Gauhati High Court
Commissioner Of Income-Tax vs Down Town Hospital Pvt. Ltd. on 22 December, 2003
Equivalent citations: [2004]267ITR439(GAUHATI)
Author: D. Biswas
Bench: D. Biswas, S.K. Kar
JUDGMENT D. Biswas, J.
1. Income-tax Appeal No. 29 of 2001 and Income-tax Appeal No. 31 of 2001 under Section 260A of the Income-tax Act 1961, were admitted for hearing on the following common questions of law :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in not upholding the order of the first appellate authority which had confirmed the Assessing Officer's order disallowing the claim of investment allowance under Section 32A of the Income-tax Act, 1961, as the nursing home/hospital of the assessee is not an industrial undertaking ?
2. Whether, on the facts and in the circumstances of the case, is not the decision of the Tribunal in directing deletion of the addition made under Section 68 of the Income-tax Act, 1961, placing reliance on the decision of the Delhi High Court in the case of Stellar Investment Ltd. [1991] 192 ITR 287 as erroneous and perverse ?"
3. The assessee, M/s. Down Town Hospital Limited, is a nursing home situated at Mathura Nagar, Guwahati. For the assessment years 1989-90 and 1990-91, the assessee-company claimed investment allowance of Rs. 6,30,000 and Rs. 6,62,654, respectively, under Section 32A of the Income-tax Act, 1961. The Assessing Officer after hearing the assessee concluded that the assessee-company is a nursing home and being essentially a private hospital, is not an industrial undertaking within the meaning of Section 32A of the Income-tax Act, 1961, and, therefore, not entitled to deduction of investment allowance. Besides, for the aforesaid assessment years, the Assessing Officer also disallowed the sums credited in the assessee's books of account as share application money appearing in the balance-sheet as on March 31, 1989, and March 31, 1990, respectively, for alleged failure of the assessee-company to furnish PAN of the persons from whom the share application monies have been received with their source of income, relevant bank account particulars, etc, The said sums were considered as the assessee's income for the relevant years under Section 68 of the Income-tax Act. Altogether, a sum of Rs. 2,00,000 has been added as the assessee's income for the assessment year 1989-90 and Rs. 65,000 for the assessment year 1990-91.
4. The Commissioner of Income-tax (Appeals) rejected the claims preferred by the assessee against the aforesaid orders under Section 143(3) of the Income-tax Act, affirming the decision of the Assessing Officer.
5. The assessee preferred Appeals Nos. 45 and 56/Gauhati of 1994 against the aforesaid orders. The learned Tribunal disposed of both the appeals by a common order dated June 20, 2001. The learned Tribunal allowed both the appeals affirming the assessee's claim.
6. We have heard Mr. U. Bhuyan, learned counsel for the appellant, and also Mr. R.P. Agarwalla, learned senior counsel for the respondent-assessee.
7. The first question relates to the claim of investment allowance on medical equipment, air-conditioner, lifts, office equipment, etc. This court in CIT v. Dr. M.L. Agarwalla [2002] 258 ITR 102 had occasion to deal with a similar situation. The assessee in that case was a radiologist engaged in the business of radio diagnostics. He had claimed deduction of certain amount under Section 32A of the Income-tax Act, 1961. The Assessing Officer rejected the claim in respect of ultrasound medical diagnostic electrical equipment, air-conditioner and voltage stabilizer on the ground that the assessee did not manufacture or produce any article or thing as envisaged in Section 32A(2)(b)(ii) of the Act of 1961. Eventually, the learned Tribunal held that the assessee was entitled to investment allowance. The Revenue preferred an appeal before this court which was disposed of on July 31, 2002, affirming the decision of the learned Tribunal in allowing investment allowance on ultrasound, medical diagnostic, air-conditioner and voltage stabilizer. It would be apposite to quote herein-below certain excerpts from the said judgment in CIT v. Dr. M.L. Agarwalla [2002] 258 ITR 102 (Gauhati), which, in my opinion would meet the doubts raised by Shri Bhuyan, learned counsel for the Revenue (page 104) :
"The decision rendered by the Tribunal in the instant case has been sought to be assailed by Shri Bhuyan, learned counsel for the Revenue with reference to a decision of this court in CIT v. Down Town Hospital Ltd. [2001] 251 ITR 683. In that case the assessee claimed deduction under Sections 80HH and 80-I in respect of the entire hospital. The court held that in the absence of a clear finding to show that a new article or thing is manufactured or produced out of some raw materials, it is difficult to hold that the assessee, Down Town Hospital, is an industrial undertaking. This decision in our opinion is not applicable in the instant Case. The assessee claimed investment allowance as per the provisions of Section 32A(2) for the ultrasound medical diagnostic electrical equipment, air-conditioner and servo voltage stabilizer and not for the entire establishment.
