9911796707
TMI Blog2014 (3) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... ve capital account - It is only one of the methods of accounting for bringing the assets and liabilities into the books of the firm - the assessee has paid the net value assets of Rs.35.00 lakhs directly to the concerned partners - Thus it amounts to crediting the partners account with their respective share and immediately making payment of the same to them - the submissions made by the assessee require verification at the end of the assessing officer – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Disallowance of depreciation – Held that:- The AO had disallowed the claim of depreciation on the reasoning that the assessee firm cannot be considered as the beneficial owner of the assets purchased from M/s Venkiteswara Hospital - while dealing with the issue relating to the disallowance of interest claim, the matter of verification of submissions made by the assessee is remitted to the assessing officer – thus, this matter is also required to be remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Disallowance of depreciation on assets purchased from old welcare hospital – Held that:- It is not necessary t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Disallowance u/s 40(a)(ia) of the Act – Interest u/s 234B of the Act - Held that:- The assessee has furnished copy of letter furnished by Dr. Pradeep and also copy of return of income filed by him to show that Dr. Pradeep had disclosed the receipts from the hospital of the assessee - The documents were filed to show that the responsibility to declare the OP & IP collections noticed in the seized records lie upon the concerned doctors - these documents were not considered by the AO – the matter requires adjudication as to the applicability of section 40(a)(ia) of the Act – thus, the matter remitted back to the AO for fresh adjudication – Decided in favour of Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... V. Nazar, whereas the present assessee-firm has got six partners. Hence, the Assessing officer took the view that the assets have been purchased by three persons cited above in their personal capacity. Since the loan availed by the assessee-firm from Catholic Syrian Bank was used for paying the loan liability of Venkiteswara Hospital, the Assessing officer considered the same as diversion of interest bearing funds and accordingly, disallowed the interest claimed thereon. 6. On the contrary, the Ld. AR submitted that the Venkiteswara Hospital was agreed to be purchased for a sum of Rs. 1.35 cores subject to the repayment of liability of Rs. 1.05 crores of Federal Bank. Accordingly, the conveyance deed was executed for a sum of Rs. 30.00 lakhs on 25-05-2005. The assessee also incurred expenses of Rs. 5.00 lakhs towards transfer. Accordingly, the total cost of purchase of Venkiteswara Hospital worked out to Rs. 1.40 crores as detailed below: 1. Value as per document v Rs. 30,00,000/- 2. Liabilities to Federal Bank Ltd. Taken over Rs.1,05,00,000/- 3. Expenses of transfer Rs. 5,00,000/- Total Rs.1,40,00,000/- The Ld. Counsel submitted that the assessing officer did not conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the funds of the assessee-firm only. Accordingly, the assessee availed loan from Catholic Syrian Bank and repaid the same. Accordingly, the Ld A.R contended that there was no diversion of funds as presumed by the Assessing officer. 8. In the rejoinder, the Ld D.R submitted that the assessing officer did not examine the journal entries passed by the assessee and also the agreement referred to by the Ld A.R. 9. We have heard the rival contentions on this issue and perused the record. It is an admitted fact that the assets belonging to M/s Venkiteswara hospital was purchased in the name of three persons, who are also the partners of the assessee firm. The AO has taken the view that they have purchased the same in their personal capacity since:- (a) it was not purchased in the name of the assessee firm or (b) the assets were not brought into the books of the assessee firm by crediting their value in the capital account of the three partners, i.e., according to the AO, while debiting the assets account with the value of assets of M/s Venkiteswara hospital, corresponding credit should have been given to the capital account of the concerned partners. Since the above mentioned two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o transfer the assets and liabilities purchased from M/s Venkiteswara Hospital to the assessee firm were made clear by the agreement dated 28.5.2005 entered between the three persons (in whose name the assets of M/s Venkiteswara Hospital was purchased) and all the partners of the assessee firm. The copy of said agreement is placed at pages 7 to 12 of the paper book filed by the assessee. 