TMI Blog2002 (9) TMI 247X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal before the appeal is heard and disposed of." 3. From the above noted grounds, it would be clear that the only grievance of the Department relates to the allowing of deduction of Rs. 28,46,808 under section 35(2)(la) which was disallowed by the Assessing Officer. 3.1 The relevant facts relating to the issue in brief are that the assessee being a Private Limited Company was engaged in carrying on the Profession of Nursing Home which provides medical treatment to patients with all kinds of eye problems. The assessee filed its return of income declaring an income of Rs. 61,58,140 on 14-12-1992. During the assessment proceedings, the Assessing Officer noted that the assessee had claimed deduction under section 35(2)(1a) amounting to Rs. 28,46,808 on account of machinery used for scientific research costing Rs. 37,15,408. He further noted that the assessee had reduced from the cost of machinery Rs. 8,68,600 on account of experimental receipts. The Assessing Officer asked the assessee to substantiate its claim under section 35(2)(1a) of the IT Act. It was submitted before the Assessing Officer that the expenditure of capital nature had been incurred on scientific re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity of the assessee-company was a business of running a Nursing Home. It was emphasised that the assessee-company had a separate legal entity different from its share-holders and employees and as such could not have the skill, education or learning which was required for carrying on a profession. Accordingly, it was submitted that the activity of the assessee was business and not the Profession. The reliance was placed on the following case laws: (1) Dr. P. Vadamalayan v. CIT [1969] 74 ITR 94 (Mad.) (2) CIT v. Dr. V.K. Ramachandran [1981] 128 ITR 727 (Mad.). (3) Addl CIT v. Ram Kripal Tripathi, [1980] 125 ITR 408 (All.) It was argued that although the terms science and research were not defined in the Income-tax Act but the dictionary meaning of those terms made it clear that it referred to the knowledge possessed as a result of studies or practice, science was a branch of study which was concerned with observations, classification of facts and formulation of laws and any investigation or experimentation for the discovery of new facts and their correct interpretation which amounted to discovery. Accordingly, it was submitted that the assessee-company carried on a scie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pia corrections results :- We have lumped the total number of the myopic dioptres to be corrected in each group, and the results actually obtained have been kept as sum total of all the cases. The results are as follows:- Group 1 (Myopia less than 5D) No. of cases 15 Total No. of dioptres 55.5 Undercorrection 15.5(27.92%) Overcorrection 0.75(1.53%) Group 2 (myopia 6 to 10D) No. of cases 44 Total No. of dioptres 314 Undercorrection 61 D (19.42%) Overcorrection 5.5 (1.75%) Group 3 (Myopia 11 D to 15 D) No. of cases 44 Total No. of dioptres 507 Under corrected 91(17.94%) Over corrected 11 (1.36%) Group 4 (Myopia 15D) No. of cases 18 Total No. of dioptres 282 Undercorrection 54(19.54%) Overcorrection 0.75 (0. 25%) From the figures given above, it is obvious that the percentage of under correction and over correction is almost the same in all the groups." It was further submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no doubt that the activity of the assessee was covered by the field specified in the definition and as such the activity of the assessee lead to the extension of the knowledge. He opined that the experiments made by the assessee on the various patients definitely added to the knowledge in respect of technique of reducing the plus minus numbers and thus, the experience of handling case after case and gradual improvement in the technique was definitely a step for the extension of knowledge on this particular subject. He, therefore, held that the assessee's case was covered by the definition, so far as scientific research was concerned. 4.3 As regards to the activity carried out by the assessee, the learned CIT(A) observed that the term used was not 'business' but "related to the business carried on by the assessee". According to him, the income from profits or gains of business or profession should have been computed in accordance with the provisions of sections 30 to 43A and section 35 was covered for the purpose of computation of income both from business or profession. He emphasised that the term business as used in section 35 was only used as a part of the phrase " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee being a Private Limited Company was engaged in the business and not in the profession. It was stated that the Assessing Officer computed the income by taking the income as per profit loss account, as such the income of the assessee was business income, therefore, the provisions of section 35(1) were clearly applicable. It was stated that the professional activities when taken on commercial lines become a business, hence the activities of the assessee were related to the business as there was a motive of earning profit. The reliance was placed on the various decisions viz: (1) Dr. P. Vadamalayan's case (2) CIT v. Trinity Hospital [1997] 225 ITR 178 (Raj.) (3) Natvarlal Ambalal Davev, CIT [1997] 225 ITR 936 (Guj.) It was vehemently argued that the machine purchased by the assessee was used for the scientific research. A reference was made to section 43(4)(iii) of the Income-tax Act. It was submitted that the research undertaken by the assessee had facilitated an extension of its business which could be possible only after the scientific research conducted by the assessee and only for that purpose, an Excimer Laser Machine was purchased. It was explained t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material available on the record alongwith various citations quoted before us. In the instant case, the first reason for the Assessing Officer in denying the claim of the assessee was that the activity undertaken by the assessee were not covered under the term "business" but were related to the "profession". The words "business" and "profession" has been defined in section 2(13) and 2(36) of the Income-tax Act, 1961. According to the aforesaid section, "Business" includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture, while the "profession" includes vocation. The section 2(36) does not state but the "profession" means: it only states that profession will includes vocation. We are of the opinion that the word "business" is a word of wide import. The expression business though extensively used, in taxing statutes is a word of definite import. In taxing statutes, it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally, with the object of making profit, to regard an activity as business there must be a course of dealings, either actually continued or con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. In that view of the matter, we are of the view that the assessee was involved in the business. Moreover, the word 'profession' involves labour, skill, education and special knowledge and implies a vocation requiring higher education and learning. All the aforesaid qualities can be possessed by an individual and not by a person who is not living being. In the instant case, although the assessee-company is a person in the eyes of law but individually it has no brain having the senses, as such it cannot possess skill which is basic requirement for doing a profession. In that view of the matter also, it can safely be held that a company cannot do a profession by itself. It is well settled law that a company is separate from its individual Directors and employees, although the Directors or employees of the Company can do the profession, but the company itself cannot do the profession, as such the activities undertaken with a profit motive by the assessee-company were related to the business and not to the profession. In view of the above discussions, we are of the considered view that the Assessing Officer was not justified in holding that the assessee was engaged in the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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