TMI Blog2018 (10) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to maintain consistency, these grounds of appeals are rejected in both the assessment years. Depreciation required to be granted to the assessee on the alleged life saving equipments - @40% OR 15% - Held that:- We find that a list of life saving medical equipments has been given in this Appendix on which deprecation at the rate of 40% is permissible. Where rate of depreciation has been provided on specific machinery, it is not to be granted on each and every machinery installed at the hospital. Thus, the ld.CIT(A) has rightly rejected the stand of the assessee. The depreciation is to be granted on the basis of rate provided in the table given in the Income Tax Rules. The machinery on which depreciation has been claimed by the assessee at 40% is not being provided in the Appendix. Therefore, the depreciation on such machinery is at 15% which has rightly been upheld by the ld.CIT(A). This ground of appeal is rejected in both years. Depreciation on certain electrical installation at 15% which has been restricted by the AO to 10% - Held that:- We find that depreciation has been restricted at the rate of 10% by the ld.AO because the assessee failed to demonstrate that el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and provisions of section 268A of the Income Tax Act, we are of the view that the present appeal of the Revenue deserves to be dismissed. It is accordingly dismissed. However, it is observed that in case on re-verification at the end of the AO it comes to the notice that the tax effect is more or Revenue s case falls within the ambit of exceptions provided in the Circular, then the Department will be at liberty to approach the Tribunal for recall of this order. Such application should be filed within the time period prescribed in the Act. In view of the above, the appeal of the Revenue is dismissed due to low tax effect. 4. Now we take both appeals of the assessee. First common issue agitated by the assessee in Asstt.Year 2011-12 (ground no.1 and 2) and in Asstt year 2012-13 (ground no.1, 2 and 3) is that, whether the ld.CIT(A) has rightly confirmed partial disallowance of expenditure incurred by the assessee towards gift expenses, business promotion expenses and entertainment in both years. Facts on all vital points are common in both years therefore, for facility of reference, we take the facts from the assessment year 2011-12. 5. Brief facts are the assessee is engage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,749/- as against expenditure debited at ₹ 26,89,430/-. As observed earlier, there is no disparity of facts about the nature of expenditure as well as business carried out by the assessee. We find that the ld.CIT(A) has examined each expenditure analytically and exhaustively. The finding of the ld.CIT(A) recorded in the Asstt.Year 2011-12 is worth to note. It reads as under: I have considered the facts of the case, the AO's observations and submission made by the AR of the appellant. The expenses disallowed by the AO in the form of gift expenses, business, promotion expenses and entertainment expenses consists of several sub-heads of such expenses. The allowability of the same is being discussed in following paragraph:- i) Out of gift expenditure an amount of ₹ 3,198/- has been incurred for celebrating birthday of staff member, marriage gift etc. Such expenditure has been held to be allowable by me in order dated 16/06/2014 in appellant's own case for AY 2010-11 in appeal no.CAB/III-032/2013-14. Following the same, the expenses are directed to be allowed in the current year also. ii) An amount of ₹ 4,30,724/- and further amount of ₹ 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his submission. The explanation to Section 37(1) makes it clear that any expenditure incurred by an assessee for any purpose which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession. The sum [and substance of the circular is also the same. In case the assessing authorities are 'not properly understanding the circular then the remedy lies for each individual assessee to fife appeals under the Income-tax Act but the circular which is totally in line with Section 37(1) cannot be said to be illegal. In fact para 4 of the circular quoted hereinabove itself clarifies that the value of the freebies enjoyed by the medical practitioner is also taxable as business income or income from other sources depending on the facts of each case. Therefore, if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the assessing officer that the expense is not in violation of the Medical Council Regulations referred to above. Thus, as per the decision of the Court, after the amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses as per the regulations of Medical Council of India and hence are not allowable as per the provisions of section 37 of the IT Act. How organizing the viewing of IPL matches at farmhouses result into advertisement of the appellant's business has nowhere been explained by the appellant. The appellant earns money from patients and not from .doctors. If the appellant's claim that these expenses are in the nature of advertisement expenses is accepted, then it only means that these are the inducements given by the appellant to doctors to refer more and more patients to its hospitals and again it makes the expenses illegal as per the guidelines of MCI. Hence, disallowance of these expenses are upheld. 