Commissioner Of Income Tax - Ichennai v. M/S.apollo Hospital Enterprises Ltd,'Ali Towers' Iv Floor

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 14.02.2022CORAM : THE HON'BLE MR. JUSTICE R.MAHADEVANAND THE HON'BLE MR. JUSTICE J.SATHYA NARAYANA PRASAD T.C.A.No.281 of 2011 Commissioner of Income Tax - IChennai.... Appellant Vs. M/s.Apollo Hospital Enterprises Ltd,'Ali Towers' IV Floor.55, Greams Road,Chennai - 600 006. ... Respondent Appeal preferred under Section 260A of the Income Tax Act,1961, against the order of the Income Tax Appellate Tribunal,Chennai “D” Bench, dated 25.02.2011 in I.T.A.No.1673/Mds/2010for the Assessment Year 1998-1999 against the order of theCommissioner of Income Tax Appeals III dated 01.07.2010 inITA.No.588/09-10/AIII in the Assessment year 1998-99 against theorder of the Deputy Commissioner of Income Tax CompanyCircle 1(1), Chennai 34 dated 23.12.2009, PA / GIR.No.AAACA5443N / AX1-015 in ITNS 65 in the Assessment Year 1998-99. For Appellant : Mr.J.NarayanasamySenior Standing CounselFor Respondent :Mr.N.V.Balaji JUDGMENT (Judgment of the Court was delivered by R.MAHADEVAN, J.) This tax case appeal has been filed by the appellant /Revenue, challenging the order dated 25.02.2011 passed by theIncome Tax Appellate Tribunal, Bench 'D' Chennai, inI.T.A.No.1673/Mds/2010, relating to the Assessment Year 1998-1999. 2.By order dated 02.08.2011, this court admitted the abovetax case appeal on the following substantial questions of law: “1. Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in holding that the assessee was entitled todeduction of lease equalization charge, which wasnothing but an amount equal to the dimnution in thevalue of depreciable lease assets, over and above thedepreciation allowed under the Income Tax Act, 1961? 2. Whether on the facts and in the circumstancesof the case, the Income Tax Appellate Tribunal wasright in holding that the "professional charges" paidto M/s. PCR Investments was an allowable deduction eventhough the payment represented non-compete fee whichwas not allowable, being expenditure of a capitalnature as held by the Hon'ble Madras High Court in thecases of Chelpark Co. Ltd. Vs C.I.T. (191 ITR 249) andin the case of Tamil Nadu Dairy Development CorporationVs. C.I.T. (239 ITR 142) and the other servicesmentioned in the agreement were not actually renderedand in any case, such services were also in the capitalfield?" 3.1. When the matter was taken up for consideration, thelearned counsel for the appellant / Revenue fairly submittedthat the first substantial question of law involved in thisappeal has already been considered and decided in favour of theassessee by judgment dated 02.01.2019, passed in TCA.Nos.776 to778 of 2009, the relevant passage of which, is usefullyextracted hereunder: "4. Both learned counsel concur on the positionthat substantial question of law No.1 relating todeduction of lease equalisation charges is covered bya judgment of the Supreme Court in the case ofCommissioner of Income Tax VI V. Virtual SoftwareSystems Limited ((2018) 404 ITR 409), wherein theSupreme Court considered the following substantialquestion of law: '5. The short question that arises forconsideration before this Court is whether thededuction on account of lease equalisationcharges from lease rental income can be allowedunder the Income Tax Act, 1961, on the basis ofGuidance Note issued by the Institute ofChartered Accountants of India (ICAI)?' 5. The conclusion of the Supreme Court atparagraph nos.16 and 17 of the said judgment is asfollows: '5. The short question that arises forconsideration before this Court is whether thededuction on account of lease equalisationcharges from lease rental income can be allowedunder the Income Tax Act, 1961, on the basis ofGuidance Note issued by the Institute ofChartered Accountants of India (ICAI)?' 5. The conclusion of the Supreme Court atparagraph nos.16 and 17 of the said judgment is asfollows: 16) In the present case, the relevantAssessment Year is 1999-2000. The main contentionof the Revenue is that the Respondent cannot beallowed to claim deduction regarding leaseequalization charges since as such there is noexpress provision regarding such deduction in theIT Act. However, it is apt to note here that theRespondent can be charged only on real incomewhich can be calculated only after applying theprescribed method. The IT Actis silent on suchdeduction. For such calculation, it is obviousthat the Respondent has to take course ofGuidance Note prescribed by the ICAI if it isavailable. Only after applying such method whichis prescribed in the Guidance Note, theRespondent can show fair and real income which isliable to tax under the IT Act. Therefore, it iswrong to say that the Respondent claimeddeduction by virtue of Guidance Note rather itonly applied the method of bifurcation asprescribed by the expert team of ICAI. Further, aconjoint reading of Section 145 of the IT Actread with Section 211 (un-amended) of theCompanies Act make it clear that the Respondentis entitled to do such bifurcation and in ourview there is no illegality in such bifurcationas it is according to the principles of law.Moreover, the rule of interpretation says thatwhen internal aid is not available then for theproper interpretation of the Statute, the courtmay take the help of external aid. If a term isnot defined in a Statute then its meaning can betaken as is prevalent in ordinary or commercialparlance. Hence, we do not find any force in thecontentions of the Revenue that the accountingstandards prescribed by the Guidance Note cannotbe used to bifurcate the lease rental to reachthe real income for the purpose of tax under theIT Act. 17) To sum up, we are of the view that theRespondent is entitled for bifurcation of leaserental as per the accounting standards prescribedby the ICAI. Moreover, there is no express bar inthe IT Act regarding the application of suchaccounting standards. 6. Accordingly, we answer substantial question oflaw No.1 in favour of the assessee and against theRevenue.” 3.2. Following the aforesaid judgment, which holds thefield, the first substantial question of law is answered againstthe appellant / Revenue. 4.1. As regards the second substantial question of lawraised herein, the learned counsel appearing for the respondentsubmitted that the appellant raised the very same issue in TCANos.776 to 778 of 2009, but the same was not even admitted bythe Co-ordinate Bench in its order dated 02.01.2019. The saidsubmission has been fairly conceded by the learned counsel forthe appellant. In view of the same, the said issue also, willhave to be answered against the appellant / Revenue. 5.In fine, the Tax Case Appeal stands dismissed. No costs. Sd/- Assistant Registrar(CS IX) //True Copy// kasTo 1. The Commissioner of Income Tax Appellate - III Chennai 2. The Income Tax Appellate Tribunal, Chennai, “D” Bench. 3. The Deputy Commissioner of Income Tax Company circle – 1(1), Chennai – 600 034. T.C.A.No.281 of 2011