TaxTMI 
TaxTMI 
2019 (8) TMI 236
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....rom the record that the assessee at the relevant time was engaged in the business of cardiac care and diagnosis and prevention of heart disease centre. It has filed its return of income on 24.11.2014 declaring total income at Rs. 3,38,56,090/-. On scrutiny of the accounts, it revealed to the AO that the assessee has debited following expenditure: Particulars Amount (Rs.) Business Promotion Exp. 14,82,202/- Gift Expenses 2,37,286/- Entertainment Expenses 4,66,831/- Total 21,86,519/- The ld.AO has disallowed all these expenditure and determined taxable income of the assessee at Rs. 3.69 crores. Dissatisfied with the disallowance, the assessee carried the matter in appeal before the ld.CIT(A) who partially allowed these expenses. 5. A perusal of the record would reveal that the ld.CIT(A) has followed the order of the CIT(A) in Asstt.Year 20111-12. The Tribunal in ITA No.3461/Ahd/2014 and others has upheld the order of the ld.CIT(A). The discussion made by the Tribunal on this issue reads as under: "4. Now we take both appeals of the assessee. First common issue agitated by the assessee in Asstt.Year 2011-12 (ground no.1 and 2) and in Asstt ....
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....ind that the ld.CIT(A) has examined each expenditure analytically and exhaustively. The finding of the ld.CIT(A) recorded in the Asstt.Year 2011-12 is worth to note. It reads as under: "I have considered the facts of the case, the AO's observations and submission made by the AR of the appellant. The expenses disallowed by the AO in the form of gift expenses, business, promotion expenses and entertainment expenses consists of several sub-heads of such expenses. The allowability of the same is being discussed in following paragraph:- i) Out of gift expenditure an amount of Rs. 3,198/- has been incurred for celebrating birthday of staff member, marriage gift etc. Such expenditure has been held to be allowable by me in order dated 16/06/2014 in appellant's own case for AY 2010-11 in appeal no.CAB/III-032/2013-14. Following the same, the expenses are directed to be allowed in the current year also. ii) An amount of Rs. 4,30,724/- and further amount of Rs. 2,11,563/- has ibeen spent for giving gifts' to doctors. Such gifts were held to be ;disallowable in the decisions in appellant's own case for AY 2010-11. Besides, the discussions made in the ....
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....ncurred for the purpose of business or profession. The sum [and substance of the circular is also the same. In case the assessing authorities are 'not properly understanding the circular then the remedy lies for each individual assessee to fife appeals under the Income-tax Act but the circular which is totally in line with Section 37(1) cannot be said to be illegal. In fact para 4 of the circular quoted hereinabove itself clarifies that the value of the freebies enjoyed by the medical practitioner is also taxable as business income or income from other sources depending on the facts of each case. Therefore, if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the assessing officer that the expense is not in violation of the Medical Council Regulations referred to above." Thus, as per the decision of the Court, after the amendment of relevant provisions by the Medical Council of India, Section 37(1) automatically came into play even without circular issued by the CBDT. Accordingly the payments made by th....
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....he appellant's business has nowhere been explained by the appellant. The appellant earns money from patients and not from .doctors. If the appellant's claim that these expenses are in the nature of advertisement expenses is accepted, then it only means that these are the inducements given by the appellant to doctors to refer more and more patients to its hospitals and again it makes the expenses illegal as per the guidelines of MCI. Hence, disallowance of these expenses are upheld." 8. The ld.counsel for the assessee at the time of hearing fairly admitted that similar disallowance was made in the Asstt. Year 2008-09 and that disallowance was upheld upto the Tribunal. However, he contended that assessee is in the business of providing medical facilities to the public at large, and therefore, it has to keep good relation with doctors as well as with the staff. Thus, in ordinary course of business it has incurred the above expenditure. This expenditure is allowable under section 37 of the Income Tax Act. On the strength of CBDT circular this expenditure cannot be disallowed to the assessee. He further contended that on account of corporate morality in giving gifts to ....
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....ound no.2: Grievance of the assessee in this ground of appeal is that the ld.CIT(A) has erred in confirming the action of the AO who restricted the claim of depreciation on life saving equipment to 15% instead of 40% claimed by the assessee. 7. The assessee has claimed depreciation at the rate of 40% on certain assets, whose details have been noticed by the AO. The AO observed that depreciation admissible on these assets is only 15% as provided in Schedule attached to Income Tax Rules. Accordingly, he disallowed Rs. 7,82,486/-. The ld.CIT(A) has upheld this disallowance by following order of his predecessor in the Asstt.Year 2011-12. The ld.counsel for the assessee conceded that similar disallowance was upheld by the ITAT in the Asstt. Year 2011-12 and discussion made by the ITAT reads as under: "10. Next common issue agitated by the assessee in both the year is with respect to depreciation required to be granted to the assessee on the alleged life saving equipments. In the details of assets, on which depreciation has been claimed, the assessee has shown the following machineries: "1. Stress Test Machine 2. TMT Machine, TMT Machine with PC Printer/Acce....
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....part of the life saving equipment listed in this appendix, the disallowance made by the 'AO is upheld and this ground of appeal is dismissed." 12. With the assistance of the ld.representatives, we have gone through the record carefully. We have perused Appendix I(III(3)(xia) of the Income Tax Rules, 1962, which is available at page no.1.474 of Income Tax Rules - TAXMANN (2018) edition. We find that a list of life saving medical equipments has been given in this Appendix on which deprecation at the rate of 40% is permissible. Where rate of depreciation has been provided on specific machinery, it is not to be granted on each and every machinery installed at the hospital. Thus, the ld.CIT(A) has rightly rejected the stand of the assessee. The depreciation is to be granted on the basis of rate provided in the table given in the Income Tax Rules. The machinery on which depreciation has been claimed by the assessee at 40% is not being provided in the Appendix. Therefore, the depreciation on such machinery is at 15% which has rightly been upheld by the ld.CIT(A). This ground of appeal is rejected in both years." 8. We do not find any disparity on the facts. Admittedly the ....
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.... disallowed and added to the total income of the assessee." 6.2. During the course of appellate proceedings, the AR of the appellant has made the following submission:- 1. Vide Ground No. 3, the Appellant has challenged the action of AO in restricting the claim of depreciation on electrical installation to 10% instead of 15% claimed by the Appellant and thereby making addition of Rs. 2,08,952/- to the income of the Appellant. 2. It may be mentioned that the Appellant has purchased the electrical items like LDB Panel, box for X-Ray machine, industrial cable of various size for running the medical equipments, PCC panels etc. The purchase of electrical items was made at Baroda Heart & Multi Speciality Hospital, Bharuch. The equipments purchased were used to run the medical equipments. The electrical fittings form part and parcel of the medical equipments. Therefore, depreciation on the same has to be allowed @ 15% being part of plant & machinery. Further, the Appellant has claimed the depreciation based on the rates mentioned in the Income Tax Rules, 1962. 3. We may also like to clarify that the electrical installations in the case of the Appellant ....