TMI Blog2019 (8) TMI 236X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeals are rejected in both the assessment years. Depreciation on life saving equipment - @15% OR 40% - HELD THAT:- As decided in own case [ 2018 (10) TMI 54 - ITAT AHMEDABAD] 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) Disallowance of depreciation on certain electronical installation - rate of 15% which has been restricted by the AO to 10% also confirmed by CIT -A - 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 electrical panel installed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) who partially allowed these expenses. 5. A perusal of the record would reveal that the ld.CIT(A) has followed the order of the CIT(A) in Asstt.Year 20111-12. The Tribunal in ITA No.3461/Ahd/2014 and others has upheld the order of the ld.CIT(A). The discussion made by the Tribunal on this issue reads as under: 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 engaged in the business of cardiac care and diagnosis and prevention of heart disease centre etc. It has filed its return of income for the Asstt.Year 2011-12 on 28.9.2011 declaring loss at ₹ 1,49,536/-. In the Asstt.Year 2012- 13 it has filed return of income on 27.9.2012 declaring ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 2,11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e not in agreement with this 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 dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iven to the doctors and hence the same are illegal expenses 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 bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld.First Appellate Authority is based on her order passed in the Asstt.Year 2011-12, which has been considered by the Tribunal in the above finding. Therefore following order of the ITAT in the Asstt.Year 2011-12, we do not find any merit in this ground of appeal. It is dismissed. 7. Ground no.2: Grievance of the assessee in this ground of appeal is that the ld.CIT(A) has erred in confirming the action of the AO who restricted the claim of depreciation on life saving equipment to 15% instead of 40% claimed by the assessee. 7. The assessee has claimed depreciation at the rate of 40% on certain assets, whose details have been noticed by the AO. The AO observed that depreciation admissible on these assets is only 15% as provided in Schedule attached to Income Tax Rules. Accordingly, he disallowed ₹ 7,82,486/-. The ld.CIT(A) has upheld this disallowance by following order of his predecessor in the Asstt.Year 2011-12. The ld.counsel for the assessee conceded that similar disallowance was upheld by the ITAT in the Asstt. Year 2011-12 and discussion made by the ITAT reads as under: 10. Next common issue agitated by the assessee in both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the IT Rules 1962 is very specific and names of the machines listed in this appendix are quite clear. The list nowhere says that the auxiliary equipment of such equipment will also be held to be eligible for depreciation @ 40%. Thus, on account of the fact that these 20 machines are not specifically mentioned in the appendix, and the appellant has failed to file any explanation as to how these matches can be held to be part of the life saving equipment listed in this appendix, the disallowance made by the 'AO is upheld and this ground of appeal is dismissed. 12. With the assistance of the ld.representatives, we have gone through the record carefully. We have perused Appendix I(III(3)(xia) of the Income Tax Rules, 1962, which is available at page no.1.474 of Income Tax Rules TAXMANN (2018) edition. 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 depre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of ₹ 2,49,000/- on 24.06.2010. However, as per ,new appendix I of the Income Tax Rules, the rate of allowable depreciation on electrical installation is 10%, worked out to ₹ 4,17,903/- depreciation on electrical installation is 10%, worked out to ₹ 6,26,855/-. Thus, as per the provisions of Income Tax Rule, 1962, the assessee company claimed excess depreciation exceeded by 2,08,952/~. Accordingly, the excess claim of depreciation on electrical installation worked out to ₹ 2,08,952/- is disallowed and added to the total income of the assessee. 6.2. During the course of appellate proceedings, the AR of the appellant has made the following submission:- 1. Vide Ground No. 3, the Appellant has challenged the action of AO in restricting the claim of depreciation on electrical installation to 10% instead of 15% claimed by the Appellant and thereby making addition of ₹ 2,08,952/- to the income of the Appellant. 2. It may be mentioned that the Appellant has purchased the electrical items like LDB Panel, box for X-Ray machine, industrial cable of various size for running the medical equipments, PCC panels etc. The pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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