TaxTMI 
TaxTMI 
2022 (10) TMI 1106
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....for by ld. AO were submitted. On going through the same ld. AO observed that the assessee has claimed expenditure of Rs. 10,87,28,000/- on account of compensation paid to Mr. Kunal Saha as per the directions of the Hon'ble Supreme Court of India vide order dated 24.10.2013 for the negligence on the part of the hospital in providing proper treatment of Late Anuradha Saha. This compensation was given to Mr. Kunal Saha, husband of Late Anuradha Saha. The said compensation was claimed as an expenditure by the assessee company. However, ld. AO was of the considered view that the said compensation cannot be allowed as an expenditure on account of two reasons; firstly, the said amount is in nature of the penalty and therefore, disallowable u/s 37(1) of the Act and secondly, the said amount is not of revenue in nature but a capital expense. Ld. AO also made disallowance of excess depreciation of Rs. 38,98,013/-, disallowance of advance written off of Rs. 4,41,000/-, treating of house property income as income from other sources and minor other additions. Loss assessed at Rs. 54,49,56,416/-. 3. Aggrieved, the assessee preferred appeal before ld. CIT(A) and partly succeeded. 4. Now, th....
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....'IT(A) is erred by not appreciating the facts that the aforesaid advance was never a part of receipt or for that matter a profit & Loss item. 10. That in the facts and circumstances of the case and in law, the Ld. CIT(A) is erred by not appreciating the facts that the amount of advance was a capital advance arising out of a deal for property and the advance was never a part of or ever declared as receipt in its books of account by the assessee company & accordingly, the aforesaid advance of property is not allowable expenses of the assessee. 11. The appellant craves leave to add/alter/modify the grounds of appeal." 5. We will first take up ground nos. 1 to 4 through which Revenue has challenged the finding of ld. CIT(A) deleting the disallowance made by ld. AO u/s 37(1) of the Act and allowing the compensation of Rs. 10.81 Cr. paid by the assessee as an expenditure. 6. Ld. D/R vehemently argued referring to various observations of the Hon'ble Apex Court, the submissions furnished at page 1 to 15 of the paper book filed by the Revenue as well as reliance placed on the judgments placed in the paper book running from page 16 to 196 and stated that the compensation awarde....
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....ns and despite that if the patient does not survive then the court should be very slow in attributing negligence on the part of the doctor. It was held as follows: (SCC p. 635) 'A medical practitioner has various duties towards his patient and he must act with a reasonable degree of skill and knowledge and must exercise a reasonable degree of care. This is the least which a patient expects from a doctor. The skill of medical practitioners differs from doctor to doctor. The very nature of the profession is such that there may be more than one course of treatment which may he advisable for treating a patient. Courts would indeed he slow in attributing negligence on the part of a doctor if he has performed his duties to the best of his ability and with due care and caution. Medical opinion may differ with regard to the course of action to be taken by a doctor treating a patient, but as long as a doctor acts in a manner which is acceptable to the medical profession and the court finds that he has attended on the patient with due care, skill and diligence and if the patient still does not survive or suffers a permanent ailment, it would be difficult to hold the doctor to be guilty....
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....hat there was no lack of care or diligence. The hospitals are institutions, people expect better and efficient service, if the hospital fails to discharge their duties through their doctors, be inn employed on job basis or employed on contract basis, it is the hospital which has to justify and not impleading a particular doctor will not absolve the hospital of its responsibilities. " (Emphasis laid by this Court) 109. Therefore, in the light of the rival legal contentions raised by the parties and the legal principles laid down by this Court in plethora of cases referred to supra, particularly, S a vita Garg's case, we have to infer that the appellant- AMR! Hospital is vicariously liable for its doctors. It is clearly mentioned in Savita Garg's case that a Hospital is responsible for the conduct of its doctors both on the panel and the visiting doctors. We, therefore, direct the appellant-AMRI Hospital to pay the total amount of compensation with interest awarded in the appeal of the claimant which remains due after deducting the total amount of Rs.25 lakhs payable by the appellants-doctors as per the Order passed by this Court while answering the point no-7. 4.2 In light t....
