Income Tax Appellate Tribunal - Ahmedabad
The Dcit, Circle- 2(1)(1),, Ahmedabad vs Esaote India (Ns) Limited,, Ahmedabad on 31 July, 2018
आयकर अपील
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IN THE INCOME TAX APPELLATE TRIBUNAL
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BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER
And SMT MADHUMITA ROY, JUDICIAL MEMBER
आयकर अपील सं./I.T.A.
No.55/Ahd/2016
( नधा रण वष / Assessment Year : 2012-13)
The Deputy Commissioner of बनाम/ Esaote India (NS)
Income Tax, Vs. Ltd.,
Circle - 2(1)(1), B/604/704, Oxford
Ahmedabad. Tower, Gurukul,
Ahmedabad - 380 052.
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACE 7569 H
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ ओर से /Appellant by : Shri Prasoon Kabra, Sr. D.R.
यथ क ओर से/Respondent by : Shri S. K. Sodhwani, A.R.
ु वाई क तार ख /
सन Date of Hearing 26/06/2018
घोषणा क तार ख /Date of Pronounce ment 31/07/2018
आदे श / O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Revenue against the appellate order of the Commissioner of Income Tax(Appeals)-7, Ahmedabad [CIT(A) in short] vide appeal no.CIT(A)- 7/383/15-16 dated 14.10.2015 arising in the assessment order passed under s.143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dated 12.01.2015 relevant to Assessment Year (AY) 2012-13.
2. The grounds of appeal raised by the Revenue are as under:-
"1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance made by the AO u/s.40(a)(ia) of the Act amounting ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13 -2- to Rs.10,77,754/-, without properly appreciating the facts of the case and the material brought on record.
2. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs.47,20,260/- u/s.37 of the Act, without properly appreciating the facts of the case and the material brought on record.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.
4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.
5. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary."
3. The first issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for Rs.10,77,754/- u/s 194A r.w.s. 40(a)(ia) of the Act.
4. Briefly stated facts are that the assessee in the present case is a limited company and engaged in the business of Imports & Re-sale of Medical Electronics Equipment & Providing after sales & warranty services for the same.
The assessee during the year has claimed interest expenses, which were paid to Non-Banking Financial Companies amounting to Rs.10,77,754/- only. However, the assessee failed to deduct the TDS on the payment of interest made to such companies u/s 194A r.w.s. 40(a)(ia) of the Act. Therefore, the AO disallowed the same and added to the total income of the assessee.
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5. Aggrieved, assessee preferred an appeal to ld. CIT(A). The assessee before the ld. CIT(A) filed the details of the companies to whom the interest was paid as detailed under:
"Name Int. Credited/paid.'
(i) TATA Capital Financial Services Ltd 241743/-
(ii) TATA Capital Financial Services Ltd. 89183/- 330936/-
(iii) India Bulls Financial 289939/-
(iv) Magma Fin Corp 147229/-
(v) Barclays Investments & Loans (India) Ltd. 309660/-
Total 1077754/-"
The assessee further submitted that it had obtained requisite certificates from the parties above mentioned in Form No. 26A showing that the receipts from the assessee have been included in their respective books of accounts and these parties have paid the taxes. Therefore, the assessee should not be treated as assessee in default u/s 201(1) of the Act. Accordingly, no disallowance on account of non- deduction of TDS can be made.
The assessee also submitted that these Forms 26A were to be filed with the DGIT (Systems) or any person authorized by DGIT (Systems) as per the Rule 31ACB of Income Tax Rule. However, this requirement to file the certificate to DGIT (Systems) was inserted on 19-02-2013. Thus, during the relevant time, there was no authority prescribed for filing the requisite form as discussed above.
The assessee further submitted in respect of interest paid to the party mentioned at Serial No. 5 i.e., Barclays Investments and Loans (India) Limited that it had filed a certificate u/s 195(3) of the Act to the assessee ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13 -4- for not deducting the TDS. Therefore, no TDS was deducted on the payment of interest to Barclays Investments and Loans (India) Limited. The ld. CIT(A) after considering the submission of the assessee deleted the addition made by the AO by observing as under :
"4.4.1 A perusal of the submissions made by the appellant during the appellate proceedings shows that form No. 26A and Annexure A i.e. certificate of the accountant as required under the proviso to Section 201(1) has been furnished by the appellant in respect of interest paid to Tata Capital Financial Services Ltd., India Bulls Financial and Magma Fin Corp. It has been certified that the amount of interest paid to these companies has been considered in the computation of their taxable income and the companies have also filed their returns of income and paid the taxes due. The A.O in the remand report has objected to the furnishing of Form 26A stating that as per Rule 31ACB, the certificate of the accountant is to be furnished to the DG[Systems] or to a person authorized by him. A perusal of the relevant Rule shows that Rule 31ACB prescribing the furnishing of Form 26A to DGIT (Systems) or person authorized by DGIT (Systems] was substituted by the IT (Second Amdt] Rules, 2013, w.e.f. 19-2-2013. Prior to its substitution, rule 31ACB, as inserted by the IT (Eleventh Amdt.) Rules, 2012, reads as under:
"31ACB. Form for furnishing certificate of accountant under the first proviso to subsection (1) of section 201. - The certificate from an accountant under first proviso to sub section (1) of section 201 shall be furnished in Form No. 26A."
Thus, the requirement for furnishing certificate to DGIT(Systems) has been incorporated w.e.f. 19-2-2013 only and prior to amendment on 19-2-2013, ie during the year under consideration in the instant case, there was no requirement of furnishing Form 26A before DGIT(Systems).
In view of the fact that Form 26A has been filed by the appellant and the interest paid to these NBFC's has been included in their taxable income, the disallowance made in respect of Tata Capital Financial Services Ltd, India Bulls Financial and Magma Fin Corp is deleted.
ITA No.55/Ahd/2016DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13 -5- In respect of the interest of Rs.3,09,660/- paid to Barclays Investments and Loans (India) Ltd., it is seen that the DDIT (International Taxation), Mumbai has authorized the said NBFC to receive the interest without deduction of taxes at source. In this context, the relevant Section i.e. Section 195(3) of the I.T. Act is reproduced as under:
"Subject to rules made under sub-section (5), any person entitled to receive any interest or other sum on which income tax has to deducted under sub- section (1) may make an application in the prescribed form to the [Assessing] Officer for the grant of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1)"
Thus, since the appellant company was exempted from deduction of tax at source in respect of interest paid to Barclays Investments and Loans (India) Ltd., no disallowance u/s. 40(a)(ia) was called for. In view of the discussion above, the disallowance of Rs.10,77,754/- is deleted. Ground of appeal No 1 is accordingly allowed."
Being aggrieved by order of ld. CIT(A) Revenue is in appeal before us. Both the parties before us relied on the order of authorities below as favorable to them.
6. We have heard the rival contentions and perused the materials available on record. The issue in this instant case relates to the expenses claimed by the assessee without deducting TDS. The ld. AR before us inter-alia submitted that there is an amendment by the Finance Act 2012 which provides that no disallowance needs to be made if the recipient has ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13 -6- included the payment made by the assessee in its receipts and has paid the taxes thereon. In this regard, we find force in the argument of the ld. AR.
There is an amendment in the 1st proviso to Sec. 201, wherein, if any payee has paid the taxes by offering/disclosing the said receipt in its return of income, then the payer (the assessee herein) should not be treated as assessee in default. The said proviso reads as under :
Consequences of failure to deduct or Pay
201. (1) Where any person, including the principal officer of a company,--
(a) who is required to deduct any sum in accordance with the provisions of this Act; or
(b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, without prejudice to any other consequences which he may incur, be deemed to be an assessee in default in respect of such tax:
[Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee in default in respect of such tax if such resident--
(i) has furnished his return of income under section 139;
(ii) has taken into account such sum for computing income in such return of income; and
(iii) has paid the tax due on the income declared by him in such return of income, and the person furnishes a certificate to this effect from an accountant in such form as may be prescribed:] We also note that the similar amendment was also brought under the provisions of section 40(a)(ia) of the Act which reads as under :
"Amounts not deductible.ITA No.55/Ahd/2016
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40. Notwithstanding anything to the contrary in sections 30 to 31[38], the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession",--32
(a) XXXXXXXXXXXX (ia) any interest, commission or brokerage, 34[rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, 35[has not been paid on or before the due date specified in sub-section (1) of section 139 :] 36 [Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] The following second proviso shall be inserted in sub-clause (ia) of clause (a) of section 40 by the Finance Act, 2012, w.e.f. 1-4-
2013 :
Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1)of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso."
The said proviso though inserted by the Finance Act 2012 w.e.f. 1-4- 2013 has been held to be retrospective in operation by recent decision of the Hon'ble Delhi High Court in the case of CIT v. Ansal Land Mark Township (P) Ltd. (2015) 61 taxmann.com 45 (Del) wherein the question ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13 -8- raised before the court and the decision rendered thereon is reproduced herein below for the sake of clarity:-
"Question: Whether the second proviso to Section 40(a)(ia) (inserted by the Finance Act, 2012), which states that TDS shall be deemed to be deducted and paid by a deductor if resident recipient has disclosed the amount in his return of income and paid tax thereon, is retrospective in nature or not?"
Held: Section 40(a)(ia) was introduced by the Finance (No.2) Act, 2004 to ensure that an expenditure should not be allowed as deduction in the hands of an assessee in a situation where income embedded in such expenditure has remained untaxed due to tax withholding lapses by the assessee.
Hence, section 40(a)(ia) is not a penalty provision for tax withholding lapse but it is a provision introduced to compensate any loss to the revenue in cases where deductor hasn't deducted TDS an amount paid to deductee and, in turn, deductee also hasn't offered to tax income embedded in such amount The penalty for tax withholding lapse per se is separately provided under section 271C and, therefore, section 40(a)(i) isn't attracted to the same. Hence, an assessee could not be penalized under section 40(a)(ia) when there was no loss to revenue.
The Agra Tribunal in the case of Rajiv Kumar Agarwal-vs-ACIT [2014] 45 taxmann.com 555 (Agra - Trib) had held that the second proviso to Section 40(a)(ia) is declaratory and curative in nature and has retrospective effect from 1st April, 2005, being the date from which sub-clause (ia) of section 40(8) was inserted by the Finance No.(2) Act, 2004, even though the Finance Act, 2012 had not specifically stated that proviso is retrospective in nature.
The High Court affirmed the ratio laid down by the Agra Tribunal and held that said provisos is declaratory and curative in nature and ha retrospective effect from 1st April, 2005."
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Asst.Year -2012-13 -9- Respectfully following the aforesaid decision of the Hon'ble Delhi High Court in the case of Ansal Land Mark Township (P) Ltd., (supra) we hold that the claim of the assessee for the interest expenses cannot be denied due to non deduction of TDS under section 194A r.w.s.40(a)(ia) of the Act.
About the interest payment to the party mentioned at Serial No.5 i.e. Barclays Investments and Loans (India) Limited, we note that it has filed a certificate u/s 195(3) of the Act to the assessee for the deduction of TDS at NIL rate. Therefore, in our considered view there was no liability for the deduction of TDS on the payment of interest to Barclays Investments and Loans (India) Limited.
Accordingly, we do not want to disturb the finding of the ld. CIT-A. Thus we direct the AO to delete the same. Thus the ground of appeal of the Revenue is dismissed.
7. The second issue raised by the Revenue in this appeal is that ld. CIT(A) erred in deleting the addition made by the AO for Rs.47,20,260/- on account of infringement of the law.
