M/s. Ganesh Aarthi Medical Research Foundation, Thanjavur v. DCIT, CHENNAI

ITA 37/CHNY/2009 | 2003-2004
Pronouncement Date: 20-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 3721714 RSA 2009
Assessee PAN AAATG4930B
Bench Chennai
Appeal Number ITA 37/CHNY/2009
Duration Of Justice 2 year(s) 11 day(s)
Appellant M/s. Ganesh Aarthi Medical Research Foundation, Thanjavur
Respondent DCIT, CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 20-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 20-01-2011
Date Of Final Hearing 20-01-2011
Next Hearing Date 20-01-2011
Assessment Year 2003-2004
Appeal Filed On 09-01-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH D BEFORE DR. O.K.NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER I.T.A. NOS. 36 & 37/MDS/2009 ASSESSMENT YEARS : 2002-03 & 2003-04 GANESH AARTHI MEDICAL RESEARCH FOUNDATION 528-B EAST MAIN STREET THANJAVUR. PAN AAATG 4930 B VS. THE DY. COMMISSIONER OF INCOME TAX CIRCLE I THANJAVUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIKRAM VIJAYARAGHAVAN & SHRI R. VIJAYARAGHAVAN RESPONDENT BY : SHRI K.E.B.RENGARA JAN JR. STANDING COUNSEL O R D E R PER DR. O.K.NARAYANAN VICE PRESIDENT THESE TWO APPEALS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEARS ARE 2002-03 AND 2003-04. THE APP EALS ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX ITA 36 &37/09 :- 2 -: (APPEALS) PASSED ON 29.10.2008. THE APPEALS ARISE OUT OF THE ASSESSMENTS COMPLETED UNDER SEC.143(3) READ WITH SE C.147 OF THE I.T.ACT 1961. 2. THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON. 3. WE HEARD SHRI VIKRAM VIJAYARAGHAVAN ADVOCATE APPEA RING FOR THE ASSESSEE AND SHRI K.E.B.RENGARAJAN LEARNED STANDING COUNSEL APPEARING FOR THE REVENUE. 4. THE FIRST COMMON ISSUE IS REGARDING THE RATE OF DE PRECATION APPLICABLE TO ULTRA-SOUND-SCAN. THE ASSESSEE HAS C LAIMED DEPRECIATION ON ULTRA-SOUND-SCAN @ 60% TREATING IT AS COMPUTER WHEREAS THE ASSESSING OFFICER HAS ALLOWED DEPRECIAT ION @ 25% WHICH IS APPLICABLE TO GENERAL MACHINERY. THE COUN SEL ARGUED EXTENSIVELY ON THIS POINT EXPLAINING THE NATURE AND FUNCTION OF ULTRA-SOUND-SCAN TO CONVINCE THE BENCH THAT ULTRA-S OUND-SCAN IS NOTHING BUT A CUSTOM MADE COMPUTER SYSTEM. HE HAS PRODUCED BEFORE US TECHNICAL LITERATURE EXPLAINING THE WORKI NG OF ULTRA- SOUND-SCAN. HE HAS EXPLAINED THAT THE TRANSDUCER P ROBE WHICH SENDS SOUND WAVES IS ENTIRELY PROCESSED THROUGH A C OMPUTER SYSTEM AND THE FINAL PRINT OUT BY IMAGE IS NOTHING BUT THE ITA 36 &37/09 :- 3 -: PROCESSING OF COMPUTER. WE CONSIDERED THIS MATTER VERY CAREFULLY. WHILE INTERPRETING THE CLASSIFICATION O F DEPRECIABLE ASSETS IT IS NOT POSSIBLE TO DISSECT THE ASSET AND DECIDE THE NATURE OF THE ASSET ON THE BASIS OF ITS TECHNOLOGIC AL FEATURES. IN MATTERS OF TAXATION WHETHER IT IS DIRECT OR INDIREC T THE GENERAL PRINCIPLE APPLIED IS TO DETERMINE THE NATURE OF AN ASSET OR A COMMODITY BY APPLYING COMMON PARLANCE TEST COMMERC IAL PARLANCE TEST OR ANY OTHER GENERAL PARLANCE TEST DE PENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE. IN THE PRE SENT CASE EVEN THOUGH ULTRA-SOUND MACHINE MAY OVERWHELMINGLY RUN BY COMPUTER SUPPORT IN ITS