TMI Blog2021 (8) TMI 1167X X X X Extracts X X X X X X X X Extracts X X X X ..... of five years. In the terms and conditions the consideration payable by assessee to Modern Medical Institute is 2.5% per annum of the gross revenue for each financial year of hospital or 1.25 crore per annum whichever is higher - Parties that in the first year 2.5% of the gross revenue shall be payable by assessee as in advance. Assessee has thus paid sum of ₹ 1.25 crore which stands adjusted towards the payment of outstanding loans as a precondition - as agreed between the parties that, all payment made by assessee to Modern Medical Institute shall be subjected to tax deducted at source - amortisation amount paid to Modern Medical Institute is different for every year. Under such circumstances, how the amortisation amount is determined by assessee for every year needs to be verified in terms of the payment condition agreed between the parties. We therefore remand this issue back to the AO for verification of the working. AO to apply the principle laid down by coordinate bench of this Tribunal while considering the payment made by assessee to Asian Heart Foundation. Disallowance made under corporate social responsibility - HELD THAT:- For year under consideration, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Appellant's case. 2. The appellant denies itself liable to be assessed over and above the income reported by it amounting to ₹ 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 ₹ 23,96,71,138/- being 150% of the total capital investment on fixed assets made by the appellant amounting to ₹ 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 officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue in nature and erred in deleting the addition made at ₹ 88,64,000/-. 3 The Ld. CIT(A) has erred both in facts and in law by forming a view that the amount paid towards lease hold rights to acquire 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 ₹ 46,25,000/-. 4. The Ld. CIT(A) erred in deleting the disallowance made under Corporate Social Responsibility at ₹ 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 ₹ 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessee s own case for assessment year 2009- 10. For assessment AY 2014-15 assessee had raised issue of claim under section 35 AD, which was disallowed by the Ld.AO for the reason that, the said claim was not made by assessee by way of a revised return. The Ld.CIT(A) upheld this observation of the Ld.AO. 2.3 Aggrieved by the order of the Ld.CIT(A) for assessment years under consideration, assessee as well as revenue and appeal before us now. 2.4 We shall first take up the appeal filed by revenue for assessment year 2012-13 and 2014-15. Both sides agree that the grounds raised by the revenue are common on identical facts in both these years. 3. Ground No.1 in both 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 ₹ 22,16,00,000/- as deposit for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the material brought on record that the Trust i.e. Asia Heart Foundation has obtained a certificate under Section 197(1) of the Act from the concerned Assessing Officer for not deducting tax at source on the rental income of ₹ 88,64,000 under Section 1941 of the Act. This fortifies the fact that the intention of both parties to the Management Agreement dt.28. 1.2008, was to treat the said amount of' ₹ 22.16 crores as a non-refundable deposit for the lease period of 25 years. The averments of the assessee that the Trust, M/s. Asia Heart Foundation has offered the same amount of ₹ 88,66,000 as its income as rental receipt during the relevant year itself has not been disputed by the authorities below. The assessee too is to amortising the amount of ₹ 22.16 crores over the period of 25 years and has amortised ₹ 88,64,000 in this year; being 1/25 th of ₹ 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in bits and pieces. The appellant has also pointed out that the Foundation has treated the sum of ₹ 88,64,000 in its books of account as rental receipt and, accordingly, obtained a certificate from the A.O (TDS) concerned for non-deduction of TDS on rent vide certificate dt. 31/3/2009. This aspect has not been controverted by the Assessing Officer. 3.8 From a perusal of the details filed by the appellant, it is clear that the intention of both parties to the agreement was to continue to lease for a period of 25 years and AO has relied on clauses, which are deterrent and come into effect only in case of default. It is well settled law that any agreement requires to be read harmoniously and the transaction is commercial in nature and for business expediency. In any commercial transaction, restrictive, 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 intenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the Assessing Officer s conclusion that the Foundation cannot write off the amount of ₹ 22,16,00,000 over a period of 10 years or even thereafter on the ground that ills capital in nature is also incorrect since the appellant is hound to return the property to the Foundation on expiry of the lease. 6.3.2 in view of the facts and circumstances of the case as discussed above and the detailed findings of the learned CIT(A) ('supra), we find that the Assessing Officer's inference that the amount of ₹ 22.16 crores is an interest free loan from the assessee to M/s. Asia Heart Foundation is /actually unsustainable: as is the Assessing Officer 's conclusion that the lessor of the property cannot write off the amount of ₹ 22.16 Crores over the period of 10 years and thereafter, since it is capital in nature is also factually incorrect since the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l year of hospital or 1.25 crore per annum whichever is higher. It has also been agreed between the parties that in the first year 2.5% of the gross revenue shall be payable by assessee as in advance. The assessee has thus paid sum of ₹ 1.25 crore which stands adjusted towards the payment of outstanding loans as a precondition. It is also agreed between the parties that, all payment made by assessee to Modern Medical Institute shall be subjected to tax deducted at source. We note that the amortisation amount paid to Modern Medical Institute is different for every year. Under such circumstances, how the amortisation amount is determined by assessee for every year needs to be verified in terms of the payment condition agreed between the parties. We therefore remand this issue back to the Ld.AO for verification of the working. We also direct the Ld.AO to apply the principle laid down by coordinate bench of this Tribunal 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 deleti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. Thus, the expenditure incurred for CSR, in the factual matrix of the case on hand is, in our opinion, allowable expenditure as per the provisions of section 37 of the Act and therefore the order of the learned CIT(A) on this issue is upheld. Consequently, Ground No.4 of Revenue's appeal dismissed. 7.5 For year under consideration, it is not the case revenue that expenditure has not been incurred. As the facts are identical, and the expenditure incurred for CSR are of similar nature, in our opinion they are allowable as expenditure under section 37 of the Act, as it has been clearly incurred for furtherance of assessee s business in other parts of the country. Respectfully following the view taken by the co-ordinate Bench herein above we do not find any infirmity in the view taken by the Ld.CIT(A). Accordingly this ground is raised by revenue for both the years under consideration stands dismissed. 8. Ground No.5 is alleged by revenue against deleting 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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