8. The ld.counsel for the assessee at the time of hearing fairly admitted that similar disallowance was made in the Asstt.Year 2008-09 and that disallowance was upheld upto the Tribunal. However, he contended that assessee is in the business of providing medical facilities to the public at large, and therefore, it has to keep good relation with doctors as well as with the staff. Thus, in ordinary course of business it has incurred the above expenditure. This expenditure is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e alleged life saving equipments. In the details of assets, on which depreciation has been claimed, the assessee has shown the following machineries: 1. Stress Test Machine 2. TMT Machine, TMT Machine with PC Printer/Accessories 3. Trade Mills for Stress Test Machine 4. Regulator, Life pressure Alarm 5. Syringe Pump 6. Patient Monitor System with Accessories and Modules New ICU Monitors 8. Vital Signs View Station 9. KLV 46W400A Sony LCD TV DAV DZ87 ow sony HT 10.Heat Exchanger and Lithium Bromide 11.Pluga make 100 mm Sumbersibale Pump set Model 12.IPB Module for Monitor V24 13.1 Big trolly with 3 tray and small trolly with 2 tray 14.OT Instrument with OT table and Different Light Sets 15.Opthalmic Sight Saving Equipments 16.Microscope 17.Monitors, 40 Monitor, Multipa Monitor for ICU 18.AMD Diplomax PHACO Machine 19. Neotech Chair Unit and OT Table 20.Horizontal Cylinder gas sterilizer with vacuum pump 11. According to the assessee, these are part of plant machinery of the assessee-company, and these are life saving equipments. Therefore, it claimed depreciation at the rate of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly been upheld by the ld.CIT(A). This ground of appeal is rejected in both years. 13. In the next ground o0f appeal, the assessee has claimed depreciation on certain electrical installation at 15% which has been restricted by the AO to 10%. While dealing with this issue in the Asstt.Year 2011-12, the ld.CIT(A) has taken note of the finding given by the AO as well as submissions made by the assessee. Thereafter, the ld.CIT(A) has upheld disallowance. The discussion made by the ld.CIT(A) reads as under: 6. The third ground of appeal is as follows:- 3. The Id. AO erred in fact and in law in restricting the claim of depreciation on electrical installation to 10% instead of 15% claimed by the Appellant and thereby disallowing depreciation of ₹ 2,08,952/- 6.1. The AO has stated in his order as follows:- 7.0 Disallowance of excess Depreciation on Electric Installation:- 7.1 On verification of depreciation chart annexed along with the return of income, it is noted that the assessee company has claimed depreciation of @ 15% on its electrical installation having W.D.V as on 01.04.2010 of ₹ 39,30,030/- and addition made during the years of ₹ 2,49,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant. 6.3. I have considered the facts of the case, the AO's observations and submission made by the AR of the appellant. Again, the appellant has failed to explain with supporting evidences that the electric installation is in the nature of part and parcel of the medical equipments. The industrial cable of various sizes for running the medical equipments, PCC penal etc. are in the nature of electrical wiring and other fittings only. Hence, the disallowance made by the AO is upheld and this ground of appeal is dismissed. 14. With the assistance of the ld.representtives, we have gone through the record. We find that depreciation has been restricted at the rate of 10% by the ld.AO because the assessee failed to demonstrate that electrical panel installed by it was part of the machinery. He considered electrical installation as independent asset than the medical equipments. The ld.CIT(A) has considered all these aspects in right perspective and no interference is called on this issue. Hence, this ground of appeal is also rejected. 15. In the result, all appeals of the assessee are dismissed. Appeal of the Revenue is dismissed due to low tax effect. Or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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