The Commissioner Of Income Tax, Chennai v. M/S.bharat Scans Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 08.01.2020 CORAM : THE HONOURABLE MR.JUSTICE N.KIRUBAKARANandTHE HONOURABLE MR.JUSTICE P.VELMURUGAN T.C.A.Nos.271 & 272 of 2018andC.M.P.No.4902 of 2018 The Commissioner of Income Tax,Chennai ..Appellant (in all the appeals)Vs M/s.Bharat Scans Pvt. Ltd.,197, Peters Road, Royapettah,Chennai 600 034 PAN: ..Respondent (in all the appeals) PRAYER : Appeals under Section 260A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, Madras“D” Bench, dated 26.05.2017 passed in ITA.Nos.3290 &3291/Mds/2016. Appeal filed against the order of theCommissioner Income Tax(Appeals)1 121 Mahatma Gandhi Road,Chennai-34 made in ITA No.384/CIT(A)-1/15-16 dated 20.09.2016for the year 2013-2014 against the order of the Commissioner ofIncome Tax (Appeals)1 121, Mahatma Gandhi Road, Chennai-34.Made in ITA No.147/CIT(AY 15-16) dated 20/09/2016 for the year2012-2013 against the Assessment order u/s 143(3) made inPAN/GIR No. for the Assessment year 2013-2014 andAssessment order made in GIR/PAN for the Assessmentyear 2012-2013. For Appellant : Mr.T.Ravikumar (in all the appeals) Senior standing counselFor Respondent : Mr.R.Kumar for Mr.T.N.Seetharaman C O M M O N J U D G M E N T (Judgment of the Court was delivered by N.KIRUBAKARAN, J) The respondent/assessee company is running a scan centreLaboratory for the benefit of the patients. https://hcservices.ecourts.gov.in/hcservices/ 2. T.C.A.No.271 of 2018: The said company filed its return for the Assessment Year2012-13 on 29.12.2012, admitting an income of Rs.1,34,64,610/-.The case was selected for scrutinisation under CASS and noticewas issued under section 143(2) to the assessee. After givingopportunity to the assessee, the assessment was completed. TheAssessment Officer disallowed the claim for deducting 40% on UPSwhich was claimed as medical diagnostic equipment stating that160KVA UPS cannot come under the Machinery and Plant as statedin Schedule III (xia) of New Appendix I as per Rule 5 of theIncome Tax. The Assessment Officer therefore disallowed thedepreciation claim of Rs.4,27,02,549/- and arrived at assessedincome Rs.5,80,76,560/-. Aggrieved by the Assessment Orderpassed by the Assessment Officer an Appeal was filed before CIT(A). The CIT(A) accepted the contention of the assessee andallowed the appeal relying upon the decision of the Tribunalpassed in ITA.No.1300/Mds/2013 dated 13.02.2014 and directed theAssessment Officer to grant depreciation of 40%. 3. T.C.A.No.272 of 2018:The assessee company filed its return for the AssessmentYear 2013-14 on 23.10.2013, admitting an income ofRs.1,64,56,420/-. The case was selected for scrutinisationunder CASS and notice was issued under section 143(2) to theassessee. After giving opportunity to the assessee, theassessment was completed. The Assessment Officer disallowed theclaim for deducting 40% on UPS which was claimed as medicaldiagnostic equipment stating that 160KVA UPS cannot come underthe Machinery and Plant as stated in Schedule III (xia) of NewAppendix I as per Rule 5 of the Income Tax. The AssessmentOfficer therefore disallowed the depreciation claim ofRs.3,55,14,452/-andarrivedatassessedincomeRs.6,06,53,346/-. Aggrieved by the Assessment Order passed bythe Assessment Officer an Appeal was filed before CIT(A). TheCIT(A) accepted the contention of the assessee and allowed theappeal relying upon the decision of the Tribunal passed inITA.No.1300/Mds/2013 dated 13.02.2014 and directed theAssessment Officer to grant depreciation of 40%. 4.The revenue aggrieved over the said orders of theCommissioner filed appeals before the Tribunal. The Tribunalupheld the orders of the Commissioner. Against the said ordersof the Tribunal only the present Appeals have been filed. 4.The revenue aggrieved over the said orders of theCommissioner filed appeals before the Tribunal. The Tribunalupheld the orders of the Commissioner. Against the said ordersof the Tribunal only the present Appeals have been filed. 5.The Appeals have been admitted on 19.06.2018 on thefollowing substantial question of law: “Whether the Tribunal erred in law in holding that theassessee is entitled to 40% depreciation on theMedical Diagnostic Equipment instead of the 15% allowed by the Assessing Officer, holding the same tobe life saving device? ” 6.Mr.T.Ravikumar, learned senior standing counsel appearingfor the revenue would find fault with the order passed by theCommissioner as well as Tribunal for having accepted theassessee's claim and allowing 40% depreciation for 160KVA UPS asMedical Equipment. He would submit that 160KVA UPS cannot betermed as life saving equipment as per Schedule III (xia) of thedepreciation table in New Appendix. Unless it forms an integralpart of the Machinery and Plant, 40% deduction cannot be given.He would rely upon a few judgments to stress the point that UPScannot be called as life saving medical equipment as stated inSchedule III (xia) of New Appendix I of the Income Tax. Hewould submit that only those 15 equipments as described inSchedule III (xia) of New Appendix I alone are entitled to 40%depreciation as they are coming under the life saving equipment,whereas 160KVA UPS is not mentioned in Schedule III (xia) of NewAppendix I and therefore, it cannot be granted 40% depreciation. 