The decision of the Rajasthan High Court in CIT v. Trinity Hospital [1997] 225 ITR 178 was rendered taking into consideration the ratio in Dr. V.K. Ramachandran [1981] 128 ITR 727 of the Madras High Court and Shaw Wallace and Co. Ltd. [1993] 201 ITR 17 of the Calcutta High Court. The nature and character of the equipment purchased and installed by the assessee in the instant case are identical and these are being used for the purpose of intensive study of the internal condition of the body which comes out in black and white and assists in proper diagnosis after expert scrutiny. If we go by the ratio available in Shaw Wallace and Co. Ltd. [1993] 201 ITR 17 (Cal) and Dr. V.K. Ramachandran [1981] 128 ITR 727 (Mad), we have no doubt in our mind that the asses-see-firm in the instant case can be said to be in production of a 'thing' within the limit of Section 32A(2)(ii) of the Act. . . .
The above decisions of various High Courts relate to the permissibility of investment allowance under Section 32A. In addition, a Division Bench of this court in CIT v. Technotive Eastern (Pvt.) Ltd. [2002] 255 ITR 253 dealt with the question whether an assessee is entitled to allowance under Sections 80HH and 80-I of the Income-tax Act, 1961, on income earned through computer documentation service. The court held that a computer division is an industrial undertaking for the nature of its use in data processing and, as such, the assessee is entitled to deduction under Sections 80HH and 80-I of the Income-tax Act. This decision lends support to the claim of the assessee that the exercise undertaken by the assessee-firm in the process of diagnosis of the disease through the ultrasound diagnostic equipments is a 'thing' produced within the meaning of Section 32A(2)(ii) of the Act. The ratio in Live Tone v. State of Tripura [2001] 122 STC 115 (Gauhati) and in Vishwa Vimohan Jha v. State of Meghalaya [2002] 1 GLT 276 also lend support to the above view. The preponderance of judicial opinion and desirability of uniformity impel us to decide that the assessee-firm is entitled to investment allowance under Section 32A(2)(b)(ii)."
8. In Mar Gregorious Memorial Muthoot Medical Centre v. CIT [2003] 261 ITR 443 (Ker), the question for consideration before the High Court was whether the Tribunal was justified in denying the investment allowance of E. C. G. machine, x-ray unit and other laboratory equipment. The Kerala High Court allowed the investment allowance for the reasons quoted hereinbelow (page 445) :
"The question that is posed for consideration is whether the assessee is entitled to get investment allowance for various equipment it has installed in the hospital. The relevant provision which is to be construed is Sections 34 and 32A(2)(b). On going through the above mentioned provisions, two conditions are to be satisfied so as to become eligible for allowance as regards machinery is concerned. One it must be concerned with a small scale undertaking and the other such undertaking must be producing some article or thing. At the first blush it may think that hospital as such could not manufacture or produce any article or thing unlike in the case of other manufacturing unit like x-ray units, E.C.G. machine, etc., by separate industrial undertakings, but instances are many where the hospital could manufacture and produce various products for the benefits of their patients or else patients have to go outside and get materials like x-ray, scanning report, etc. This court had occasion to consider an almost similar situation in CIT v. Yunus Kunju [1991] 189 ITR 672, which was subsequently followed by the Gauhati High Court in CIT v. Dr. M.L. Agarwalla [2002] 258 ITR 102 and took the view that the assessee is entitled to investment allowance in respect of ultrasound medical diagnostic electrical equipment, air-conditioner and voltage stabilizer on the ground that the assessee did not manufacture or produce any article or thing as envisaged in Section 32A(2)(b)(ii) of the Act (sic). The Calcutta High Court in CIT v. Air Survey Co. of India P. Ltd. [1998] 232 ITR 707 in the case of the assessee, an air survey company, engaged in the business of survey, mapping, aerial photography and aero-magnetic photography claimed investment allowance under Section 32A of the Act in respect of aircraft radio purchased, after relying upon the decisions in CIT v. Trinity Hospital [1997] 225 ITR 178 (Raj) and CIT v. Upasana Hospital [1997] 225 ITR 845 (Ker) answered the question in favour of the assessee."
