Dr B D Kabra, Seth Sita Ram Kabra Memorial Nursing Home,Sikar v. The Commissioner Of Income Tax, Rajasthan, Jaipur

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANBENCH AT JAIPUR D.B.INCOME TAX APPEAL NO. 119 / 2002 DR B D Kabra, Seth Sita Ram Kabra Memorial Nursing Home,Sikar ----Appellant Versus 1. The Commissioner of Income Tax, Rajasthan, Jaipur. 2. The Income Tax Officer, Ward-2, Sikar. ----Respondent __________________________________________ For appellant : Mr. Sanjay Jhanwar For Respondents : Mr. Daksh Pareek on behalf of Mr. Sameer JainJain __________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Per Hon’ble Jhaveri, J. Judgment 13/12/2016 1. By way of this appeal the appellant has challengedthe judgment & order of the Tribunal whereby the Tribunal hasallowed the appeal of the department and dismissed the appealof the assessee. 2.The facts of the case are that return declaringincome of Rs.84,784/- was filed on 23.3.1993. The main source (2 of 9 ) of income was from medical practice and running of a NursingHome. The assessee was also having business income andincome from other sources. While processing the return u/s 143(1)(a) excess depreciation of Rs.26,518/- in respect of Car andPlant and Machinery was added to the total income and thusdetermining the total income at Rs.1,11,300/- , which has beenaccepted as correct by the assessee himself vide his letterdated 28.9.1993 and the demand also stands paid. However,such mistake was noticed in as much as neither the arrears ofsalary amounting to Rs.99,744/- were added to the totalincome nor relief u/s 89 was allowed to the assessee. Noticeu/s 154 dated 29.9.1991 for the proposed addition and reliefwas served upon the assessee on 29.9.1993 fixing the case for28.9.1993. The assessee filed his written submission vide hisletter dated 28.9.1993 and as per order-sheet of even dateagreed in principal for the proposed addition as well as reliefu/s 89. Accordingly an order u/s 154 was passed on 28.9.1993determining the total income at Rs.2,11,042/- and additionaldemand of Rs.37,189/- after allowing relief u/s 89 of the Act. 3.Notice u/s 143(2) for the first time was served uponthe assessee alongwith a detalied questionare on 26.8.1993fixing the case for hearing on 9.9.1993. On the request of theassessee and his A/R, Shri P.D. Jain, case was adjourned to27.9.1993. Details filed by the assessee were examined andfurther information on various points as mentioned in order-sheet dated 17.9.1993 was called for by 7.10.1993. But in view of the illness of the Counsel the case had to be adjourned . 4.Enquiries got conducted through ward inspector revealed that 2[nd] floor of the Nursing Home was being used bythe assessee and his family for the purpose of their residence.In his statement recorded on oath on 12.10.1993 Shri (Dr.B.D.Kabra) admitted the following order:- (i). He alongwith his family has been residing in Nursing Homepremises w.e.f.9.9.89 on 2[nd] floor which was entirely in hispossession. (ii). No part of interest and depreciation of building has beendisallowed by the Assessing Officer on account of personalpurposes. 5.The CIT (Appeals) has partly allowed the appeal,while not allowing additional depreciation @ 10% as against thedepreciation @ 5% claimed in original return. Against the orderof CIT (Appeals), the assessee preferred an appeal, whichinteraila including a ground that the appellant was entitled todepreciation on hospital building @10%, though it had claimeddepreciation @ 5% while filing its original return. 6.This Court, while admitting the appeal on 14.08.2003, has framed the following substantial questions oflaw for consideration: (ii). No part of interest and depreciation of building has beendisallowed by the Assessing Officer on account of personalpurposes. 5.The CIT (Appeals) has partly allowed the appeal,while not allowing additional depreciation @ 10% as against thedepreciation @ 5% claimed in original return. Against the orderof CIT (Appeals), the assessee preferred an appeal, whichinteraila including a ground that the appellant was entitled todepreciation on hospital building @10%, though it had claimeddepreciation @ 5% while filing its original return. 6.This Court, while admitting the appeal on 14.08.2003, has framed the following substantial questions oflaw for consideration: “1. Whether on the facts and in thecircumstances of the case, the Tribunal wasjustified in not entertaining the appellant’sclaim regarding depreciation @ 10%instead of 5% on Nursing Home Buildingon the ground that such claim was notmade either in the return or in thecircumstances of the case, the Tribunal wasjustified in not entertaining the appellant’sclaim regarding depreciation @ 10%instead of 5% on Nursing Home Buildingon the ground that such claim was notmade either in the return or in the assessment proceedings? 