7.The learned senior standing counsel would also submitthat the concession/exemption/rebate/incentive/subsidiary givenby way of exemption notification should be interpreted verystrictly. In this regard, he would rely upon the constitutionBench judgment of the Hon'ble Supreme Court in the case ofCommissioner of Customs (Import), Mumbai Vs. Dilip Kumar andCompany and others reported in 2018 (9) SCC 1 and judgment ofthe Hon'ble Supreme Court in the case of Alpine Industries Vs.Collector of Central Excise, New Delhi reported in 2003 (3)Supreme Court Cases 111 to the effect that while interpretingtariff entries in taxation statute, the entries are to beunderstood by their popular meaning that is, the meaningattached to them by those using the product and not to beunderstood by the scientific and technical meaning. 8.The appellant relied upon a Division Bench judgment ofthis Court in the case of Dinamalar Vs. Income Tax Officerreported in 2016 (389) ITR 0094 Mad to stress the point that ifthe machines for which depreciation is being sought do not fallunder the definition of the entries found in the Appendix I, theAssessee cannot claim depreciation. He relied upon anotherjudgment in the case of Commissioner of Income Tax Vs. BazpurCo-operative Sugar Factory Ltd., reported in 2005 (198) CTR 0590and stressed the point that the particular equipment regardingwhich the allowance is sought is not falling under the AppendixI. He relied upon another judgment of Rajasthan High Court inthe case of Commissioner of Income Tax Vs. Bhola Ram reported in2002 (177) CTR 0082 which is relating to the rig and compressorused for drilling bore wells and that rig and compressor mountedon a lorry, does not fall under the category of “motor lorry” occurring in entry No.III(ii)D(9) of Part I of Appendix I to theIncome Tax Rules. He relied upon another judgment rendered bythe Authority for Advance Rulings, New Delhi in the case of InRe: Enercon (India) Ltd., reported in 2011 SCC online AAR-IT 35to drive home the point that in the absence of any ambiguity inthe schedule, the same has to be followed in letter and spirit. 9.By relying upon those judgments, the learned counselwould submit that 160KVA UPS will not come under the schedule oflife saving medical equipment and therefore, the orders of theTribunal as well as the Appellate Commissioner have to bereversed. occurring in entry No.III(ii)D(9) of Part I of Appendix I to theIncome Tax Rules. He relied upon another judgment rendered bythe Authority for Advance Rulings, New Delhi in the case of InRe: Enercon (India) Ltd., reported in 2011 SCC online AAR-IT 35to drive home the point that in the absence of any ambiguity inthe schedule, the same has to be followed in letter and spirit. 9.By relying upon those judgments, the learned counselwould submit that 160KVA UPS will not come under the schedule oflife saving medical equipment and therefore, the orders of theTribunal as well as the Appellate Commissioner have to bereversed. 10.On the other hand, Mr.R.Kumar, learned counselrepresenting Mr.T.N.Seetharaman, learned counsel for therespondent would submit that 160KVA UPS would come underSchedule III (xia) of New Appendix I of the Income Tax and inthe Assessee's own case for the year 2009-10, the Income TaxCommissioner as well as the Tribunal accepted the respondent'scontention that 160KVA UPS would come under the definition ofthe life saving medical equipment as stated in Schedule III(xia) of New Appendix I of the Income Tax. 11.The appellant would submit that 160KVA UPS isspecifically used for the purpose of running the diagnosticmachines and equipments, in case of power failure and therefore,it would come under the definition of life saving medicalequipments. He would rely upon the judgment of this Court inthe case of Commissioner of Income Tax Vs. Vasantha SubramanianHospital Pvt. Ltd., reported in 2018 (408) ITR 176 (Mad) tosubmit that any narrow interpretation cannot be given withregard to definition of Medical Equipments and it cannot berestricted to the items mentioned in Part III item (xia), basedon the medical literature. 12.Heard the parties and perused the records. 