DCIT, CHENNAI v. M/s. Apollo Hospital Enterprises Ltd., CHENNAI

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER) .. I.T.A. NO. 1673/MDS/2010 ASSESSMENT YEAR : 1998-99 THE DY. COMMISSIONER OF INCOME TAX COMPANY CIRCLE I(1) CHENNAI 600 034. (APPELLANT) V. M/S APOLLO HOSPITAL ENTERPRISES LTD. ALI TOWERS IV FLOOR 55 GREAMS ROAD CHENNAI 600 034. PAN : AAACA5443N (RESPONDENT) APPELLANT BY : SHRI K.E.B. RENGARAJAN JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI T. BAN USEKAR O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE IN WHICH IT HAS RAISED FOUR GROUNDS. GROUNDS NO.1 AND 4 ARE GENERAL IN NA TURE AND REQUIRE NO SPECIFIC ADJUDICATION. 2. VIDE ITS GROUND NO.2 REVENUE IS AGGRIEVED THAT LEASE EQUALIZATION CHARGES OF RS. 77 19 523/- WAS ALLOWED BY THE CIT(APPEALS). I.T.A. NO. 1673/MDS/10 2 3. ASSESSEE HAD GIVEN ON LEASE MEDICAL EQUIPMENTS A ND VEHICLES TO OTHER HOSPITALS IN ITS GROUP AND IN ACCORDANCE W ITH THE GUIDANCE NOTE ON ACCOUNTING FOR LEASES ISSUED BY THE INSTITU TE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI) CLAIMED AS REVENUE EXP ENSE LEASE EQUALIZATION CHARGES OF RS. 77 19 523/-. ASSESSING OFFICER DISALLOWED SUCH CLAIM ON THE GROUND THAT THIS WAS O NLY A NOTIONAL CLAIM. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(APP EALS) AND PLACED RELIANCE ON THE DECISION OF A CO-ORDINATE BE NCH OF THIS TRIBUNAL IN ITS OWN CASE FOR ASSESSMENT YEAR 1999-2 000 IN I.T.A. NO. 1516/MDS/2006. ACCORDING TO ASSESSEE IT WAS HELD BY THE TRIBUNAL THAT LEASE EQUALIZATION CHARGES WAS A LEGITIMATE CL AIM AND ALLOWABLE. CIT(APPEALS) RELYING ON THIS DECISION OF THE TRIBUN AL IN THE ASSESSEES OWN CASE REFERRED SUPRA HELD IN FAVOUR O F ASSESSEE. 4. NOW BEFORE US THE LEARNED D.R. SUBMITTED THAT R EVENUE HAS FILED APPEAL AGAINST THE DECISION OF THIS TRIBUNAL RELIED ON BY THE CIT(APPEALS) BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT. 5. PER CONTRA LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF THE CIT(APPEALS). I.T.A. NO. 1673/MDS/10 3 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. CIT(APPEALS) HAD RELIED ON THE ORDER OF THIS TRIBUN AL FOR ASSESSMENT YEAR 1999-2000 IN I.T.A. NO. 1516/MDS/2006 DATED 19 .12.2008. IT WAS HELD IN PARA 13N OF THE SAID DECISION BY THIS TRIBUNAL AS UNDER:- 13N. THEREFORE FOLLOWING THE DECISIONS OF HYDERABAD AND DELHI BENCHES OF ITAT WE FIND THAT THE CLAIM OF DEDUCTIO N BY THE ASSESSEE TOWARDS LEASE EQUALIZATION CHARGES IS LEGI TIMATE AND THE CIT(APPEALS) IS JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 7. NOTHING WAS BROUGHT BEFORE US BY THE LEARNED D.R . TO SHOW THAT THE ABOVE DECISION OF THE TRIBUNAL HAS BEEN OVERTUR NED BY ANY HIGHER JUDICIAL AUTHORITIES. WE THEREFORE DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS). GROUND NO.2 RA ISED BY THE REVENUE STANDS DISMISSED. 8. GROUND NO.3 IS THAT CIT(APPEALS) DELETED THE DIS ALLOWANCE OF PROFESSIONAL CHARGES OF RS. 1 38 19 260/- AND THIS WAS NOT JUSTIFIED. 9. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD CLAIME D PROFESSIONAL CHARGES OF RS. 1 38 19 260/- PAID TO ONE M/S PCR IN VESTMENTS FOR AGREEING TO REFRAIN FROM CARRYING ON A COMPETITIVE BUSINESS. A.O. WAS OF THE OPINION THAT SUCH PMT WAS CAPITAL IN NAT URE AND DISALLOWED IT. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(APPEAL S) AND SUBMITTED I.T.A. NO. 1673/MDS/10 4 THAT SIMILAR CLAIM OF THE ASSESSEE WHICH WAS DISAL LOWED BY THE LOWER AUTHORITIES WAS ACCEPTED BY THIS TRIBUNAL IN ASSES SEES APPEAL FOR ASSESSMENT YEAR 1999-2000 IN I.T.A. NO. 1282/MDS/20 06. LD. CIT(APPEALS) WAS APPRECIATIVE OF THIS CONTENTION AN D RELYING ON THE ABOVE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASS ESSMENT YEAR 1999-2000 DELETED THE DISALLOWANCE. 10. NOW BEFORE US THE LEARNED D.R. ASSAILING THE ORDER OF THE CIT(APPEALS) SUBMITTED THAT THE DECISION OF TRIBUNA L IN I.T.A. NO. 1282/MDS/2006 HAS BEEN CHALLENGED IN APPEAL BEFORE THE HON'BLE JURISDICTIONAL HIGH COURT. 11. PER CONTRA THE LEARNED A.R. SUPPORTED THE ORDE R OF LD. CIT(APPEALS). 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IT IS NOT DISPUTED THAT THE PAYMENTS WERE PROFESSIONAL CHARGES PAID TO M/S PCR INVESTMENTS WHICH WAS DISALLOWED BY THE LOW ER AUTHORITIES. THIS TRIBUNAL IN ITS ORDER DATED 19.12.2008 IN I.T. A. NO. 1282/MDS/2006 WHILE DEALING WITH THE ISSUE HELD AS UNDER:- 12P. THE PAYMENTS MADE BY THE ASSESSEE-COMPANY TO M/S PCR INVESTMENTS HAVE BEEN PROPERLY ACCOUNTED AND PROVED. SUCH I.T.A. NO. 1673/MDS/10 5 PAYMENTS RECEIVED BY M/S PCR INVESTMENTS HAVE BEEN PR OPERLY ACCOUNTED IN THEIR BOOKS AND FORMED PART OF THE GRO SS REVENUE OF THAT COMPANY. THERE ARE NO MATERIALS OR CIRCUMSTANC ES TO MAKE AN INFERENCE THAT THE AGREEMENT ENTERED INTO BETWEE N THE ASSESSEE-COMPANY AND M/S PCR INVESTMENTS IS A SHAM AGREEMENT. AS A MATTER OF FACT NEITHER THE ASSESS ING OFFICER NOR THE CIT(APPEALS) HAS A CASE THAT THE AGREEMENT IS A SHAM AGREEMENT. BOTH THE AUTHORITIES BELOW HAVE ACCEPTE D THE VALIDITY OF THE AGREEMENT AND ITS BINDING NATURE. B UT THE DIFFERENCE IS ONLY IN THAT NATURE OF APPRECIATING TH E NATURE OF PAYMENT. ACCORDING TO THE CIT(APPEALS) THE AGREEME NT WAS TO AVOID COMPETITION WHICH IS NOT A CORRECT STATEMENT IN THE LIGHT OF THE FACTS AVAILABLE ON RECORD. THE ASSESSING OFFIC ER SAYS THAT IT IS A CAPITAL EXPENDITURE WITHOUT ANY REASON. THERE FORE WE HAVE TO HOLD THAT THE CONCLUSIONS ARRIVED AT BY BOTH THE AUTHORITIES ARE UNFOUNDED. WHEN THAT IS THE CASE THE ARGUMENT OF THE ASSESSEE STANDS ACCEPTABLE. 12Q. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF T HE CASE WE DELETE THE DISALLOWANCE OF THE PROFESSIONAL CHARGES PAID BY THE ASSESSEE-COMPANY AND DIRECT THE ASSESSING OFFICER TO DEDUCT THE PROFESSIONAL CHARGES WHILE COMPUTING THE TAXABL E INCOME OF THE ASSESSEE-COMPANY. 13. THE FACTUAL SITUATION BEING SAME WE ARE OF THE OPINION THAT THE CIT(APPEALS) WAS JUSTIFIED IN RELYING ON THE ABOVE ORDER OF THIS TRIBUNAL FOR DELETING THE DISALLOWANCE. NOTHING WA S BROUGHT ON RECORD BY THE LEARNED D.R. FOR TAKING A DIFFERENT V IEW FOR THE IMPUGNED ASSESSMENT YEAR. WE THEREFORE DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(APPEALS) ON THI S ISSUE. GROUND NO.3 STANDS DISMISSED. I.T.A. NO. 1673/MDS/10 6 14. IN THE RESULT THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 25 TH FEBRUARY 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 25 TH FEBRUARY 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-III CHENNAI (4) CIT CHENNAI-I CHENNAI (5) D.R. (6) GUARD FILE