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....nt of the patient was offence under law of Torts, Indian Contract Act, Consumer Protection Act, in this respect we first and foremost refer to judgment rendered in Malay Kumar Ganguly vs. Dr. Sukumar Mukherjee & Ors (2009) 9 SCC 221, wherein while holding that AMRI cannot be charged with Criminal Negligence under section 304A of the Indian Penal Code, the Hon'ble Supreme Court had held as under: ''....For negligence to amount to an offence the element of mens rea must be shown to exist. '' It is not the case of the department that Respondent Assessee negligence had an element of mens-rea/Guilty Mind. Even otherwise, the infringements of provisions of law of Torts, Indian Contract Act, Consumer Protection Act can give rise to an action for damages under Civil Law and cannot be stated to be an offence under Criminal Jurisprudence. The National Consumer Disputes Redressal Commission has awarded Compensation and the Hon'ble Supreme Court has revised the quantum of said Compensation, as "deficiency" was found in the services rendered by the Respondent Assessee in the treatment of patient within the meaning of Consumer Protection Act, 1986. The definition of "deficiency" as per Secti....
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....a (MCI) which after notice to the concerned doctors and the Petitioner hospital passed the impugned order which has been extracted above. 6. The Petitioner's grievance is twofold. Firstly, that since the Medical Council of India (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the Regulations) have been framed in exercise of the power conferred under Section 20-A read with Section 33 (m) of the Indian Medical Council Act, 1956, these regulations do not govern or have any concern with the facilities, infrastructure or running of the Hospitals and secondly, that the Ethics Committee of the MCI acting under the Regulations had no jurisdiction to pass any direction or judgment on the infrastructure of any hospital which power rests solely with the concerned State Govt. The case of the Petitioner is that the Petitioner hospital is governed by the Delhi Nursing Homes Registration Act, 1953. It is urged that in fact, an inspection was also carried out on 22.07.2011 by Dr. R.N. Dass, Medical Superintendent (Nursing Home) under the Directorate of Health Services, Govt, of NCT of Delhi and the necessary equipments and facilities were found to be in order which negates th....
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....ering respondent. (v) That the petitioner contends that an adverse order has been passed by the MCI and that too without hearing the petitioner. Both these contentions of the petitioner are incorrect and frivolous as firstly, there is no adverse order made by the MCI against the petitioner as MCI does not have any such jurisdiction; secondly, the petitioner was throughout represented before the Ethics Committee of MCI during the proceedings initiated on complaint of one Mr. Sunil Manchanda against some of the doctors working in the petitioner hospital. The petitioner was heard through its advocates on several occasions and had submitted several documents also in support of their stand." 8. It is clearly admitted by the Respondent that it has no jurisdiction to pass any order against the Petitioner hospital under the 2002 Regulations. In fact, it is stated that it has not passed any order against the Petitioner hospital. Thus, I need not go into the question whether the adequate infrastructure facilities for appropriate post-operative care were in fact in existence or not in the Petitioner hospital and whether the principles of natural justice had been followed or not while pass....
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.... and held that "pharmaceutical companies' gifting freebies to doctors, etc, is clearly 'prohibited by law', and not allowed to be claimed as a deduction under Section 37(1). Doing so would wholly undermine public policy. The well-established principle of interpretation of taxing statutes - that they need to be interpreted strictly - cannot sustain when it results in an absurdity contrary to the intentions of Parliament." However, in the facts of the instant case the Respondent Assessee state and submit that negligence attributed to it, as per the Judgment of Hon'ble Supreme Court, cannot be stated to be for any offence. Furthermore, the expense incurred by it towards payment of Compensation, as per directions of Hon'ble Supreme Court, cannot be said to be Prohibited by Law. In the case of Apex Laboratories (supra), the expense incurred by Assessee towards freebies etc. was prohibited by law as per CBDT Circular No.5/2012 dated 01.08.2012 and as per Medical Council of India (Professional Conduct, Etiquette and Ethics) Regulations, 2002 (the Regulations), framed in exercise of the power conferred under Section 20-A read with Section 33 (m) of the Indian Medical Council Act, 1956. B....
