TaxTMI 
TaxTMI 
TaxTMI 
2021 (5) TMI 753
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....acts and in law in not appreciating that the payments made by the appellant to various eye hospitals ophthalmologists was not in violation of law or against public policy, but merely consideration! compensation paid for use of designated space/ infrastructure in their premises. 1.2 That the CIT(A) erred on facts and in law in disregarding the Memorandum of Understanding (MoU) entered into by the appellant, holding alleging the same to be a selfserving document to circumvent MCI regulations. 1.3 That the CIT(A) erred in not appreciating that the MCI regulations were not at all binding on pharmaceutical and other allied health sector companies and thereby not applicable in the case of the appellant. 1.4 That the C IT(A) failed to appreciate that the case of the appellant did not fall under any of the clauses specified in the MCI regulation and accordingly there could have, even otherwise. been no violation of MCI regulation as alleged by the assessing officer. 1.5 Without prejudice. the CIT(A) failed to appreciate that contravention of MCI Regulations, if at all, should have even otherwise been decided by Medical Council and not the Income Tax Authorities. 2. That the CIT(A....
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....itted that the disallowance of Rs. 13,80,84,400 made by the assessing officer is legally unsustainable and calls for being deleted in toto. Re: Disciplinary measure cannot constitute offence/infraction of law Without prejudice to the above and even otherwise, it is submitted that there is a fundamental distinction between 'an offence' and 'disciplinary action/proceedings', Whereas disciplinary proceedings are intended to govern! regulate the conduct of certain class of persons who are expected to adhere to certain prescribed standards, an offence is a wrong against the public at large and is committed in violation of the duty which the wrongdoer owes to the society/ public at large, and is punishable with fine or prosecution, or both. One of the parameters for classifying any proceedings as disciplinary proceedings or criminal proceedings is that while criminal offence is punishable with imprisonment or fine, professional misconduct is visited by requisite action by the disciplinary authority designated to govern / regulate such professionals. Reliance is placed on the decision of Kolkata Bench of Tribunal In the case of Apama Agency Ltd vs. ITO: 163 ITO 511 whe....
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....render unenforceable any agreement, the consideration or object of which is "forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law or is fraudulent or involves or implies injury to the person or property of another or the Court regards it as immoral, or opposed to public policy". As opposed to the provisions of section 23 of the Contract Act, the scope df section 37 of the Act is restricted to an act/omission which is "prohibited by law". In the instant case, the aforesaid arrangement of setting up shops/centers in the close vicinity of hospitals / clinics is, in our respectful submission, nothing more than a strategic business decision and payments made in pursuance thereto are purely to advance business interest. Thus, it is submitted that the purpose behind incurring the expenditure is the advancement of business which is purely commercial and flat the one which is prohibited by law. It is further submitted that while determining the applicability of the above Explanation, one has to adopt the "purpose" test, i.e., the purpose for which the expenditure is incurred has to be seen from the standpoint of the person incurring the exp....
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....xmann. com 398 (Hyd) In view of the aforesaid legal position, it is submitted that since "payment" of consideration/ compensation to doctors for use of premises and for availing locational advantage of in-house patients is not per se prohibited under any law and the purpose thereof is merely to secure a commercial advantage, which is not prohibited in law, therefore, the action of the assessing officer in invoking the provisions of Explanation to section 37(1) of the Act is unjustified and hon'ble to be reversed. Re: Allegations of the Assessing officer Apart from the above, in the impugned assessment order, the assessing officer has also alleged that the appellant has deducted tax at source in terms of section 194J and 194H of the Act as opposed to section 194-I of the Act meaning thereby that the payments were not in essence for renting of premises. In this regard, it is respectfully submitted that since the payment(s) were made on the basis of turnover, the appellant, on a conservative basis, deducted tax at source under section 194J and 194H on payments made to doctors and eye center(s) respectively. However, mere deduction of tax at source under a different head would not,....
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....the substance there and not by the nomenclature used. Documents are to be construed having regard to the contexts thereof wherefor_ 'labels _ may not be of much relevance". : The Karnaktaka High Court in the case of CIT vs. The Panbari Tea Co. Ltd 57 ITR 422, on the doctrine of substance over form observed as under: "Under section 105 of the Transfer of Property Act, a lease of immovable property is a transfer of a right to enjoy the property made for a certain time, express or implied or in perpetuity, in consideration of a price paid or promised, or of money, a share of crops! service or any other thing of value, to be rendered periodically or on specified occasions to the transferor by the transferee, who accepts the transfer on such terms. The transferor is called the lessor, the transferee is called the lessee, the price is called the premium, and the money, share service or other thing to be so rendered Is called the rent. The section, therefore, brings out the distinction between a price paid for a transfer of a right to enjoy the property and the rent to be paid periodically to the lessor. When the interest of the lessor is parted with (or a price, the price paid Is premi....
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....trolled by doctors only. The payments are fixed at a particular percentage under revenue sharing basis. The alleged lease of the premises is nothing but referral fees which are accounted in the books of accounts. There, cannot be any percentage of profits for the lease of any premises having a fixed area. The claim made by the appellant that amounts are paid for lease of the premises is not acceptable. The appellant has accounted these payments as referral fees and TDS is also effected on payments made to the parties under sections 194H and 194J of the I. T. Act. The MoU signed by the appellant is self serving document in order to escape from the rules of the Medical Council of India and hence, the MoU is rejected. These expenses are clearly not allowable as allowable expenditure as the payments made are against public policy and rules framed by medical authority. Hence, I confirm the disallowance made by the Assessing Officer. These grounds of appeal are rejected." 4. We next advert to the basic relevant facts. This assessee is a company engaged in retail trading of opthalmic lenses, frames, sunglasses and medicines. It filed its return on 28.11.2014 declaring loss of Rs. 10,38,0....
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.... capital therein. Clause 3 case 3 in the said agreement was also referred that the assessee was supposed to share a fixed percentage of its (revenue excluding sales tax and sur charge) on monthly basis. Both the said parties are also stated to have made it clear in the agreement that the term "revenue" shall be total of value of the order delivered in the current calendar month, which was to be paid @ 30% in favour of the specified clinic / ophthalmologist. 6. Mr. Vohra next argued that the assessee's business is a highly competitive one wherein it has to agree to share its revenue or referral fees since a major chunk of its customers come from the hospital/first party only. And the eye specialist(s) could prescribe any number of lense(s) or treatment to the patients concerned wherein the latter would be at liberty to go to any eye care shop situated inside the clinic or outside in open market. Learned counsel strongly emphasizes that the assessee is carrying a highly competitive business. And that it has been conferred locational advantage(s) since its shop(s) are situated in eye clinic(s) concerned without charging any rent or other sums. Coming to revenue share, learned co....
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....e above narrated facts, we are of the opinion that the situation is no different in the instant case as well wherein the assessee; a company engaged in eye care business has shared its revenue with the eye clinics and ophthalmologists inter alia in lieu of availing rent free premises without maintenance charges. We make it clear that the learned senior counsel has himself argued that it is an instance of the emerging business model only. We observe in these facts that no business model could be taken allowable of it since violate public policy as per the above stated CBDT Circular. We also observed during the hearing that the learned senior counsel has filed paper book running into 193 pages containing various case law(s), he himself was fair enough that none of the said decisions would apply herein since they do not involve any such business model of revenue sharing. All the said decisions are distinguishable on the facts therefore as per the assessee's stand. These facts and circumstances make it apparent that the interest of general public patients is very much compromised by the assessee's revenue's sharing agreement. We accordingly uphold the lower authorities action treat....