TaxTMI 
TaxTMI 
2024 (12) TMI 20
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....llowing the guidelines issued by the CBDT. Accordingly, statutory notices u/s 143(2) and 142(1) were issued and served on the assessee in response to which the assessee filed the requisite details from time to time. 3. During the course of assessement proceedings, the Assessing Officer noted that the assessee company is engaged in treatment options for Infertility such as Surrogacy, I.V.F, 1.C.S.., IUI, Egg/ Oocyte Donation, PGS/Embryo Donation, Oocyte/Embryo Freezing. During the year under consideration, the assesee has total receipts from medical services of Rs. 14,39,94,684/- and other income of Rs 92,80,354/-. The company is recognizing income under following sub heads of revenue: 1) Consultancy 2) Hysteroscopy 3) Investigation 4) IUI 5) IVE/ICSI 6) Misc. treatments 7) Scanning 8) Surrogacy 4. The Assessing Officer noted that out of the above, the income from surrogacy is Rs 11,90,47,249 and the rest is from other sources. After claiming all expenses, the profit before tax is shown at Rs 5,91,15,388/-. In the computation of income, the assessee has shown income of Rs 45,90,235/ being on account of "IC....
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....wing even his own method of recognizing revenue in proper and complete manner and appearing to be deferring the revenue to subsequent periods. He further noted that in these surrogacy treatment cases, which is spread over a period of time across different years, while the assessee is debiting the expenses related to surrogacy treatment in various cases in the profit and loss account but the revenue is not recognized proportionately and being deferred. When these specific discrepancies in the above cases were pointed out during the search and seizure operation the assessee admitted in the sworn statement stating that "surrogate child was born in many cases and full payment has been received from such patients." Further to cover up the above discrepancies, the Director of the company Dr. Samit Shekar had voluntarily admitted additional income of Rs. 8.04 crores, out of the outstanding advances of Rs 14.47 crores for FY 2016-17. 8. During the course of search assessment proceedings, when the assessee was asked to clarify as to how he has reflected the admission of additional income in the declaration made u/s 132(4) during the search, the assessee vide letter dated 16/11/2018 submi....
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....6.20 crores and thus the total revenue from surrogacy should have been Rs 14.51 crores but the assessee has finally shown revenue from surrogacy of Rs 11.90 crores only for the full F.Y. 2016-17. The Assessing Officer therefore, confronted the assessee regarding the discrepancy. However, the assessee did not give any reasonable explanation which could satisfy the Assessing Officer. Further, on examination of 37 cases aggregating to Rs. 2,62,04,660/- with the books of account he found that in all the cases except Billy Cuthbert, which being a refund case, the balances are lying for more than 3 years. In fact, when considered till the month of Dec. 2018 then some of the balances are outstanding for more than 5 years. 10. He noted that when there is no progress in these cases and assessee itself submitted that "most of them were not completed on account of change in guidelines by Govt. of India by way of circulars", then the onus lies on assessee to establish that treatment is still in progress and refund is due to the clients if there is no favourable change in the guidelines, by way of confirmation letters from the clients in this regard. 11. The Assessing Officer, on perusal ....
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....ny expenditure from the above income. 13. The Assessing Officer also asked the assessee to furnish the list and the status of cases outstanding as on 31.03.2017. From the details so furnished, he noted that an amount of Rs. 5,28,09,291/- is outstanding in certain cases due to change of guidelines by way of government circulars in 2012 & 2015, as per Supreme Court Verdict and on medical Grounds. On verification of the above-mentioned list of cases where the advances outstanding are aggregating to Rs. 5,28,09,291/-, with the Books of accounts the Assessing Officer found that it includes those cases whose outstanding advances summing up to Rs 2,62,04,660/- as mentioned earlier. 14. The remaining outstanding Advances cases shows that in 24 cases, totaling to Rs 2,66,04,631/- are almost same as that of 37 cases totaling to Rs 2,62,04,660/- except that in those 37 cases the assessee itself has recognized as revenue as per the seized books of account and later reversed but the facts of these cases otherwise are also almost same. Rejecting the explanation given by the assessee, the Assessing Officer made addition of Rs. 2,66,04,631/- being advances from surrogacy clients as income of....
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....g the expenses, it is not recognizing the corresponding income pertaining to such expenses. During the course of search the appellant admitted an additional income of Rs. 8.04 crores out of the outstanding advances of Rs. 14.47 crores as on the date of search. However while filing the return of income post the search proceedings the appellant stated as under: "During the F.Yr. 2016-17, as in every financial year at the year end, all the cases pending were evaluated basing on the progress, complexity, completion and basing on qualifying nature, income was recognized and offered as income. The remaining amounts were considered as advances received from patients accordingly. The pending cases as on 31-03-2017 are shown as Advances received from patients the same is enclosed herewith in support of the above statement. During the Course of the search under duress the department enquired the basis of recognition of income & directed us to offer additional income from the advances as on the date of search without verifying relevant records, not taking into account whether or not the cases had reached the stage of completion & whether they were eligible to be off....
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....Division) dated 03.11.2015 which barred the foreign nationals for commission of surrogacy in India. The appellant stated that the as per these guideline the foreign patients are not permitted to seek the surrogacy treatments. The Assessing Officer himself has not disputed that the matter is pending with the Apex Court. The Assessing Officer further stated that these parties are not part of the litigants in the Apex Court in the writ petition filed by one of the foreign nationals in WP(Civil) 841 of 2015. The observation of the Assessing Officer is incorrect in the manner with regard to that if the said parties are not litigants in the Apex Court it will result in the advances to be considered as income of the appellant. The Government of India guidelines bars foreigners of surrogacy treatment in India and if certain people have moved the Hon'ble Apex Court does not mean that every person has to approach the Court. As the Government of India guideline is general in nature for all foreigners, obviously the outcome of the litigation would not be litigants specific but for the general term of foreigners. Therefore this analogy is not correct. The next observation ....
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....utstanding on account of change of the guidelines. The Assessing Officer after having added a sum of Rs. 2,62,04,660/-, stated that the above amount is included in the list of Rs. 5,28,09,291/-. And went on to examine the other amounts and it noted that a sum of Rs. 2,26,48,125/- out of the residual is outstanding as on the date of assessment and a sum of Rs. 39,56,508/- is outstanding as on 31.03.2018 as per the tables brought out in the assessment order. The quantum of Rs. 2,26,48,125/- pertain to 14 parties and the sum of Rs. 39,58,506/- pertain to 10 parties. The Assessing Officer noted that the cumulative amount of these 24 parties being a sum of Rs. 2,66,04,631/- has a similar case pertaining to 37 parties cumulating to Rs. 2,62,04,660/- and therefore considered the sum of Rs. 2,66,04,631/- as income of the appellant in the para 5.1 of the assessment order. As the analogy followed is identical for the addition made, the adjudication made would also stay the same and the addition of Rs. 2,66,04,631/- is hereby deleted on account of the same observations while deleted the sum of Rs. 2,62,04,660/-. In view of the same, the ground no. 2 and 3 are allowed. ....
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.... sum at 15% of the above amount which works out to be Rs. 14,11,671/- as income for the year with regard to the 14 cases as stated above and the appellant's AR agreed for the said estimation. The Assessing Officer is directed further to give deduction in the subsequent year as the income in whole has been recognized by the appellant on the above advances otherwise it would tantamount to double addition. Out of list of 54 cases mentioned on page 21, as on the date of the assessment order, no delivery has taken place in 20 cases therefore it would not be fair on the same. That leaves a balance of 20 cases out of which 7 pertain to the balance part of the subsequent F.Y of 3 months from a period of 01.01.2018 to 31.03.2018 of Rs. 42,75,291/-, the Assessing Officer is directed to consider an estimated income of Rs. 4,27,529/- @ 10% and allow the same as deduction in the subsequent year and the appellant's AR agreed for the same. The balance 13 cases were delivered in the subsequent year which would not need interference. In view of the same addition of Rs. 18,39,200/- is confirmed out of the sum of Rs. 55,46,136/- and with a direction that the same has to be d....
