HEART – A PLANT?

[Mr. M. GOVINDARAJAN]

Heart is the main organ of the human body. Without heart any live is expected.  Every one is much careful in maintaining the body that no heart problem will occur in future.  When one speaks of heart it brings forth imagery of myriad emotion which encompass often varied passions of soulful love, abominable deceit, unremitting treachery and revenge.  Heart is personified.  

Isn’t it fascinating to involve heart in tax matter?   It happened. We may go through the case law ‘Shanthi Bhushan V. Commissioner of Income Tax’ – (2011) 336 ITR 26 (Delhi) = 2011 (5) TMI 31 - DELHI HIGH COURT.  In this case, Shri Shanthi Bhusan, a seasoned, experienced and eminent Advocate of this country, in the assessment year had filed a return declaring a total income of ₹ 2,15,520 on 25.01.1983.  He revised the return on 04.09.1983 in which the reduced the income to ₹ 2,14,050.  The Assessing Officer, during the course of assessment, found that he claimed a expense of a sum of ₹ 1,74,000/- incurred on coronary surgery performed on him in Houston in USA.  

The assessee claimed that the expenditure incurred by him was akin to the expenses incurred on current repairs of a plant.  The heart is in the nature of a plant.  He claimed waiver of this expense under Section 31 of the Income Tax Act which permits deduction of expenditure incurrent on current repairs of plant.  The Assessing Officer was of the view that this expenditure was not allowable as deduction.   The assessee alternatively claimed under Section 37.  The Assessing Officer was of the view that this case was not even covered under Section 37 of the Act.

The assessee put forth the following arguments:

• He suffered a heart attack in December 1979 because of which he was advised against undertaking strenuous physical activity, which included any hectic professional work requiring him to travel out of station;
• As per the advise of doctor he underwent surgery;
• The repair of his heart had directly impacted his professional competence;
• After surgery his income was on the increase; during the year 1982 – 83 his gross receipts were ₹ 3.55 lakhs; 1983 – 84 – ₹ 5.1 lakhs; 1984-85 – ₹ 10.8 lakhs; 1985-86 ₹ 12.12 lakhs; 1986-87 – ₹ 10 lakhs; such was the impact on his income after surgery;
• The word ‘plant’ defined under Section 43(3) of the Act was very wide and varied;
• A lawyer ought to be allowed deduction of expenses incurred on repair of his heart under Section 31 of the Act;
• In case the expense incurred by the assessee was not allowable under Section 31, it surely fell within the domain of Section 37 of the Act;

The assessee relied on the judgment of the Bombay High Court in ‘Mehboob Productions P Limited V. Commissioner of Income Tax’ – (1977) 106 ITR 758 (Bom) = 1974 (12) TMI 18 - BOMBAY HIGH COURT in which the medical expenses, incurred to the Director while he was in tour to USA providing him medical facilities, had been allowed as an expense.

The Assessing Officer rejected the claim under Section 31 and 37 of the Act.  The Assessing Officer was of the view that for the expenditure to be allowed as deduction under Sec. 37(1) of the Act it ought to fulfill three conditions:

• The incurred expenditure could not be on capital account;
• The expenditure should not be of a personal nature;
• It should have been expended wholly and exclusively for the purposes of business or profession and not for personal nature.

The Assessing Officer was of the view that the expenditure did not fulfill the last two conditions, inasmuch as, it was not incurred wholly and exclusively for the purpose of business or profession and was of a personal nature.  In respect of claim under Section 31 he was of the view that the expenditure should be relatable to an asset of the business or that of the profession.   If expenses on repair of plant had been incurred it would necessarily have to be disclosed in the books, before expenses incurred on it, could be claimed as a deduction under Sec. 31.  It should have to be shown on the asset side of the balance sheet and if it is so shown it would have carry an acquisition cost.   It is not the case of the assessee.   He distinguished the case law relied on by the assessee on the contention that the assessee being neither his own employee nor he had gone abroad for professional activity.   He had traveled specifically for treatment.   Therefore the expenses were not allowable.

The assessee aggrieved against the order of the Assessing Officer filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner (Appeals) affirmed the decision taken by the Assessing Officer.  He was of the opinion that regardless of the earning capacity, since every individual was interested in the efficient working of his heart then could it be said that a lawyer’s heart was used, only, for the purpose of his profession.

Then he took over the case to the Tribunal, the Tribunal came to the conclusion that the assessee could not have demonstrated that heart was used as a ‘tool of his trade’ since the heart was even otherwise an organ, essential, for normal and healthy functioning of a human body, and not necessarily for a professional such as a lawyer.

Not satisfied with the findings of the Tribunal the assessee brought his case to the High Court.  The High Court held as follows:

• Deduction under Section 31 of the Act would not be available for two reasons-

• If the heart of a human being, as in the case of the assessee, were to be considered a plant, it would necessarily mean that it is an asset which should have a mention in the assessee’s balance sheet of the previous year in issue, as also, in the earlier years and he had to show the cost of acquisition of such an asset in his books of accounts;
• Even if one were to give widest meaning to the word ‘plant’ in Section 31 of the Act it would still not fall within the definition of the word ‘plant;

• The fact that a healthy and a functional human heart is necessary for a human being irrespective of his vocation or social strata is stating the obvious.   But this would not necessarily lead to the conclusion that the heart is used by a human being as a tool of his trade or professional activity;
• Thus the claim of the assessee under Section 31 is rejected;
• It is trite law that the claim for deduction under Section 37 should satisfy three conditions as discussed by the Assessing Officer and the claim under this section is rejected;
• Expenses incurred to repair an impaired heart would add perhaps to the longevity and efficiency of a human being. The improvement in the efficiency of the human being would be in every activity undertaken by a person. Thus there is no direct or immediate nexus between the expenses incurred by the assessee on the coronary surgery and his efficiency in the professional field per se. 

The High Court rejected the appeal of the assessee.