2. Whether the Assessing Officer was notobliged to allow the deduction as stipulatedin law and compute the income inaccordance with the provisions of law?” 7.Counsel for the appellant has taken us to the provisions of Section 32(1)(ii) and Explanation 5, which readsas under: Depreciation. 32. (1) In respect of depreciation of— (i) buildings, machinery, plant or furniture,being tangible assets;being tangible assets; (ii) know-how, patents, copyrights, trademarks, licences, franchises or any otherbusiness or commercial rights of similarnature, being intangible assets acquired onor after the 1st day of April, 1998, owned, wholly or partly, by the assessee andused for the purposes of the business orprofession, the following deductions shall be—allowed (i) in the case of assets of an undertakingengaged in generation or generation anddistribution of power, such percentage on theactual cost thereof to the assessee as maybe prescribed; (ii) in the case of any block of assets, suchpercentage on the written down valuethereof as may be prescribed: Provided that no deduction shall be allowedunder this clause in respect of— (a) any motor car manufactured outsideIndia, where such motor car is acquired bythe assessee after the 28th day of February,1975 but before the 1st day of April, 2001,unless it is used— (i) in a business of running it on hire fortourists ; ortourists ; or (ii) outside India in his business or profession inanother country; andanother country; and (b) any machinery or plant if the actual cost thereofis allowed as a deduction in one or more yearsunder an agreement entered into by the CentralGovernment under section 42:is allowed as a deduction in one or more yearsunder an agreement entered into by the CentralGovernment under section 42: Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) [33][or thefirst proviso to clause (iia)], as the case may be,is acquired by the assessee during the previousyear and is put to use for the purposes ofbusiness or profession for a period of less thanone hundred and eighty days in that previousyear, the deduction under this sub-section inrespect of such asset shall be restricted to fiftyper cent of the amount calculated at thepercentage prescribed for an asset under clause(i) or clause (ii) or clause (iia), as the case maybe : Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) [33][or thefirst proviso to clause (iia)], as the case may be,is acquired by the assessee during the previousyear and is put to use for the purposes ofbusiness or profession for a period of less thanone hundred and eighty days in that previousyear, the deduction under this sub-section inrespect of such asset shall be restricted to fiftyper cent of the amount calculated at thepercentage prescribed for an asset under clause(i) or clause (ii) or clause (iia), as the case maybe : [Provided also that where an asset referred toin clause (iia)or the first proviso to clause (iia), asthe case may be, is acquired by the assesseeduring the previous year and is put to use for thepurposes of business for a period of less than onehundred and eighty days in that previous year,and the deduction under this sub-section inrespect of such asset is restricted to fifty per centof the amount calculated at the percentageprescribed for an asset under clause (iia)for thatprevious year, then, the deduction for the balancefifty per cent of the amount calculated at thepercentage prescribed for such asset under clause(iia)shall be allowed under this sub-section in theimmediately succeeding previous year in respectof such asset:] Provided also that where an asset beingcommercial vehicle is acquired by the assessee onor after the 1st day of October, 1998 but beforethe 1st day of April, 1999 and is put to use beforethe 1st day of April, 1999 for the purposes ofbusiness or profession, the deduction in respect ofsuch asset shall be allowed on such percentage on the written down value thereof as may beprescribed. Explanation.