COMMON PARLANCE THE ULTRA -SOUND-SCAN IS NOT CONSIDERED AS A COMPUTER. HERE THE COMMON PARLANCE TEST HAS TO BE APPLIED IN THE CONTEXT OF THE END USE OF THE MACHINE. ULTRA-SOUND-SCAN IS USED BY MEDICAL FRATERNITY. TH EREFORE THE QUESTION IS HOW THE DOCTORS TREAT AN ULTRA-SOUND MA CHINE. THE DOCTORS DO NOT TREAT THE ULTRA-SOUND MACHINE AS A C OMPUTER. IT IS A COMPUTERIZED MEDICAL APPARATUS. IT IS AN IMAGING SYSTEM USED FOR DIAGNOSIS EVEN THOUGH COMPUTER MAY BE THE BRAIN OF THE ULTRA- SOUND-SCAN MACHINE. THERE IS NO SPECIAL RATE OF DE PRECIATION RECOMMENDED IN THE STATUTE FOR MEDICAL INSTRUMENTS. THEREFORE THE GENERAL RATE ALONE IS APPLICABLE. THE ASSESSIN G OFFICER IS ITA 36 &37/09 :- 4 -: JUSTIFIED IN RESTRICTING THE CLAIM OF DEPRECIATION TO THE GENERAL RATE OF 25%. 5. THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. 6. THE NEXT COMMON ISSUE IS AGAINST THE DISALLOWANCE O F EXPENSES MADE BY THE ASSESSING OFFICER AND CONFIRME D BY THE COMMISSIONER OF INCOME-TAX (APPEALS). THE ASSESSIN G OFFICER HAS MADE A DISALLOWANCE OF 50% OF THE EXPENSES. TH E DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT THE A SSESSEE HAS NOT PRODUCED VOUCHERS AND BILLS FOR VERIFICATIO N. IN THE EARLIER ASSESSMENT YEARS NO SUCH DISALLOWANCE WAS MADE IN A SSESSEES CASE. THE QUANTUM OF EXPENDITURE INCURRED FOR THE IMPUGNED ASSESSMENT YEARS ARE COMPARABLE TO THE EXPENSES INC URRED FOR THE EARLIER ASSESSMENT YEARS. IN THESE CIRCUMSTANC ES WE FIND THAT THE DISALLOWANCE @ 50% IS HIGH. THE DISALLOWA NCE IS MODIFIED TO 20%. THIS GROUND IS PARTLY ALLOWED. 7. THE LAST COMMON ISSUE RAISED IN THESE APPEALS IS ON THE QUESTION OF LEVY OF INTEREST UNDER SEC.234B. INITI ALLY THE RETURNS WERE PROCESSED UNDER SEC.143(1). THEREAFTER NOTIC ES WERE ISSUED UNDER SEC.148 AND THE ASSESSMENTS WERE COMPL ETED ITA 36 &37/09 :- 5 -: UNDER SEC.143(3). WHILE LEVYING INTEREST UNDER SEC .234B THE ASSESSING OFFICER LEVIED THE INTEREST ON THE ENTIRE AMOUNT OF TAX DETERMINED FOR THE PERIOD FROM 1 ST APRIL TO THE DATE OF PASSING OF THE ORDER UNDER SEC.143(3). 8. AS RIGHTLY ARGUED BY THE ADVOCATE THIS IS NOT PROP ER. SEC.234B(3) PROVIDES THE MANNER OF LEVYING INTEREST IN SIMILAR CIRCUMSTANCES. THE INTEREST HAS TO BE LEVIED ONLY ON THE ADDITIONAL DEMAND CREATED AND THAT TOO FROM THE DAT E OF PASSING OF THE ORDER UNDER SEC.143(1) TO THE DATE OF PASSIN G OF THE ORDER UNDER SEC.143(3). THIS PRINCIPLE HAS BEEN ENUNCIAT ED BY I.T.A.T. MUMBAI BENCH IN ITS DECISION RENDERED IN DATAMATICS LTD. V. ACIT REPORTED IN 111 TTJ (MUMBAI) 55. WE THEREFORE DI RECT THE ASSESSING OFFICER TO RE-COMPUTE THE INTEREST UNDER SEC.234B ON THE MODIFIED ADDITIONAL DEMAND FOR THE REDUCED PERI OD FROM 143(1) ORDER TO 143(3) ORDER. THIS ISSUE IS DECIDE D IN FAVOUR OF THE ASSESSEE. 9. IN RESULT THE APPEALS FILED BY THE ASSESSEE ARE PA RTLY ALLOWED. ITA 36 &37/09 :- 6 -: ORDER PRONOUNCED IN THE OPEN COURT AT THE TIM E OF HEARING ON THURSDAY THE 20 TH DAY OF JANUARY 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) JUDICIAL MEMBER (DR. O.K.NARAYANAN) VICE-PRESIDENT CHENNAI DATED : 20 TH JANUARY 2011 MPO* COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR