2003 (4) TMI 85 - HC - Income Tax

Whether, on the facts and circumstances of the case, the Tribunal was correct in law in holding that the nursing home could be run only by a qualified doctor? Held that the Tribunal was not correct in holding that the nursing home can be run only by qualified doctors - Whether, on the facts and circumstances of the case, the Tribunal had any material to hold that the assessee was paying only rental for beds and equipments of the nursing home and in further holding that the nursing home was run by the assessee? - Whether, on the facts and circumstances of the case, the Tribunal was correct in holding that income from running the physiotherapy centre did not represent the income of Smt. Shobha Srivastava but was the income of the assessee? - Whether, on the facts and circumstances of the case, the Tribunal was correct in holding that the income from operation of the x-ray machine did not belong to Shri Sanjay Srivastava but was the income of the assessee?

Summary

Issues Involved:
1. Income derived from running the nursing home.
2. Requirement of a qualified doctor to run a nursing home.
3. Rental payments and operation of the nursing home.
4. Income from the physiotherapy center.
5. Professional qualification for deriving income from the physiotherapy center.
6. Income from the operation of the x-ray machine.
7. Requirement of a qualified doctor for operating the x-ray machine.
8. Control and supervision of the nursing home, physiotherapy center, and x-ray machine.
9. Computation of income by including income earned by the family members.

Detailed Analysis:

Issue 1: Income Derived from Running the Nursing Home
The Tribunal held that the income derived by Shri Bhagwan Prasad from running the nursing home was the income of the assessee. This decision was based on the view that the assessee's father, wife, and son were not professionally qualified to run the nursing home and thus the income should be attributed to the assessee.

Issue 2: Requirement of a Qualified Doctor to Run a Nursing Home
The Tribunal's observation was that the nursing home could only be run by a qualified doctor. However, the High Court found this to be legally erroneous, stating, "It is not essential that the persons who are proprietor of the nursing home should also be doctors." The High Court noted that the father had employed qualified doctors to look after patients and perform surgeries, and thus the Tribunal's finding was based on partly relevant and partly irrelevant considerations.

Issue 3: Rental Payments and Operation of the Nursing Home
The Tribunal had held that the assessee was paying rental for beds and equipment and was effectively running the nursing home. However, the High Court found that the Commissioner of Income-tax (Appeals) had considered evidence showing that the father had made investments from his personal resources and had engaged doctors for the nursing home. The High Court directed the Tribunal to reconsider this issue in light of the correct legal position.

Issue 4: Income from the Physiotherapy Center
The Tribunal held that income from the physiotherapy center did not represent the income of Smt. Shobha Srivastava but was the income of the assessee. The High Court noted that the Commissioner of Income-tax (Appeals) had considered evidence that the wife had some experience in physiotherapy, had engaged a technical person, and made investments from the sale of jewelry. The Tribunal was directed to reconsider this issue as well.

Issue 5: Professional Qualification for Deriving Income from the Physiotherapy Center
The Tribunal concluded that income from the physiotherapy center could only be derived by a professionally qualified physiotherapist. The High Court found this conclusion to be based on irrelevant considerations, as the wife had engaged qualified personnel to run the center.

Issue 6: Income from the Operation of the X-ray Machine
The Tribunal held that the income from the operation of the x-ray machine did not belong to Shri Sanjay Srivastava but was the income of the assessee. The High Court noted that the Commissioner of Income-tax (Appeals) found that the son had purchased the x-ray machines from his mother. This issue was also directed to be reconsidered by the Tribunal.

Issue 7: Requirement of a Qualified Doctor for Operating the X-ray Machine
The Tribunal's view was that income from the operation of the x-ray machine could belong only to a qualified doctor. The High Court found this to be legally erroneous, as the ownership and operation of the x-ray machine could be separate from the professional qualifications of the owner.

Issue 8: Control and Supervision of the Nursing Home, Physiotherapy Center, and X-ray Machine
The Tribunal held that the operation of these facilities was under the control and supervision of the assessee. The High Court directed the Tribunal to reconsider this finding, taking into account the evidence provided by the assessee and the Commissioner of Income-tax (Appeals).

Issue 9: Computation of Income by Including Income Earned by Family Members
The Tribunal had directed the inclusion of income earned by the wife, father, and son in the hands of the assessee. The High Court found that the Tribunal's findings were based on partly relevant and partly irrelevant considerations and directed the Tribunal to reconsider the computation of income.

Conclusion:
The High Court concluded that the Tribunal was not correct in holding that the nursing home could be run only by qualified doctors. It directed the Tribunal to reconsider questions Nos. 3, 4, 5, and 6 in light of this conclusion. The parties were directed to bear their own costs.