8. The Assessee during the year has incurred an expense of Rs.47,20,260/- under the head of sales promotion expenses. The assessee claimed that it had supplied UPS / Digital Thermal B/W Printer & Color inkjet printer to Central Medical Stores Organizations free of cost. The assessee further claimed that the material was supplied free of cost in ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
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pursuance of the purchase order received from Central Medical Stores Organizations.
However, the AO was of the view that the gift given by pharmaceutical and allied health sector industries to medical practitioners and their professional association is prohibited under the Medical Council Act, 1956. Accordingly, the expenses cannot be allowed under explanation to Section 37(1) of the Act. The AO in support of his claim placed reliance on the CBDT Circular No.5 of 2012 issued on 01.08.2012. Accordingly, the AO disallowed the expenses and added to the total income of the assessee.
9. Aggrieved, assessee preferred an appeal before ld. CIT(A). The assessee before the ld CIT(A) submitted that sales promotion expenses were incurred by supplying accessories to its actual customers/buyers and these were not supplied to any third party. The assessee furnishes the breakup of sales promotion expenses, which is reproduced as under:
"(a) Government Sale (Accessories) : 3829092 These expenses include UPS, printer, spares, electrical, DVDs required for running and handling the machine.
(b) Doctors/Hospitals Sales (Accessories) : 479094 These expenses include UPS, printer, spares, electrical DVDs required for running and handling the machine.
(c) Sundry, spares, electrical items, etc. : 412074
Total Sales Promotion expenses 4720260"
The assessee also submitted that there was no show-cause notice issued by the AO before making the disallowance of sales promotion expenses.ITA No.55/Ahd/2016
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Similarly, the disallowance has been made merely by similar disallowance made in the preceding A.Y. 2010-11.
The products supplied under the head sales promotion expenses were actually delivered to the Govt. Hospitals / other hospitals as part of purchase orders. The assessee in support of his claim also submitted a copy of purchase order.
It was also submitted that the CBDT Circular No.5 of 2012 was applicable to pharmaceutical company and allied health sector industries but the activity of the assessee does not fall in the category of pharmaceutical company or allied health sector industry. Therefore, the provision of the said circular cannot be made applicable to the assessee. In fact, the sales promotion expenses represent the product supplied to the Govt. Hospital in pursuance to the purchase order issued by the Govt. of Gujarat.
The ld. CIT(A) after considering the submission of the Assessee deleted the observation made by the AO by observing as under:
"6.2 I have considered the assessment order and the submissions made by the appellant. A perusal of the assessment order shows that the AO had disallowed the amount of Rs.47,20,260/- debited as sales promotion expenses in view of CBDT Circular No. 5 of 2012. This Circular was issued by the CBDT to curb the practice of pharma companies offering gifts for promotion of their products. The appellant has submitted during appellate proceedings that it was not a pharmaceutical company but was engaged in the business of supplying medical equipments imported from other countries. Hence, the said Circular was not applicable to it. After a perusal of the submissions ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
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made by the appellant, I am of the opinion that disallowance of sales promotion expenses by applying provisions of Circular No.5/2012 cannot be made since the appellant is not a pharmaceutical company. The items which were given by the appellant company were not free items but were part and parcel of the machineries and equipments that were supplied by it to various customers. Further, it is also seen that most of the expenses incurred is on account of sales made to Government hospitals. Most of these expenses pertain to the cost of accessories and peripherals supplied to customers and needed for the operation of the machines. Moreover, an similar addition on identical facts in the appellant's own case for Asst. Year 2010-11 was decided in favour of the appellant by the learned CIT(A)-VIII, Ahmedabad vide his order No. CIT(A)-VIII/DCIT/Cir-4/131/12-13 dated 11.10.2013. Respectfully following the decision of my predecessor and in view of the facts of the case, the addition of Rs.47,20,260/- is deleted. Ground of appeal No.3 is accordingly allowed."
