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TMI Blog2024 (8) TMI 1013X X X X Extracts X X X X X X X X Extracts X X X X ..... not capital expenditure is an allowable deduction. In this case, it is not the case of the AO that the expenditure was capital expenditure. Thus, the only thing one needs to verify is that whether it was incurred wholly and exclusively for the purpose of earning income. Admittedly, assessee had earned income from dispensing medicines. We have perused the list of expenditure submitted by the ld.AR and apparently, we are convinced that it was incurred in relation to income earned from dispensing medicines. The AO has also not challenged genuineness of the expenditure. The AO has not doubted that expenditure was not incurred for earning income. As relying on PETROLEUM SPORTS PROMOTION BOARD [ 2014 (3) TMI 298 - DELHI HIGH COURT ] we are of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee also have valid 12A registration issued by Income Tax Department on 12.01.2009. During the assessment proceedings, Assessing Officer asked assessee to explain why Return of Income was filed in ITR-5 whereas it should have been filed in ITR-7. The Assessing Officer(AO) also asked the assessee to explain why expenditure claimed should not be disallowed. The assessee explained that assessee is running a charitable healthcare facility. The entire expenditure has been incurred for charitable healthcare facilities. The assessee explained before the AO that assessee had employed Doctors and Other Medical Staff to whom assessee is paying salaries and incurring expenditures. Assessee is not charging any fees from the patients. However, asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Department had granted assessee exemption under section 11 of the Act. For A.Y.2020-21i.e.the year under section, assessee claimed that assessee had shown entire income under Income From Other Sources and claimed expenditure as deduction under section 57(iii) of the Act. Admittedly, assessee had filed the details of expenditure as called for by the AO. However, AO in para 5 of the assessment order held as under : Since assessee filed ITR-5 instead of ITR-7 and claimed deduction udder wrong section i.e. u/s 57 instead of section 11 of the I.T. Act, all the expenditure claimed are liable to be disallowed. However, for the sake of natural justice and keeping in view that assessee had been claiming similar deduction u/s 11 of the I.T. Act up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said expenditure is allowable under section 57(iii) of the Act. The ld.AR relied on the decision of the Hon ble Delhi High Court in the case of DDIT(E), Investigation, Circle-II Vs. Petroleum Sports Promotion Board in [2014] 362 ITR 235 (Delhi). Submission of ld.Departmental Representative(ld.DR) : 6. The ld.DR vehemently supported orders of the Lower Authorities. The ld.DR pleaded that the income earned from sale of medicines cannot be taxed as Income From Other Sources as it is a business income. Therefore, the expenditure claimed cannot be allowed under section 57(iii) of the Act. 6.1 We asked ld.DR a specific question whether assessment order can be improved at this stage!, as nowhere in the assessment order AO has mentioned that Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispensing medicines. The AO has also not challenged genuineness of the expenditure. The AO has not doubted that expenditure was not incurred for earning income. The Hon ble Delhi High Court in the case of DDIT Vs. Petroleum Sports Promotion Board(supra) held as under: .If the income is assessed under the residual head full play must be allowed to Section 57(iii). Though prima facie it would appear that the phraseology employed in Section 57(iii) is different from Section 37(1), it has been held by the Supreme Court in CIT v. Rajendra Prasad Moody, [1978] 115 ITR 519 that Section 57(iii) must be construed broadly and the somewhat wider language of Section 37(i) should not affect the interpretation of Section 57(iii). The assessee in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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