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2021 (8) TMI 1167 - AT - Income TaxLeasehold rights amortised by assessee during the lease period - HELD THAT - Assessee obtained right to operate and manage Asian Heart Foundation by virtue of an agreement dated 20/01/2008 for 25 years, as paid by assessee. Assessee amortised the said amount over the lease period. When this issue came up before this Tribunal for the first time for assessment year 2009-10 - CIT(A) deleted the disallowance by following the above view taken by this Tribunal. Admittedly there is no difference in the facts considered by the co-ordiante bench for asst. year 2009-10 and the year under consideration. Amount paid towards the leasehold rights of Modern Medical Institute of society, Raipur - HELD THAT - Admittedly the laundry observes that the said payment is made by assessee to operate and manage Modern Medical Institute of society, for a period of 15 years with an extension of five years. In the terms and conditions the consideration payable by assessee to Modern Medical Institute is 2.5% per annum of the gross revenue for each financial year of hospital or 1.25 crore per annum whichever is higher - Parties that in the first year 2.5% of the gross revenue shall be payable by assessee as in advance. Assessee has thus paid sum of ₹ 1.25 crore which stands adjusted towards the payment of outstanding loans as a precondition - as agreed between the parties that, all payment made by assessee to Modern Medical Institute shall be subjected to tax deducted at source - amortisation amount paid to Modern Medical Institute is different for every year. Under such circumstances, how the amortisation amount is determined by assessee for every year needs to be verified in terms of the payment condition agreed between the parties. We therefore remand this issue back to the AO for verification of the working. AO to apply the principle laid down by coordinate bench of this Tribunal while considering the payment made by assessee to Asian Heart Foundation. Disallowance made under corporate social responsibility - HELD THAT - For year under consideration, it is not the case revenue that expenditure has not been incurred. As the facts are identical, and the expenditure incurred for CSR are of similar nature, in our opinion they are allowable as expenditure under section 37 of the Act, as it has been clearly incurred for furtherance of assessee s business in other parts of the country. Respectfully following the view taken by the co-ordinate Bench herein above we do not find any infirmity in the view taken by the Ld.CIT(A). Disallowance of provision of leave salary expenses - HELD THAT - This issue now sand settle against assessee by the decision of Hon ble Supreme Court in case of UOI vs. Exide Industries 2020 (4) TMI 792 - SUPREME COURT as upheld constitutional validity for the allowability of deduction for leave encashment u/s 43B(f) of the Income Tax Act, 1961, on payment basis.We therefore direct the Ld.AO to compute the disallowance to the extent of unpaid amount, in accordance with the ratio of Hon ble Supreme Court. Claim raised under section 35AD - Authorities below rejected the claim of assessee as it was not made before the Ld.AO by way of revised return - HELD THAT - Similar issue was considered in case of Goetze India Ltd vs.CIT 2006 (3) TMI 75 - SUPREME COURT held that the claim of deduction not made in the return cannot be entertained by the assessing officer otherwise than by filing a revised return. The court also held that the decision does not impinge upon the powers of the Tribunal under section 254 of the Act. Respectfully following the above ratio, we remand this issue back to the Ld.AO for consideration
Issues Involved:
1. Disallowance of rental expenditure amortized in the books of account. 2. Disallowance of Corporate Social Responsibility (CSR) expenses. 3. Disallowance of provision towards unpaid leave salary encashment. 4. Claim under section 35AD of the Income Tax Act. Detailed Analysis: 1. Disallowance of Rental Expenditure Amortized in the Books of Account: The assessee entered into management agreements to operate and manage hospitals at Kolkata and Raipur, making substantial payments for leasehold rights. The assessee amortized these payments over the lease periods, treating them as rent in its books of account. The Assessing Officer (AO) disallowed these expenditures, treating them as capital in nature. However, the CIT(A) deleted the disallowances, following the Tribunal's decisions in the assessee’s own case for previous assessment years. The Tribunal upheld the CIT(A)'s decision, noting that the agreements were commercial in nature, intended for business expediency, and the payments were treated as rental income by the lessors. The Tribunal emphasized that the agreements should be read in their entirety to understand the parties' intentions, and the amortized amounts were correctly treated as rent. 2. Disallowance of Corporate Social Responsibility (CSR) Expenses: The AO disallowed the CSR expenses, arguing there was no nexus between the expenditure and the assessee’s business. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision. The Tribunal referred to its previous decisions in the assessee’s own case, where similar CSR expenses were allowed as they were incurred for running free clinics and medical camps, which were in line with the assessee’s business of providing medical services. The Tribunal concluded that the CSR expenses were incurred for the furtherance of the assessee’s business and were allowable under section 37 of the Act. 3. Disallowance of Provision Towards Unpaid Leave Salary Encashment: The AO disallowed the provision for leave salary expenses under section 43B(f) of the Act, as the amounts were not actually paid. The CIT(A) deleted the disallowance, but the Tribunal reversed this decision, following the Supreme Court's ruling in UOI vs. Exide Industries. The Supreme Court upheld the constitutional validity of section 43B(f), allowing deductions for leave encashment only on a payment basis. The Tribunal directed the AO to compute the disallowance to the extent of unpaid amounts. 4. Claim Under Section 35AD of the Income Tax Act: The assessee's claim under section 35AD was disallowed by the AO and upheld by the CIT(A) because it was not made through a revised return. The Tribunal remanded the issue back to the AO for reconsideration, following the Supreme Court's decision in Goetze India Ltd vs. CIT. The Tribunal noted that while the AO cannot entertain claims not made in the return without a revised return, the Tribunal has the power to consider such claims. The AO was directed to verify the claim based on the details filed by the assessee and consider it in accordance with the law. Conclusion: The Tribunal partly allowed the revenue's appeals and allowed the assessee's appeal for statistical purposes, directing the AO to reconsider specific issues based on the Tribunal's guidance and legal precedents.
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