2014 (2) TMI 1340 - AT - Income Tax

Additions towards capital expenses - current repairs - purchase of particular tube which is a part of the CT Scanner - purchase of UST-5299, PGS online UPS, Water flow PCB and PCB INJ LV - CIT(A) accepted the contention of the assessee with regard to the Dura 352-X-Ray Tube for CT Scanner amounting to ₹ 19,75,000/- and deleted the disallowance and confirmed the rest of the disallowance for the reasons mentioned in his order. - Held that - We concur with the views of the ld. CIT(A) with regard to deletion of addition of ₹ 19,75,000/- which was a part of the C.T. Scanner and is not a machinery by itself. But at the same time, the ld. CIT(A) is not justified in confirming the addition of UST-5299, PGS online UPS, Water flow PCB and PCB INJ LV control - additions on account of UST-5299, PGS online UPS, Water flow PCB and PCB INJ LV control deleted - Decided in favor of assessee and against the revenue. Disallowance of expenses - catering expenses - hotel bills expenses - Held that - These expenses claimed by the assessee have been incurred for the first time for starting cancer unit during the impugned year and earlier the patients were making their own arrangements for meals. The system adopted by the assessee that during the period of admission no separate charges for food were billed and the same were inclusive in the package/room rent. One half meal or tea is taken at ₹ 80 and ₹ 30 on the day of discharge. The Ld. CIT(A) has rightly scrutinized the bills which were also before the AO and has rightly come to the conclusion that no addition can be made by the AO - Decided in against the revenue.

Summary

Issues Involved:
1. Deletion of addition on account of catering expenses.
2. Deletion of addition on account of hotel bills expenses.
3. Deletion of addition on account of capital expenses.
4. Capitalization of machinery repairs and maintenance expenses.

Detailed Analysis:

1. Deletion of Addition on Account of Catering Expenses:
In ITA No. 217(Asr)/2013 for the assessment year 2008-09, the Assessing Officer (AO) noticed an expenditure of Rs. 30,62,138/- debited under catering expenses and questioned the absence of corresponding bills raised on patients. The AO disallowed Rs. 7,65,534/- (25% of the expenses) due to lack of separate records and justification for higher billing rates. The CIT(A) admitted additional evidence, including an indoor patients register, and deleted the disallowance. The Tribunal upheld the CIT(A)'s decision, noting the expenses were incurred for starting a cancer unit and were included in the room rent package, finding no infirmity in the deletion of the addition.

2. Deletion of Addition on Account of Hotel Bills Expenses:
The AO also disallowed 25% of other hotel bills claimed under conference expenses due to lack of detailed bills. The CIT(A) admitted additional evidence, including attendance records of doctors at conferences, and deleted the disallowance. The Tribunal concurred with the CIT(A), noting that the hotel bills were on record and no specific defects were pointed out. Thus, the Tribunal found no infirmity in the deletion of the addition.

3. Deletion of Addition on Account of Capital Expenses:
In ITA No. 218(Asr)/2013 for the assessment year 2009-10, the AO disallowed Rs. 8,72,976/- on catering expenses, which was deleted by the CIT(A). The Tribunal found the facts identical to the previous year and upheld the CIT(A)'s deletion of the addition.

4. Capitalization of Machinery Repairs and Maintenance Expenses:
The AO treated certain repair and maintenance expenses as capital expenses, disallowing Rs. 21,03,362/- after allowing depreciation. The CIT(A) deleted the disallowance of Rs. 19,75,000/- for a Dura 352-X-Ray Tube, considering it part of the CT Scanner, but confirmed the rest. The Tribunal agreed with the CIT(A) on the deletion of Rs. 19,75,000/- but reversed the confirmation of other additions, noting these were parts of the main machinery and should be treated as repairs and maintenance. Consequently, the Tribunal directed the AO to delete the additions of Rs. 2,00,000/-, Rs. 43,118/-, Rs. 92,126/-, and Rs. 1,96,064/-.

Conclusion:
The Tribunal dismissed the Revenue's appeals in ITA Nos. 217 & 218(Asr)/2013 and allowed the assessee's cross objection in C.O. No. 22(Asr)/2013, finding no infirmity in the CIT(A)'s decisions on catering and hotel expenses and reversing the capitalization of certain repair expenses. The order was pronounced in the open court on February 24, 2014.