Being aggrieved by the order of ld CIT(A) Revenue is in the second appeal before us. The ld. DR before us submitted that the activity of the assessee falls under the allied health sector industry. Therefore, the Circular is very much applicable to the assessee.
The Circular was issued by CBDT dated 05/2012 but it was applicable retrospectively. In this regard, the ld DR relied on the judgment of Hon'ble High Court of Himachal Pradesh in the case of Confederation of Indian Pharmaceutical Industry (SSI) (having its registered office at A- 3/314, First Floor, Paschim Vihar, New Delhi - 110063) through its Vice President Sh. T.C. Kansal (Director) M/s Systol Remedies Pvt. Ltd., Trilokpur Road, Opp. Petrol Pump, Kal Amb, Distt. Sirmour (H.P.) vs. 1. The Central Board of Direct Taxes, Norht Block, New Delhi - 1100001,
2. Union of India, through Secretary Ministry of Finance, North Block, New Delhi - 110001 vide CWP No.10793 of 2012-J. ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
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The ld. Departmental Representative also submitted that the payment to the doctors and their associations as a gift is illegal, which cannot be allowed u/s 37(1) of the Act. Therefore, this deduction on account of sales promotion expenses cannot be allowed though the Circular was issued in the later years. The ld. D.R. in support of his claim has also relied on the order of Mumbai Tribunal in the case of ACIT vs. Liva Healthcare Limited reported in 73 Taxmann.com 171.
On the other hand, the ld. AR filed a Paper book which is running from pages 1 to 67 and submitted that the activity of the assessee does not fall under the category of pharmaceutical and allied health Sector Industries. Therefore, the Circular issued by the CBDT cannot be applied to the instant case.
Ld. AR further submitted that the products were supplied in pursuance to the purchase order issued by the Govt. of Gujarat, which is placed on Pages 23 to 28. Therefore it cannot be concluded that the products were supplied free of cost. The ld, AR further submitted that the Circular issued by the CBDT is not applied retrospectively. In this regard, the ld. AR relied on the order of Mumbai Tribunal in the case of Macleods Pharmaceuticals Ltd vs. ACIT reported in 161 ITR 291.
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The ld. AR in support of his claim also relied on the order of this Jurisdictional Tribunal in the case of M/s. Cadila Pharmaceutical Ltd vs. DCIT in ITA No.1117/Ahd/2012.
The Ld. DR in his rejoinder submitted that if products were supplied to the Government Hospital in pursuance to the purchase order, then it should not be shown under the head sales promotion expenses. Rather it should have been shown in the financial Statement as purchase and sales of the goods.
The ld. AR in his rejoinder submitted that the products supplied to Government Hospitals wrongly categorized under the head sales promotion expenses. In fact, it represents the purchases of the goods, which were subsequently sold to the Government hospitals. The ld. AR vehemently supported the order of Ld. CIT(A).
10. We have heard the rival contention and perused the material available on record. In the present case, the assessee has supplied certain products free of cost to the government hospitals and other hospitals, which were claimed as a deduction under the head sales promotion expenses. The AO was of the view that goods supplied to the doctors and other professional association free of cost are prohibited in terms of Circular No.5/2012 issued by CBDT dated 01.08.2012.
However, the ld CIT(A) reversed the order of AO by observing that the assessee is not a pharmaceutical company. Therefore, the Circular issued ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
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by CBDT cannot be applied. The ld. CIT(A) also observed that the assessee had not supplied any item free of cost to the hospitals, but these items were representing part of the machinery and equipments supplied to various parties.
Now the issue before us arises for our adjudication ase detailed as under:
i. Whether the Circular No.5/2012 issued by CBDT is applicable retrospectively or prospectively.
ii. Whether the assessee falls under the category of pharmaceutical company/allied sector undertaking as discussed above.
iii. Whether the items supplied by the assessee are part of the machines / equipments supplied to the customers.
At the onset, we note that the CBDT circulars are not binding on the Tribunal as held by the Hon'ble Apex Court in the case of CIT Vs. Hero Cycles Private Limited reported in 94 taxman 271 wherein it was observed as under :
14. Moreover, it is well-settled that circulars can bind the ITO but will not bind the appellate authority or the Tribunal or the Court or even the assessee. There is nothing in the alleged circular which supports the contention of the assessee. It merely says that each case has to be examined and the issue would be basically a find of fact. The assessee had not made his claim before the ITO by relying on this circular.
We also note that the benevolent circulars issued by the CBDT are binding on the Tribunal as held by the judgment of Hon'ble Supreme Court in the case of Keshavji Ravji & Co. Vs. CIT reported in 183 ITR 1 wherein it was observed as under :
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The task of interpretation of the laws is the exclusive domain of the courts. However, - this is what Shri Ramachandran really has in mind - circulars beneficial to the assessees and which tone down the rigour of the law issued in exercise of the statutory power under section 119 of the Act or under corresponding provisions of the predecessor Act are binding on the authorities in the administration of the Act. The Tribunal, much less the High Court, is an authority under the Act. The circulars do not bind them. But the benefits of such circulars to the assessees have been held to be permissible even though the circulars might have departed from the strict tenor of the statutory provision and mitigated the rigour of the law. But that is not the same thing as saying that such circulars would either have a binding effect in the interpretation of the provision itself or that the Tribunal and the High Court are supposed to interpret the law in the light of the circular. There is, however, support of certain judicial observations for the view that such circulars constitute external aids to construction.
In view of the above, we hold that no reliance can be placed on the CBDT circular as discussed above.
Besides the above, we also note that in the case on hand the goods were supplied to the hospitals in pursuance to the purchase order which is placed on the pages 23 to 28 of the PB. The relevant extract of the purchase order is reproduced as under :
"SCHEDULE TO ACCEPTANCE OF TNEDER NO :
CMSO/INST/F.196/2010-11
PLACE WITH:
M/s. Esaote India (NS) Limited,
B-604/704,Oxford Tower, Gurukul,
Ahmedabad - 380 052, India
Item Descriptions of Stores Quantity Rate Total
No.
196.01 Color Dopper 75 Nos. Euro 9900 Euro 742500
Sonography Machine.
Brand : ESAOTE
Model : MY LAB 20
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PLUS
+Custom Duty @ 9.61% Rs.56,817=00 Rs.42,61,275=00 1 Disply-15" high resolution LCD Monitor, Non Interlace, Flicker Free Monitor
a) 1024 or more number of channels
b) Dynamic range > 150
c) Speckle reduction
d) 4D upgradeability of the machine must be more than 25 volumes per second which is optional & price must be fixed.
e) Application-Adomen, Obstetrics, Gynaecology, Cardiology, Urology, small parts 2 Broad Bank Multi Frequency Probe-
Probe details:
(a) 2 to 5 MHz Frequency Convex Probe - 192 elements and 40 R foot print size.
(b) 3.12 MHz Frequency transvaginal angled probe 192 elements and 10-12 Footprint size.
4 Display mode-B, B+B, B+M, M,CINE (500 frames - Cine Storage).
Color mode, bidirectional power Doppler, triplex live, dual live-color & B/w simultaneous. More than 256 frames per second. 5 Digital Scan Converter 512×512×8 with 256 Gray scales. 6 Depth up to 30 Cms (probe dependent) 7 Image processing Separate controls for Dynamic range, gain TGC, Focus, Post Processing and Frame Filters.
8 Magnification 4 × (both in live/ Frozen mode) 9 General Measurements Distance, Velocity, volume, Area and Circumference. Auto Spectral Doppler calculation in live and post freeze images.