12. According to the assessee, it has also brought all the assets and liabilities in its books of account by passing a journal entry and making payment of net asset value. According to the assessee, the net asset value of Rs.30.00 lakhs plus expenses amount of Rs.5.00 lakhs was paid to the concerned partners instead of crediting their respective capital account. We agree with the contentions of Ld A.R that the value of assets brought in by the partners need not always be credited to their respective capital account. It is only one of the methods of accounting for bringing the assets and liabilities into the books of the firm. In the instant case, the assessee has paid the net value assets of Rs.35.00 lakhs directly to the concerned partners. Thus it amounts to crediting the partners account with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm cannot be considered as the beneficial owner of the assets purchased from M/s Venkiteswara Hospital. However, the contention of the assessee is that it has brought all the assets and liabilities taken over from M/s Venkiteswara Hospital into its books by virtue of agreement entered on 28.5.2005 between the partners of the assessee firm and the three partners in whose name the purchase was registered. However, while dealing with the issue relating to the disallowance of interest claim, we have set aside the matter of verification of submissions made by the assessee to the file of the assessing officer. Hence, in our view, this issue should also be examined by the AO afresh along with the issue relating to the disallowance of interest claim. Accordingly, we set aside the order of Ld CIT(A) on this issue in all the years and restore it to the file of the assessing officer with the direction to examine this issue also along with the issue relating to interest claim. 16. The next common issue contested in all the years relates to the disallowance of depreciation claimed on assets purchased from "Old Welcare Hospital". The facts relating to the same are discussed in brief. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the conclusion that there was no such firm in existence as old "Welcare Hospital" and consequently the question of dissolution of partnership and distribution of assets amongst its partners will not arise. Further the AO also observed that the assets have not been brought into the books of the assessee firm. Accordingly he rejected the claim of depreciation on assets of Old Welcare Hospital in all the years. 17. Before the Ld CIT(A), the assessee submitted that the assets of Old welcare hospital have been brought into the books of assessee firm, which is evident from Schedule 'G' of the Balance Sheet. It was also submitted that the assessee also brought into its books the liabilities of the old Welcare hospital and they were paid out the funds of the assessee firm, which fact is not disputed by the AO. The Ld CIT(A) was convinced with the said submissions and further he noticed that the assets were used for the purpose of hospital business and the income generated on usage of those assets have been offered for assessment. Accordingly, he deleted the disallowance of depreciation in all the years. The revenue is aggrieved by the said decision. 18. We have heard rival contentions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee firm, then the assessee firm shall become owner of those assets. Accordingly, we notice that the conditions prescribed u/s 32 of the Act have been satisfied and hence, we find no reason to disallow the claim of depreciation. However, according to the assessing officer, these assets have not been brought into the books of the assessee firm, which is in contradiction to the submissions made by the assessee, i.e., according to the assessee, all the assets have been brought into the books of the assessee firm at the WDV value. We have already noticed that it is not clear as to whether this fact was examined by Ld CIT(A). Hence, this aspect requires verification at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh in the light of discussions made supra and take appropriate decision in accordance with the law. 20. The next common issue contested by the revenue in assessment years 2008-09 and 2009-10 relates to the disallowance of repairs and maintenance expenses. The assessee had claimed expenses towards Repairs and Main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice that the Administrative Commissioner had initiated revision proceedings u/s 263 of the Act in respect of Repairs Expenses in all the four years under consideration and the appeals filed by the assessee before the Tribunal challenging the revision orders have been dismissed. The Ld A.R submitted that the Repairs expenses include both building repairs and other repairs and the revision orders pertain to building repairs only. 23. We notice from the order dated 24-05-2013 passed by this Bench of Tribunal in the assessee's own cases in ITA Nos. 382 to 385/Coch/2012 passed against the revision orders passed by the Ld. Commissioner (referred supra), the Tribunal has examined the issue of nature of expenditure and has given a finding. For the sake of convenience, we extract below the operative portion of the order of the Tribunal: "8. The question arises for consideration is when the taxpayer purchased a new building for establishing hospital and incurred expenditure for making the building