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2018 (12) TMI 188
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....ax (Appeal) has erred in facts and in law in upholding the disallowance of Interest on TDS of Rs. 1,10,590/-. 4. The learned Commissioner of Income Tax (Appeal) has erred in facts and in law in upholding the disallowance of Travelling Expenses of Rs. 28,36,700/-. 5. The learned Commissioner of Income Tax (Appeal) has erred in facts and in law in upholding the Capital Nature of Expense of Rs. 3,34,854/-. 2. The assessee is a super specialty cardiac hospital operating in the city of Vadodara and Surat providing cardiac treatment to patients. During the previous year relevant to the assessment year under consideration, the assessee has shown gross profit of Rs. 4,52,22,098/- on the total receipts of Rs. 27,49,71,580/- which works out the gross profit rate at 16.45% as against the gross profit of Rs. 3,52,28,195/- on the total receipts of Rs. 23,31,25,376/- which works out the gross profit rate at 15.11% shown in the immediately preceding assessment year. 3. The first ground relates to disallowance u/s.14A r.w. rule 8D of the IT Rules, 1962 for the administrative expenses incurred for earning exempt income. The case of the assessee is that the investment made by....
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.... been incurred for the purposes of earning of exempt income. In this regard, it is also seen that the appellant has made new investments for such purpose during this year and also mutual funds have been sold to earn Long Term Capital Gain which is also exempt from income. Such investment of top officials of the company and hence, the disallowance as per Rule 8D is required to be made out of administrative expenses. 4.2.2. The appellant's another claim is that the borrowed fund has not been used for earning of exempt income. In this regard, it is seen that the interest payment is negligible i.e Rs. 85,300/- . The AO has nowhere established that the borrowed fund had been used for making such investments. At the same time, the interest free funds available with the appellant are more than the investments made for the purpose of earning of exempt income. Hence, as per the decision of the Hon'ble High Court of Gujarat in the case of CIT-I, Vs UTI Bank Ltd., in Tax Ap. No.118 of 2012 vide order dated 22.03.2013, no disallowance our of interest expenditure could have been made in the present case. Accordingly, the disallowance made under Rule 8D is restricted to Rs. 1,53,589/- a....
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....ing for the parties and having regard to the facts and circumstances of the case, particularly the judgment cited above by the Ld. Representative of the assessee, we are of the considered view that the case is identical to that of the judgment relied upon. We, therefore, respectfully following the same, allow the ground of appeal in favour of assessee by deleting the orders of disallowance u/s.14A r.w. Rule 8D of the Act passed by the authorities below. Thus, Ground No.1 of assessee's appeal is allowed. 9. The second ground is against upholding of donation expenses u/s.80G of the Act to the tune of Rs. 15,75,000/-. 9.1. The facts leading to this issue is this that in the Audit Report at Column 26 deduction u/s.80G has been certified to the extent of Rs. 2,50,000/- whereas the assessee has debited Rs. 7,95,111/- in the Profit & Loss account against donation expenses. Upon asking, the assessee submitted the donation receipt of Rs. 20,75,000/-. The assessee claimed donation u/s.80G, to the tune of Rs. 15,75,000/- to the Disable Welfare Trust of India. However, the certificate of registration of that particular trust was not submitted before the Ld. AO. The AO held that Rs. 15,75....
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....Bill, 2009 was as under: "Further as per clause (v/) of sub-section (5) of section 80G of the Income-tax Act, 1961, the institutions or funds to which the donations are made have to be approved by the Commissioner of Income-tax in accordance with the rules prescribed in rule 11AA of the Income-tax Rules, 1962. The proviso to this clause provides that any approval granted under this clause shall have effect for such assessment year or years, not exceeding five assessment years, as may be specified in the approval. Due to this limitation imposed on the validity of such approvals, the approved institutions or funds have to bear the hardship of getting their approvals renewed from time to time. This is unduly burdensome for the bona fide institutions or funds and also leads to wastage of time and resources of the tax administration in renewing such approvals in a routine manner. Therefore, it is proposed to omit the proviso to clause (v/) of sub-section (5) of section 80G to provide that the approval once granted shall continue to be valid in perpetuity. Further, the Commissioner will also have the power of withdraw the approval if the Commissioner is satisfi....