9. It is clear from the aforesaid judgments that investment allowance has been permitted in respect of medical equipments, air-conditioners, voltage stabilizers, etc., particularly, because of preponderance of various judicial pronouncements and desirability of uniformity in the decision. It is pertinent to mention here that the Kerala High Court while rendering the aforesaid decision took into consideration the decision of this court rendered in CIT v. Dr. M.L. Agarwalla [2002] 258 ITR 102. On the factual matrix of the case at hand and keeping in mind the decisions in the aforesaid judgments, this court is inclined to allow investment allowance for acquisition of medical equipment, air-conditioners, lifts and other office equipment. Mr. Bhuyan relied upon a judgment of the Bombay High Court in Insight Diagnostic and Oncological Research Institute Pvt. Ltd. v. Deputy CIT [2003] 262 ITR 41. For the same reasons as in Dr. M.L. Agarwalla [2002] 258 ITR 102 (Gauhati) and in Mar Gregorious Memorial Muthoot Medical Centre v. CIT [2003] 261 ITR 443 (Ker), we respectfully disagree with the decision of the Bombay High Court.
10. The second question relates to deletion of addition made under Section 68 of the Income-tax Act, 1961, in respect of certain amounts received as share application money from different persons. The learned Tribunal in the impugned order has given a clear finding after appreciation of the materials on record that the assessee filed the details regarding the source of funds of the parties and their income-tax file numbers before the Assessing Officer, According to the learned Tribunal, the assessee also submitted before the Assessing Officer the confirmations from the creditors where full addresses, income-tax file numbers, etc., were given. Even some of the payments were made by cheques. Relying upon the decision in CIT v. Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi), the Tribunal came to the conclusion that no addition under Section 68 of the Act is permissible where the shareholders are identified and it is established that they had invested the monies in the purchase of the share. The aforesaid decision in Stellar Investment Ltd. [1991] 192 ITR 287 (Delhi) was also affirmed by the hon'ble Supreme Court in the case of CIT v. Stellar Investment Ltd, [2001] 251 ITR 263. The Supreme Court observed that (page 263) : "We have read the question which the High Court answered against the Revenue. We are in agreement with the High Court. Plainly, the Tribunal came to a conclusion on facts and no interference is called for. The appeal is dismissed. No order as to costs".
11. In the case at hand, the learned Tribunal found on the facts that the identities of the creditors have been established and all essential particulars were furnished by the assessee. The assessee has discharged its burden to the satisfaction of the learned Tribunal, There is in fact no scope for reappreciation of the materials on record as this court is required to tender its opinion on the question of law on the given facts and circumstances of the case (Ref : Aluminium Corporation of India Ltd. v. CIT [1972] 86 ITR 11 (SC)). Therefore, the Assessing Officer was wrong in adding the aforesaid amount as income of the assessee. We feel that no opinion contrary to the views expressed by the learned Tribunal in directing deletion of the aforesaid sum is plausible in the given facts of the case.
12. In the result, both the questions are answered in favour of the assessee and against the Revenue.