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....of Rs. 2,62,04,660/- as revenue from the same in the books of account maintained which was seized from the assessee's premises on 10.01.2017 during the search operation and the assessee has on a subsequent date reversed these entries, the learned CIT (A) is not justified in deleting the addition of Rs. 2,62,04,660/- and Rs. 2,66,04,631/- respectively. Further, the learned CIT (A) is not justified in deleting an amount of Rs. 37,06,936/- out of the addition of Rs. 55,46,136/- made by the Assessing Officer under ICDS. She submitted that the when treatment could not have been carried out by the assessee again due to the government guidelines and when there was neither any provision for reviewing the surrogacy agreement nor any clause for refund of the advance therefore, the advances were assessable income. 21. The learned Counsel for the assessee, on the other hand, while supporting the order of the learned CIT (A) drew the attention of the Bench to the following written submission to support his case: The appellant is a company in which public are not substantially interested and is providing medical services for Infertility for childless parents who are not capable of co....
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....n eggs or carrying pregnancy to term the genetic parents choose a woman for donating eggs/ovum and a surrogate mother to carry the pregnancy to term. e) A payment is to be made by the genetic parents for getting eggs/ovum from the woman who may be a relative in some cases or may be anonymous and also to the surrogate mother to carry the pregnancy to term. f) The egg so obtained after ovarian stimulation is fused with the sperm of the genetic father and the resultant embryo is transferred in the womb of the genetic mother. In such an event, there is no requirement of a surrogate mother. However, in many cases of infertility it is found that the woman is not capable of carrying a pregnancy in her womb to term which may be because of several disorders and therefore needs a surrogate mother to preserve the pregnancy. g) The genetic parents choose the surrogate mother to carrying the pregnancy on behalf of the genetic mother. They choose the surrogate mother from others. Always it is the choice of the genetic parents to choose the surrogate mother and is not the choice of the hospital or the doctor. The duty of the appellant and the doctor is to give an opinio....
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....he said Writ Petition is pending. The foreign nationals are still hopeful of getting a favourable judgement from the Supreme Court of India and that they can undergo surrogacy in India thereafter. Therefore those persons who have paid the advances have not asked for refund of the advances. In view of the above, the advances received are kept in the books of account mostly from the year 2013 and onwards. Such advances are due to the foreign nationals as long as the liability to pay the amount subsists, it continues to be a liability and does not become the income of the assesse. The assesse humbly submits that such advances do not partake the character of income unless the foreign national who paid the advances surrenders their right. Till then the amounts are to be retained as liability and cannot be considered as income. It is submitted that a liability cannot be considered as income unless the liability ceased to exist. In the case of the assesse, the liability exists and the assesse is bound to repay the amount or adjust the same against any future liability. a) In case the Writ Petition filed before the Supreme Court is disposed of in favour ....
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....he books of account for a long time and such outstanding advances represent the income of the assessee. Similarly, he made addition of Rs. 55,46,136/- by estimating the income @ 15% on Rs. 3,69,74,242/- under ICDS in respect of 54 cases. We find the learned CIT (A) gave part relief to the assessee, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned DR that since the treatment could not have been carried out due to government guidelines and since there was no provision for refund in the agreement, the advances were assessable as income of the assessee which the Assessing Officer has rightly done. It is also her argument that since the said amounts were being shown as advances from surrogacy clients for 4 to 5 years and since the assessee had recognized the advance of Rs. 2,66,04,660/-as revenue in its books, but reversed the entries after the search and since the assessee did not refund any part of the advances to any of these clients over the years, therefore, the learned CIT (A) was not justified in deleting the addition of Rs. 2,62,04,660/- and Rs. 2,66,04,631/- respectively. Similarly, in absence of furnishing any do....