13.Schedule III (xia) of New Appendix I of the Income Taxis extracted as follows: “(xia) Life saving medical equipment, being(a) D.C. Defibrillators for internal use and pacemakers (b) Haemodialysors (c) Heart lung machine (d) Cobalt Therapy Unit (e) Colour Doppler (f) SPECT Gamma Camera (g) Vascular Angiography System including Digital Subtraction Angiography (h) Ventilator used with anaesthesia apparatus 12.Heard the parties and perused the records. 13.Schedule III (xia) of New Appendix I of the Income Taxis extracted as follows: “(xia) Life saving medical equipment, being(a) D.C. Defibrillators for internal use and pacemakers (b) Haemodialysors (c) Heart lung machine (d) Cobalt Therapy Unit (e) Colour Doppler (f) SPECT Gamma Camera (g) Vascular Angiography System including Digital Subtraction Angiography (h) Ventilator used with anaesthesia apparatus (i) Magnetic Resonance Imaging System(j) Surgical Laser(k) Ventilator other than those used withanaesthesia(l) Gamma knife(m) Bone Marrow Transplant Equipment includingsilastic long standing intravenous catheters forchemotherapy(n) Fibre optic endoscopes including, Paediatricresectoscope/audit resectoscope, Peritoneoscopes,Arthoscope,Microlaryngoscope,FibreopticFlexible Nasal Pharyngo Bronchoscope, FibreopticFlexible Laryngo Bronchoscope, Video LaryngoBronchoscope and Video Oesophago Gastroscope,Stroboscope, Fibreoptic Flexible OesophagoGastroscope(o) Laparoscope (single incision)”Though the technology is advancing everyday, the Appendix Iwhich is called as New Appendix I is more than a decade old andit came into effect from the Assessment Year 2006-07 onwards.The 15 life saving medical equipments which have been given inSchedule III (xia) of New Appendix I of the Income Tax are themachines which were available at the time of framing Appendix,viz., 15 years ago. Every year new inventions and innovationsare being made by the Scientists, especially in the medicalfield. As already found by the Division Bench of this Court inthe case of Commissioner of Income Tax Vs. Vasantha SubramanianHospital Pvt. Ltd., reported in 2018 (408) ITR 176 (Mad), item'd' of Schedule III (xia) of New Appendix I of the Income Tax,viz., Cobalt Therapy Unit has become out of date and is no morein use. The cancer treatment made by chemotherapy, radiotherapyand a new invention has also come into effect by way of Protontherapy. When such is the case, relying upon the 1½ decades oldAppendix is of no use and the very purpose of giving exemptionsto the life saving medical equipments would be frustrated ifthis Court goes by new Appendix, which came into effect duringthe 2006-07. The legislature should be conscious enough toamend the Appendix. When the legislature is not coping up withtime, definitely this Court is duty bound to take intoconsideration the advancement in the medical field, modernequipments and apparatus used in the medical field. 14.No doubt, 160KVA UPS is not enlisted in Schedule III(xia) of New Appendix I of the Income Tax. Merely because it isnot enlisted, it cannot be negatived that it is not a lifesaving medical equipment. The purpose for which 160KVA UPS isused only for running medical equipments like ultra sound scan,PET/CT scan, MRI scan and other diagnostic machineries. Therespondent itself is a diagnostic lab. The purpose for whichthe diagnostic lab has purchased 160KVA UPS is only for using it, in case of emergency viz., power failure to see thatdiagnostic machines are not stopped due to power failure. Themedical equipment should not fail due to power failure. 15.As rightly pointed out by the Commissioner of Appeals,160KVA UPS is not an ordinary UPS being used commonly in thehousehold or office. It is a special UPS which is valued atRs.53,02,620/-. It has been stated in para 5.2.3 of AppellateCommissioner's order as follows: it, in case of emergency viz., power failure to see thatdiagnostic machines are not stopped due to power failure. Themedical equipment should not fail due to power failure. 15.As rightly pointed out by the Commissioner of Appeals,160KVA UPS is not an ordinary UPS being used commonly in thehousehold or office. It is a special UPS which is valued atRs.53,02,620/-. It has been stated in para 5.2.3 of AppellateCommissioner's order as follows: “5.2.3 Keeping in view the facts and circumstances ofthe case and the true import of the words “life savingmedical equipment being SPECT Gamma Camera” asdiscussed above, it is held that the medicaldiagnostic imaging equipment more particularlydescribed as PET/CT installed by the appellant is a“life saving medical equipment being SPECT GammaCamera” and therefore eligible for depreciation @ 40%as stipulated in depreciation table part-III item(xia). Furthermore, as regards denial of depreciationon UPS, it is seen that the UPS is very much a part ofthis equipment. The cost of this UPS is about Rs.53lakhs whereas UPS as is ordinarily understood as aaccessory to computers costs about Rs.5000 to 10000.This fact alone justifies that “UPS 160KVAA GE MAKE”costing Rs.53,02,620/- is a part & parcel of PET/CTand has no independent use and therefore, eligible forthe same rate of depreciation of 40%. Thus, theappellant succeeds on these grounds of appeal. GroundNos.5 to 7 raised by the appellant are allowed.” From the above it is very clear that the Appellate Commissionercategorically stated that UPS is very much important for medicalequipment and it is a part and parcel of PET/CT and has noindependent use and is eligible for depreciation of 40%. Thesaid order passed by the Appellate Commissioner for theAssessment year 2009-10 was followed by the AppellateCommissioner in the present case, allowing 40% depreciationreversing the order of the Assessment Officer. 