fit for the purpose of its business or profession, whether such expenditure could be treated as revenue expenditure or capital expenditure? We find that the Kerala High Court in the case of Vee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1007597 (B) Welcare pharmacy A.Y. 2009-10 Name of Sundry Creditors Amount (Rs.) 1. Dorai Agencies 171816 2. Fathima Drug House 367750 3. Pharma Agencies 161348 4. Rudra Agencies 100422 5. Shanthi Raj Distributors 210935 6. Urban Edge 255497 7. Vinayaka Medicals 100061 8. Thrissur Combines 109385 Total 1477214 However, the assessee did not produce either the creditors or the confirmation letters obtained from them. Hence the Assessing officer assessed the aggregate amount of Rs. 24,84,811/- (10,07,597 + 14,77,214) as the income of the assessee. 25. However, before Ld. CIT(A), the assessee filed the confirmation letters obtained from the creditors. Hence, the Ld. CIT(A) called for a remand report from the Assessing officer. In the remand report, the Assessing officer accepted the following items of sundry creditors: Dadwings Palakkad Rs.3,62,547 Rudra Agencies Rs.1,00,422 Shantiraj Distributors Rs.2,10,935 Vinayaka Medicals Rs.1,00,061 Trichur Combines Rs.1,09,385 In respect of the remaining creditors, there was difference in the balance between the assessee's accounts and the accounts of the creditors in respect of the following three creditors: (a) KA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee did not prefer appeal against the said direction, the assessee is not aggrieved by the decision of Ld CIT(A). Since these parties have furnished the account statement, in our view also, the outstanding balance to the extent shown in the statements of accounts furnished by the parties have to be considered as proved. Hence, the Ld. CIT(A) has directed the Assessing officer to assess the difference between the balances as the income of the assessee. Under these set of facts, we do not find any reason to interfere with his order on this issue. 28. The next issue contested by the revenue in the appeal filed for assessment year 2009-10 relates to the disallowance made u/s 40(a)(ia) of the Act. During the course of assessment proceedings, the AO noticed that the assessee has been making payments of IP and OP collections to the doctors, which were also evidenced by the seized documents numbered as MVR-A1 to MVR-A3 and APCM2 to APCM9. During the course of search proceedings, sworn statements were recorded from one of the employees named Smt. Anitha and also from the Managing partner of the assessee firm Shri A.V. Sathar. Both of them confirmed that the OP & IP collections pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 194J of the Act in respect of payments made to the doctors and hence the AO has disallowed the same by invoking the provisions of sec. 40(a)(ia) of the Act. 31. The Ld Counsel for the assessee, however, submitted that the assessee has provided facilities to the visiting doctors and has collected the OP & IP fee on their behalf. At the end of the day, the assessee has handed over the collections to the respective doctors. He submitted that the assessee firm was not entitled to any part of such collections. Hence there was no necessity for the assessee to account for either the collections made on behalf of the doctors or the payments made to them. The Ld Counsel submitted that the employee of the assessee as well the Managing partner have clarified this factual position in the sworn statement taken from each of them separately. Further, the assessee has also filed a letter obtained from one of the main doctors named Dr. Pradeep to substantiate this factual position. The ld Counsel further submitted that the doctors are not employees of the assessee firm and they were allowed to practice in the hospital of the assessee in the best of interest of the hospital, i.e., on commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not claim the payments made to the doctors as its expenditure , i.e., according to Ld A.R, the provisions of sec. 40 of the Act lists out the expenditure which shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession". 34. We have already noticed that the assessee has furnished copy of letter furnished by Dr. Pradeep and also copy of return of income filed by him to show that Dr. Pradeep had disclosed the receipts from the hospital of the assessee. The said documents were filed to show that the responsibility to declare the OP & IP collections noticed in the seized records lie upon the concerned doctors. Admittedly, these documents were not considered by the AO. Further the Ld CIT(A) has given direction to the AO to take necessary action against other doctors also. Though there is merit in the observations made by Ld CIT(A) that the sworn statements given by the employee, sworn statement given by the managing partner and the documents pertaining to Dr. Pradeep support the stand of the assessee, yet in view of the fact that the assessing officer has made the addition u/s 40(a)(ia) of the Act in a hasty manner without pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
