9911796707
TMI Blog2021 (8) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... the income reported by it amounting to Rs. 30,21,17,510/- on the facts and circumstances of the case. 3. The learned Commissioner of Income-tax [Appeals] erred in not allowing the eligible claim of deduction under section 35 AD of the Act amounting to Rs. 23,96,71,138/- being 150% of the total capital investment on fixed assets made by the appellant amounting to Rs. 15,97,80,759!- on the facts and circumstances of the case. 4. The learned Commissioner of Income-tax [Appeals] erred in not allowing the eligible deduction claimed by the appellant under section 35AD of the Act during the assessment proceedings relying upon the ratio of the decision of the Hon'ble Apex Court in the case of Goetz [India] Ltd., Vs. CIT [2006] reported in 284 ITR 323 [SC]. The learned Commissioner of Income-tax [Appeals] ought to have appreciated that in accordance with the Board Circular and based on parity of reasoning of several case laws, even though if the assessee has inadvertently not claimed any eligible deduction in its return of income it is incumbent on the officers of the department to grant eligible deduction on the facts and circumstances of the case. 5. The Appellant craves leave ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire the business of M/s Modern Medical Institute of Society, Raipur for carrying out its business as revenue in nature and erred in deleting the addition made at Rs. 46,25,000/-. 4. The Ld. CIT(A) erred in deleting the disallowance made under Corporate Social Responsibility at Rs. 91,11,919/- without appreciating the facts that there was no relevance or nexus between this expenditure to that of the business carried out and also the assessee company has not proved that these expenses are incurred wholly and exclusively for business purpose. 5. The Ld.CIT(A) has erred in the deleting the disallowance of Rs. 1,40,84,420/- on account of provision made towards leave salary without appreciating the facts that these have not been actually paid within the meaning of Sec.43B(f) and also erred in admitting the assessee's addl. ground of appeal on this issue." Brief facts of the case are as under: 2. The assessee is a company registered under the Companies Act and is engaged in the business of hospital services in the name and style of M/s Narayana Hrudayalaya Pvt. Ltd. For the years under consideration, assessee filed its return of income on the specified dates. Assessee was also s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these appeals are general in nature and therefore do not require any adjudication 3.1 Ground No.2 pertains to the amount paid towards leasehold rights amortised by assessee during the lease period. 3.2 The Ld.DR submitted that assessee entered into management agreement on 28/01/2008 to operate and manage the hospital at Kolkata for lease period of 25 years. It was submitted that, as per the terms and conditions of the agreement the assessee paid sum of Rs. 22,16,00,000/- as deposit for securing the rights over the existing hospital during the lease. Assessee amortised this expenditure during the period of 25 years and is treated as rent paid in the books of account. The Ld.DR submitted that this expenditure has been paid by assessee's capital in nature thereby acquiring the right of running the hospital business. He thus submitted that these are to be disallowed as capital expenditure. 3.3 On the contrary, the Ld.AR submitted that, this issue is a recurring issue, and has been subject matter for consideration before this Tribunal in the preceding assessment years. He placed reliance on the orders passed by this Tribunal in assessee's own case for assessment year 2009-10 and 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o is to amortising the amount of Rs. 22.16 crores over the period of 25 years and has amortised Rs. 88,64,000 in this year; being 1/25 th of Rs. 22.16 crores. The judicial decisions relied upon by Revenue, we find, are distinguishable on facts. We also find that the learned CIT(A) has dealt with this issue in detail in the impugned order while holding the issue in favour of the assessee and with which findings we concur. in this context, it is relevant to extract the operational portion of the impugned order of the learned CIT(A) to clarify the factual position on this issues at paras 3.5 to 3.9 thereof :- 3.5 I have carefully considered the appellant's submissions and also also perused assessment order, remand report, etc. As can be seen from the assessment order, the Assessing Officer has disallowed the claim of rental expenditure of Rs. 88,64,000/- for the following reason :- 1,) The appellant has given an interest free loan to the Foundation for 25 years in lieu of which it has acquired the right to manage the hospital. ii) The Foundation has also not treated the proportionate amount as income but has treated the entire amount received by it as interest free loan. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, contingent and penal clauses are placed in the agreement in order to safeguard the interest of the parties to the instrument in the event of contingencies taking place. Making the contingent covenants as the main issue is not in order. Thus, when an agreement is entered into, the pith and substance of the transactions has to be looked into and also to consider the intention of the parties. As, in the instant case, the intention of the parties is very, clear from their conduct that the lease is for a period of 25 years, the appellant was right in law to amortise the lease deposit over a period of 25 years i.e. Rs. 88,64, 000 per year. The appellant has relied on certain judicial decisions in support of its case and made elaborate written submissions on the issue and drawn attention to the various clauses in the agreement to demonstrate that these are deterrent and contingent in nature. The deduction claimed is to be granted on the subject mailer of the transaction which, in my view, is that the appellant has taken the hospital on lease for 25 years and no amount is refundable 10 the appellant after the expiry of the lease. After considering the decision relied upon by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is legally bound to return possession of the hospital property to M/s. Asia Heart Foundation after the lease period is over. in this view of the matter, we are of the considered view that the impugned order of the learned CIT(A) does not call for any interference on this issue and consequently dismiss grounds 2 and 3 raised by revenue on the issue of the assessees claim amortisation of lease rental expenditure of Rs. 88,64, 000 during the period under consideration." 3.6 In the present facts of the case the Ld.CIT(A) deleted the disallowance by following the above view taken by this Tribunal. Admittedly there is no difference in the facts considered by the co-ordiante bench for asst. year 2009-10 and the year under consideration. We therefore do not find any infirmity with the view taken by the Ld.CIT(A) and the same is upheld. Accordingly ground number 2 raised by revenue in both the years under consideration stands dismissed. 4. Ground No.3 is in respect of the amount paid towards the leasehold rights of Modern Medical Institute of society, Raipur. 5. The Ld.DR submitted that assessee has paid sum of Rs. 46.25 lakhs for acquiring the rights to operate and manage the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while considering the payment made by assessee to Asian Heart Foundation. Accordingly this ground raised by revenue stands allowed for statistical purposes for both the years under consideration. 7. Ground No.4 has been alleged by revenue against deleting the disallowance made under corporate social responsibility. 7.1 The Ld.DR submitted that there is no nexus between the CSR expenditure made by assessee with that of assessee's business. He submitted that assessee has failed to establish that the expenditure has been incurred wholly and exclusively for the business carried out. The Ld.DR placed reliance on the observations of the Ld.AO. 7.2 On the contrary the Ld.AR submitted that the payment made during assessment years under consideration towards corporate social responsibility will not fall under the purview of Explanation 2 to section 37(1). It has been submitted that during assessment years under consideration assessee incurred expenditure towards running free clinics and medical treatment camps at Ameathi in Uttar Pradesh. He further pointed out that similar disallowances for assessment AY 2009-10 and 2010-11 in assessee's own case was deleted by coordinate bench of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the disallowance of provision of leave salary expenses. 8.1 The Ld.DR submitted that, assessing officer disallowed the sum towards provision made by assessee for leave salary expenses under section 43B (f), for the reason that, the same has not been actually paid. The Ld.AO however for assessment AY 2014-15 restricted the disallowance to the amount that was not paid by the assessee during the relevant year under consideration. On the contrary, the Ld.AR relied on observations of Ld.CIT(A). 8.2 We have perused submissions advanced by both sides in the light of records placed before us. 8.3 This issue now sand settle against assessee by the decision of Hon'ble Supreme Court in case of UOI vs. Exide Industries reported in 116 taxman.com 378. Hon'ble Supreme Court upheld constitutional validity for the allowability of deduction for leave encashment under Section 43B(f) of the Income Tax Act, 1961, on payment basis. 8.4 We therefore direct the Ld.AO to compute the disallowance to the extent of unpaid amount, in accordance with the ratio of Hon'ble Supreme Court. Accordingly this ground is raised by revenue for both the years under consideration stands allowed. Assessee's appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