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.... in his order categorically mentioned that a list of persons claiming them to be doctors for whom such expenditure was made as furnished by the assessee but names of several persons instead of PAN "no data" has been mentioned. It also appears from such document that spouses of some of those doctors had also travelled on the tickets provided by the assessee. The same has happened in majority of the cases where the PANs of spouses were not available. In the absence of any details of the seminar, the Ld. CIT(A) came to a conclusion that the so-called seminar expenses as claimed by the assessee was incurred for pleasure trip of certain persons and not wholly or exclusively for the business of the assessee. Such expenses were also prohibited by Regulation 6.4.1 of the Indian Medical Council (Professional Conduct, and Etiquette & Ethics) Regulation 2002 which creates Bar on the Physicians to receive gifts or commission or books in consideration of or for referring rendering or procuring any patient for medical surgical or other treatment. The Ld. CIT(A) thus disallowed such expenses. 18. At the time of hearing of the instant appeal, the Ld. Counsel for the assessee submitted at length....
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....e not applicable to the hospitals. While doing so, the Hon'ble High Court at Delhi observed as follows: "7. In the counter affidavit filed by the Respondents, it is not disputed that the MCI under the 2002 Regulations has jurisdiction limited to taking action only against the registered medical practitioners. It's plea however, is that it has not passed any order against the Petitioner hospital therefore; the Petitioner cannot have any grievance against the impugned order. At the same time, it is stated that only simple observations were made by the Ethics Committee of the MCI about the state of affairs in the Petitioner hospital and the same did not harm any legal right or interest of the Petitioner. It will be apposite to extract the relevant paragraphs of the counter affidavit filed by the MCI as under:- "4. Preliminary Objections: (i) That the instant writ petition is not maintainable under Article 226 of the Constitution of India as there is no cause of action for filing of this instant petition. The MCI has not passed any order against the petitioner in the impugned minutes of meeting dated 27.10.2012, therefore, there is no cause of action for ....
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....e by the Ethics Committee do reflect upon the infrastructure facilities available in the Petitioner hospital and since it had no jurisdiction to go into the same, the observations were uncalled for and cannot be sustained. 9. Since the MCI had no jurisdiction to go into the infrastructure facilities, I need not also go into the aspect that in the year 2011, the facilities available in the hospital were inspected and were found to be in order. 10. The petition therefore has to succeed. I hereby issue a writ of certiorari quashing the adverse observations passed by the MCI against the Petitioner hospital highlighted in Para 1 above. 11. The writ petition is allowed in above terms." 20.1. The said issue was also decided in the matter of Solvay Pharma India Ltd. vs. Pr.CIT, the relevant portion thereof is as follows: "20. The intent of the applicability of the MCI Regulations was always to cover only individual medical practitioners, and not the pharmaceutical and medical device companies. Whether there is any contravention of the MCI Regulations or not is a matter which can be decided by the MCI itself and not by the Income-tax Department. Furthe....
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....y authority under law upon the pharmaceutical company or any allied health sector industry, then such a regulation cannot have any prohibitory effect on the pharmaceutical company like the assessee. If Medical Council regulation does not have any jurisdiction upon pharmaceutical companies and it is inapplicable upon Pharma companies like assessee then, where is the violation of any of law/regulation? Under which provision there is any offence or violation in incurring of such kind of expenditure. 23. Now coming to the Explanation to Section 37(1) invoked by the CIT, the Explanation provides an embargo upon allowing any expenditure incurred by the assessee for any purpose which is an offence or which is prohibited by law. This means that there should be an offence by an assessee who is claiming the expenditure or there is any kind of prohibition by law which is applicable to the assessee. Here in this case, no such offence of law has been brought on record, which prohibits the pharmaceutical company not to incur any development or sales promotion expenses. A law which is applicable to different class of persons or particular category of assessee, same cannot be made applica....
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....a different act so as to impose any kind of hardship or liability to the assessee. In any case, it is trite law that the CBDT circular which creates a burden or liability or imposes a new kind of imparity, same cannot be reckoned retrospectively. The beneficial circular may apply retrospectively but a circular imposing a burden has to be applied prospectively only. Here in this case the CBDT has enlarged the scope of 'Indian Medical Council Regulation, 2002' and made it applicable for the pharmaceutical companies. Therefore, such a CBDT circular cannot be reckoned to have retrospective effect. The free sample of medicine is only to prove the efficacy and to establish the trust of the doctors on the quality of the drugs. This again cannot be reckoned as freebies given to the doctors but for promotion of its products. The pharmaceutical company, which is engaged in manufacturing and marketing of pharmaceutical products, can promote its sale and brand only by arranging seminars, conferences and thereby creating awareness amongst doctors about the new research in the medical field and therapeutic areas, etc. Every day there are new developments taking place around the world in ....