallowed Rs.201 lakhs which is practically the whole of the incremental expenses. The increase in other items of expenses were due to increase in costs and regular services in the nature of doctors fees, service charges paid for using the services of inhouse doctors of other hospitals, professional fees paid for accounting services, auditors, tax consultancy services etc. which have been incurred for the purpose of the business of the company. The Assessee explained the nature of each one of the expenditure under the aforesaid head as follows: (a) Consultancy charges to medical doctors Rs.97.62 lakhs: The Assessee was operating only 2 units in financial year 2006-07 and 5 units in financial year 2007-08 (relevant to AY 2008-09). The new units (at Gokula, Nasik and SMH) commenced operations during the year. In the new unit at SMH, the Assessee had employed new doctors who were being paid consultancy charges. These additional 3 units resulted in incremental expenses to the tune of Rs. 97.62 lakhs (Gokula - Rs.l6.98 lakhs, CMCCNasik Rs.37.08 an....
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.... & expenditure from new units have been declared in his accounts. The expenses claimed under legal and professional charges -from which disallowance have been made have been classified as under A. Corporate head Rs.156.37 lakhs B. Curie Unit Rs. 23.94 lakhs C. Gokula Unit Rs. 16.98 lakhs D. CMCC, Nasik Unit Rs. 37.08 lakhs E. SMH Unit Rs. 43.56 lakhs F. Expenses of Triesta Rs. 25.86 lakhs TOTAL Rs.303.79 lakhs Expenses on corporate head includes certain expenses in connection with expansion of business which are covered under section 35D of the Act. These are as under: (i) Rs. 11.38 lakhs - Paid to PWC for due diligence report work. (ii) Rs. 1.93 lakhs - Paid to Infogenia Analytics Private Limited for assistance in preparation of project reports. (iii) Rs. 1.07 lakhs - Paid to M/s.Prashanth Deshpande & Associates for due diligence agreement drafting etc. (iv) Rs. 0.86 lakh - Paid to Meghraj SP Corporate Finance (Pvt) Ltd. for assistance in preparation of project reports Rs.15.24 lakhs Therefore to the extent of th....
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.... Institute Limited's proposed hospital in Gurgaon, Haryana (iii) Further Dr Same agrees to transfer his entire shareholding in HCG to any of the promoters or nominees of HCG at Rs. 93.71 per share, (being the price equal to Rs 328/- per share, adjusted to subsequent bonus issue of shares at the rate of 2.5 shares against each share held), within a period of three months." 10. It was submitted by the ld. DR that the sum of Rs.82 lakhs has been considered as revenue expenditure, whereas the same as per agreement prima facie appears to be for acquiring shares of Dr. Vivek Sama, which would be capital expenditure. Besides the above, it was also brought to our notice that there has been no specific reason as to why the other expenses were treated as revenue expenses without analyzing the nature of expenses. It was also submitted that there was no basis on which expenses were bifurcated as allowable u/s. 35D of the Act. It was finally submitted that the matter should be remanded to the AO for fresh consideration in the light of submissions made by the assessee before the CIT(A). 11. The ld. counsel for the assessee reiterated the stand of the assessee as put forth b....
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....d the same were as follows: (a) Secured loan Rs.946.20 lakhs: The details and purpose of secured loans as at 3l March 2008 is as follows: Particulars Amount (Rs. in lakhs) Purpose of loan Finance lease liabilities from HP Financial Services Pvt. Ltd. 72.78 Hire purchase of computers. Fully utilized for this purpose. Deferred Payment credit from Siemens Aktiengesellschaft Medical Solutions, Germany 873.42 Towards purchase of equipments. This is only a deferred credit arrangement with the vendor. There is no actual inflow of funds into the company on account of this liability and hence it could not be used for giving loans to any other party. Total 946.20 (b) Unsecured loan Rs.560.97 lakhs: The assessee company also had the following unsecured loans for specific purposes as at 31st March 2008 (including that of Triesta Sciences India Private Limited): Particulars Amount (Rs. in lakhs) Purpose of loan Spread Loan Assistance from ICICI Bank Ltd (Triesta Sciences) 177.00 Towards purchase of equipments. Fully utilized for this purpose. Deferred Payment....
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.... the borrowed funds on which interest was paid and claimed as deduction while computing the total income had not been used for the purpose of business of the assessee. On the other hand the Assessee has demonstrated that borrowed funds on which interest was paid had been used for the purpose of business of the Assessee. We therefore uphold the order of the CIT(Appeals) and dismiss the grounds No. 5 & 6 raised by the revenue. 21. In the result, the appeal by the revenue is partly allowed for statistical purposes. Pronounced in the open court on this 18.1.2013. Annexure - I HEALTH CARE GLOBAL ENTERPRISES LIMITED ASSESSMENT YEAR 2008-09 SCHEDULE OF PROFESSIONAL CHARGES Name of the party Rs. in lakhs Remarks u/s 35D Others A Corporate Dr. Vivek Sama 82.00 Final settlement - SMH Curie Cancer Centre 82.00 Dr. Ramesh S Bilimagga 15.00 Medical Director of HCG - Retainership fees 15.00 Price Water House Coopers Pvt Ltd 11.38 Professional Services - Certification work 11.38 -0.00 Dr. G Kilara 8.00 ....