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2023 (7) TMI 981 - AT - Income TaxDeduction u/s 80IB(11C) - addition relating to trading in medicines and surgical equipments - CIT-A deleted the addition - As per DR the words used in section 80IB(11C) are “derived from” and not “attributable to” - HELD THAT:- Since pharmacy is an integral part of running of hospitals, looking to that instant facts, the Assessing Officer has correctly disallowed the deduction in respect of income earned from trading in medicines. In response, the counsel for the assessee placed reliance on the observations by ld. CIT(A) in the appellate order. The counsel for the assessee submitted that the assessee is a multi-specialist hospital having over 100 beds. In such cases, running of inhouse pharmacy is essential for running of hospitals since substantial medicines are required on day to day basis in treating the patients. A hospital of such large operations cannot run unless and until there is inhouse pharmacy to cater to the needs of inhouse patients No infirmity in the observations made by the CIT(A), while allowing the appeal of the assessee on this issue. As respectfully following the observations in the case of Eureka Medical Pvt. Ltd. [2018 (8) TMI 267 - ITAT NAGPUR] we are of the considered view that the assessee is eligible to claim deduction u/s. 80IB(11C) of the Act in respect of inhouse pharmacy maintained by the assessee within the premises of hospital. We are in agreement with the documents taken by the counsel for the assessee that in case of multi-speciality hospital having over 100 beds, it is not feasible to efficiently run the hospital, without having an inhouse pharmacy to cater to the needs of inhouse patients. Disallowance u/s. 14A - CIT(A) allowed the appeal of the assessee on the ground that during the year under consideration, the assessee had not earned exempt income during the year under consideration - HELD THAT:- We are of the considered view that there is no infirmity in the order of CIT(A) as during the year under consideration no exempt income was earned by the assessee. In a recent ruling passed in the case of Era Infrastructure India Ltd. [2022 (7) TMI 1093 - DELHI HIGH COURT] it has been held that the amendment brought in by the Finance Act, 2022, to section 14A by inserting a non-obstante clause and Explanation will take effect from 01-04-2022 and cannot be presumed to have retrospective effect. Therefore, for assessment year 2013-14, no disallowance could be made u/s. 14A if no exempt income was earned by the assessee. In the case of Asian Grantio India Ltd [2019 (10) TMI 1193 - ITAT AHMEDABAD] the Ahmedabad ITAT held that Disallowance of expenses under section 14A read with rule 8D of 1962 Rules cannot be made in absence of exempt income. Decided in favour of revenue. Proportionate disallowance - assessee had advanced interest free loans to its group companies - HELD THAT:- Looking into the facts of the case, in the interest of justice, the issue is being restored to the file of AO to ascertain whether the aforesaid amount of interest free loan given by the assessee to its group companies is out of own funds or out of interest bearing funds. In the result, the issue is being restored to the file of the Assessing Officer with the above directions.
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