—For the purposes of this proviso,—(a) the expression "commercial vehicle" means"heavy goods vehicle", "heavy passenger motorvehicle", "light motor vehicle", "medium goodsvehicle" and "medium passenger motor vehicle"but does not include "maxi-cab", "motor-cab","tractor" and "road-roller"; (b) the expressions "heavy goods vehicle", "heavypassenger motor vehicle", "light motor vehicle","medium goods vehicle", "medium passengermotor vehicle", "maxi-cab", "motor-cab", "tractor"and "road roller" shall have the meaningsrespectively as assigned to them in section 2 ofthe Motor Vehicles Act, 1988 (59 of 1988): Provided also that, in respect of the previousyear relevant to the assessment year commencingon the 1st day of April, 1991, the deduction inrelation to any block of assets under this clauseshall, in the case of a company, be restricted toseventy-five per cent of the amount calculated atthe percentage, on the written down value of suchassets, prescribed under this Act immediatelybefore the commencement of the Taxation Laws(Amendment) Act, 1991: Provided also that the aggregate deduction, inrespect of depreciation of buildings, machinery,plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences,franchises or any other business or commercialrights of similar nature, being intangible assetsallowable to the predecessor and the successor inthe case of succession referred to in clause (xiii),clause (xiiib) and clause (xiv)of section47 or section 170 or to the amalgamatingcompany and the amalgamated company in thecase of amalgamation, or to the demergedcompany and the resulting company in the case ofdemerger, as the case may be, shall not exceed inany previous year the deduction calculated at theprescribed rates as if the succession or theamalgamation or the demerger, as the case may be, had not taken place, and such deduction shallbe apportioned between the predecessor and thesuccessor, or the amalgamating company and theamalgamated company, or the demergedcompany and the resulting company, as the casemay be, in the ratio of the number of days forwhich the assets were used by them. –---------------- be, had not taken place, and such deduction shallbe apportioned between the predecessor and thesuccessor, or the amalgamating company and theamalgamated company, or the demergedcompany and the resulting company, as the casemay be, in the ratio of the number of days forwhich the assets were used by them. –---------------- Explanation 5.—For the removal of doubts, it ishereby declared that the provisions of this sub-section shall apply whether or not the assesseehas claimed the deduction in respect ofdepreciation in computing his total income;” 8.Counsel for the appellant has, therefore, contended that in view of the above provisions of law, it was the boundenduty of the ITO to allow depreciation in accordance with law,though it has claimed @ 5%, keeping in view of the decisionof the Supreme Court in the case of Commissioner of Income Tax Vs. Dr. B. Venkata Rao- (2000) 243 ITR 81 andmore particularly; the conclusion given by the Supreme Courtin para 3 and 4 which reads as under: “3. The most apposite decision in this context isthat delivered by the Allahabad High Court in S.K. Tulsi and Sons v. CIT . Reference was made toan earlier judgment, where also the functionaltest approved by this court in several decisionswas applied. It was held that if it was found thatthe building or structure constituted anapparatus or a tool of the taxpayer by means ofwhich business activities were carried on, itamounted to a "plant" ; but where the structureplayed no part in the carrying on of thoseactivities but merely constituted a place whereinthey were carried on, the building could not beregarded as a plant. 4. The Tribunal and the High Court in the instantcase proceeded upon assumptions of what anursing home should contain. This may not be altogether appropriate. What is to be determinedis whether the particular nursing home buildingwas equipped as to enable the assessee to carryon the business of a nursing home therein orwhether it is just any premises utilised for thatobject.” 9.Learned counsel has also relied on the decision of Supreme Court in the case of National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax- (1998) 22 ITR 383(SC) wherein Supreme Court has held that the claim ofdepreciation can be raised at appellate stage, though suchclaim was not raised before the Assessing Officer. Counselcontended that in case before Supreme Court the claim ofdepreciation was raised before the Tribunal, whereas inappellants case it had been raised before CIT(Appeals). 10.The counsel for the respondent has supported theorder of the Tribunal and contended that the view taken by theTribunal is required to be accepted. 11.Heard Mr. Sanjay Jhanwar, learned counsel for theappellant and Mr. Daksh Pareek learned counsel for therespondent. 12.Taking into consideration the law declared by theSupreme Court in the aforementioned two judgments, we areof the opinion that the claim of additional depreciation @ 10%made at the level of CIT (Appeals) is required to be allowed andthe same is required to be raised from 5% to 10%. 13.In view of the aforementioned Supreme Courtdecisions, both the issues are answered in favour of theassessee, to the extent that the depreciation @ 10% as against @5% permitted by the Assessing Officer will be allowed. 14.The appeal stands disposed of. (DINESH MEHTA)J. (K.S. JHAVERI)J. bblm