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....as found in the services rendered by the Respondent Assessee in the treatment of patient within the meaning of Consumer Protection Act, 1986. The definition of "deficiency" as per Section 2(g) of the Consumer Protection Act, 1986 is as under: "Deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service; The definition of the word "deficiency" was re-casted under Section 2(11) of the Consumer Protection Act, 2019 as under: "Deficiency means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service and includes (a) any act of negligence or omission or commission by such person to the consumer and (b) deliberate withholding of relevant information by such person to the consumer." Th....
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....iability. It cannot be disputed that there was no offence, Criminal Activity, or any infraction of law as is envisaged under Explanation 1 to Section 37 of the Act. As stated hereinabove, the Hon'ble Supreme Court in its Judgment rendered in Malay Kumar Ganguly vs. Dr. Sukumar Mukherjee & Ors (2009) 9 SCC 221 had absolved the Respondent Assessee Hospital from Criminal liability and furthermore department had not been able to show that the Compensation paid was for "any purpose which is an offence or which is prohibited by law". Reliance in this connection is also placed on the Judgment of Full Bench of Hon'ble Punjab & Haryana High Court rendered in the case of Jamna Auto Industries vs. CIT [2008] 167 taxmann.com 192 (P&H) [See Pages 211 to 219, of Case Law PB (more particularly pages 212 to 213)]. Further, the Hon'ble Supreme Court in its Judgment dated 24.10.2013 wherein they had awarded Compensation had held that the Respondent Assessee Hospital is vicariously liable and responsible for the conduct of its doctors both on panel and the visiting doctors. The Assessee Hospital refers to and relies on the judgment of Hon'ble Amritsar ITAT in M/s. Ashwani Financial Services Pvt L....
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....he appellant was negligent and had therefore awarded the compensation. During the course of carrying on its business the appellant is under obligation to provide proper treatment to the patients as per the standard norms prescribed. Since the appellant failed to provide proper treatment and was held as negligent in doing so, it amounts to breach of contract. The learned AR has relied on various judgments. 4.3 I have considered the submissions and find substantial merit and agree with the appellant that the payment of compensation for its negligence to provide proper treatment to the patient amounts to breach of contract and that the payment of compensation made therefore is an allowable business expenditure u/s 37 of the IT Act. Hence the AO is directed to delete the addition of Rs. 10,87,27,521/-. Ground No. 2 of the appeal is allowed." 8.2. Now, on perusal of the above finding of ld. CIT(A) and also considering the plethora of judgments filed by the assessee in the paper book so far as the proposition of ld. Counsel for the assessee is concerned that the said amount is not a penalty for an offence or for being any act prohibited by law, we find merit since the said compensatio....
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....nly been able to clean its image to some extent as it paid the compensation to the affected party and this action may have brought a positive impact on the goodwill which fell down drastically when the Civil case was filed against it. 8.5. So, whether the said sum is a revenue expenditure is still in doubt and the first appellate authority has also not adjudicated this issue which has been observed by ld. AO in the assessment order for making the alleged disallowance. The alleged sum is admittedly not a penalty in nature but whether it a revenue or capital expenditure still needs to be examined. We, therefore, are of the considered view that this issue that "whether the alleged sum i.e. compensation paid by the assessee company on the direction of Hon'ble Supreme Court of India to the relative of a patient who died due to the negligence of the doctors and the hospital authority is in the nature of capital expenditure or revenue expenditure" needs to be restored to ld. CIT(A) for necessary adjudication. Needless to mention that the assessee shall be provided fair opportunity of being heard and to file necessary submissions as well as to place reliance on judicial pronouncements....