10 Application specific measurements, calculations and report formats for. Obstetrics (OB lables, Rations, Art, Growth curves, Bio Physical score) Gynaecology, Abdomen, Urology Cardiology and small parts user aditable report formats.
11 Image labeling aids Application specific body marks, annotations and multi-directional arrows.
12 Non-volatile image and report memory storage and retrieval of up to 500 images and 500 reports.
13 Key board - Alphanumeric Key board with special character keys. 14 External Interface - 2 separate USB ports. DICOM III compatible. 15 Machine should have inbuilt hard disk, having minimum capacity of 80GB ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
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16 Inbuilt CD/DVD writer.
17 Three probe live, universal connecter.
18 Stand alone system for easy movement must be provided with sturdy and smooth in movement castor wheels.
19 Call must be attended within 24 hours, stand by USG machine will be provided within 48 hours and standby color Doppler unit to be provided within one week.
20 Product should confirm to FDA/CE approval. All these certificate should be submitted in hard copy.
21 UPS for the machine with 60 Minutes battery Back up. 22 Digital Thermal B/W Printer & color inkjet printer. A.T. Holder must provide Original documentary proof of the date & place of Manufacturing of Supplied equipments otherwise stores will not be accepted by concern Consignee."
In view of above, we hold that the circular as discussed above is not applicable to the case on hand. Similarly, the facts of the case are different with the order of Mumbai Tribunal in the case of Liva Healthcare Limited (supra) as relied on by the ld. DR. Accordingly no reliance can be placed on such order.
The case relied on by the ld. DR in the case of Confederation of Indian Pharmaceutical Industry (supra) also does not support the Revenue. It is because this case does not talk about the applicability of the Circular issued by the CBDT rather it upheld the validity of the Circular issued by the CBDT. Thus, the argument of the ld DR is that the Circular is applicable with a retrospective date does not hold good. The relevant extract of the order is reproduced below:
"The explanation to Section 37(1) makes it clear that any expenditure incurred by an assessee for any purpose which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession. The sum and substance of the circular is also the same. In ITA No.55/Ahd/2016 DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13
- 19 -
case the assessing authorities are not properly understanding the circular then the remedy lies for each individual assessee to file appeals under the Income-tax Act but the circular which is totally in line with Section 37(1) cannot be said to be illegal. In fact para 4 of the circular quoted hereinabove itself clarifies that the value of the freebies enjoyed by the medical practitioner is also taxable as business income or income from other sources depending on the facts of each case. Therefore, if the assessee satisfies the assessing authority that the expenditure is not in violation of the regulations framed by the medical council then it may legitimately claim a deduction, but it is for the assessee to satisfy the assessing officer that the expense is not in violation of the Medical Council Regulations referred to above.
4. We, therefore, find no merit in the petition, which is accordingly rejected. No costs."
As we have decided the issue in favor of the assessee, other arguments raised by the assessee and revenue becomes infructuous. Therefore, we refrain ourselves from adjudicating them. Thus the ground of appeal is raised by the Revenue is dismissed.
11. In the result, the appeal of the Revenue is dismissed.
This Order pronounced in Open Court on 31/07/2018
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(MADHUMITA ROY) (WASEEM AHMED)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 31/07/2018
Priti Yadav, Sr.PS
ITA No.55/Ahd/2016
DCIT vs. Esaote India (NS) Ltd.
Asst.Year -2012-13
- 20 -
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. संबं'धत आयकर आयु)त / Concerned CIT
4. आयकर आय)
ु त(अपील) / The CIT(A)-7, Ahmedabad.
5. ,वभागीय /त/न'ध, आयकर अपील य अ'धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड4 फाईल / Guard file.
आदे शानुसार/ BY ORDER, स या,पत /त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation 11/07/2018 (dictation-pad 8 pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...17/07/2018
3. Other Member...
4. Date on which the approved draft comes to the Sr.P.S./P.S ...23/07/2018
5. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......
7. Date on which the file goes to the Bench Clerk.....................
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order............