16.As already pointed out by this Court in the earlierparagraph, the purpose for which 160KVA UPS is being used hasbeen seen. Usually, for an ordinary computer, the UPS used wouldcost about Rs.5,000/- to Rs.10,000/-. Therefore, there is adifference between ordinary UPS and 160KVA UPS. The use is onlyat the time of emergency, that is during power failure. When themedical equipments are used for the patients, the power should beavailable continuously. If there is a power failure, thediagnostic machines would not work, resulting in lot ofinconvenience to the patients. Therefore, 160KVA UPS has got noindependent use except when it is connected with medical equipments used by the respondent, which is a diagnosticlaboratory. 17.As already stated by this Court, the Revenue authoritiesshould send proposals regularly to the Ministry to amend theAppendix, taking into consideration advance in medical field andavailability of modern equipments which are being used currently.The officials themselves should enrich themselves with knowledgeregarding modern day equipments, so that they could giveproposals to the authorities to amend the Appendix, in theinterest of public especially patients. 18.Relying upon the 15 year old Appendix will not serve thepurpose. Our country is a thickly populated country and morepeople are suffering from many diseases, especially cancer. Ifthat is so, the people should get best treatment and for that,modern and technical machineries are necessary and therefore,items mentioned in Schedule III (xia) of New Appendix I are of nouse. This Court is aware of the fact that everyday inventionsare being made. The legislature while framing the Appendix wouldnot have visualized the modern day inventions as on dateavailable at the time during 2006-07. Therefore, theCommissioner of Appeals as well as Tribunal are right in giving40% depreciation to 160KVA UPS. 18.Relying upon the 15 year old Appendix will not serve thepurpose. Our country is a thickly populated country and morepeople are suffering from many diseases, especially cancer. Ifthat is so, the people should get best treatment and for that,modern and technical machineries are necessary and therefore,items mentioned in Schedule III (xia) of New Appendix I are of nouse. This Court is aware of the fact that everyday inventionsare being made. The legislature while framing the Appendix wouldnot have visualized the modern day inventions as on dateavailable at the time during 2006-07. Therefore, theCommissioner of Appeals as well as Tribunal are right in giving40% depreciation to 160KVA UPS. 19.Though Mr.Kumar, relied upon TCA.No.550 of 2015 filed forthe Assessment Year 2009-10, by the revenue which has beendismissed by this Court on 27.08.2019, Mr.Ravikumar, learnedsenior standing counsel rightly pointed out that the said Appealwas not dismissed on merit, but it was only on the low tax effectand the subtantial questions of law in that appeal were also leftopen. Therefore, the said judgment cannot be relied upon.However, this Court agrees with the views taken by the AppellateCommissioner in that case. 20.There is no quarrel with regard to the dictum laid downby the constitution Bench of the Hon'ble Supreme Court in thecase of Commissioner of Customs (Import), Mumbai Vs. Dilip Kumarand Company and others reported in 2018 (9) SCC 1, with regard tostrict interpretation regarding concession or exemptionnotification. In this case, exemption notification is very oldand therefore, this Court has to step in and interpret theconcession notification in such a way that it is in tune withtime for the reasons stated in the above paragraphs. Therefore,the substantial question of law is answered against theappellant. 21.Accordingly, Appeals fail and the same are dismissed. Nocosts. Consequently, connected Miscellaneous Petition is alsoclosed. Sd/- Assistant Registrar//True Copy// Sub Assistant Registrar To 1.The Commissioner of Income Tax, Chennai2.Income Tax Appellate Tribunal 'D' Bench, Chennai.3.The Deputy Commissioner of Income Tax, Corporate Circle(2) Chennai+2cc to Mr.T.Ravikumar, Advocate in SR.NO..1727+1cc to Mr.T.N.Seetharaman, Advocate in SR.NO..2031T.C.A.Nos.271 & 272 of 2018KS(CO)RV(22/10/2020)