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05-09-2019, CIMS Hospital, Section 14A, 15, 59, 8D, Tribunal Ahmedabad

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1 week 1 day ago #10720 by amit
Section - 14A, 15, 59, 8D, 115JB
Order Date - 05-09-2019
Favouring - Assessee Partly
Court - Tribunal Ahmedabad
Appellant - CIMS Hospital Pvt . Ltd.
Respondent - DCIT
Justice - PRAMOD KUMAR VP & MADHUMITA ROY JM
Citation - 919Taxpundit49
Appeal No. - I.T.A. No. 3213/Ahd/2016
Asstt. Year - 2012-13

Order

PER : Ms. MADHUMITA ROY - JM:

These two cross appeals (filed by the assessee and the revenue) are directed against the order dated 23.09.2016 passed by the Commissioner of Income Tax (Appeals)-1, Ahmedabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to “the Act”) arising out of the order dated 04.03.2015 passed by the DCIT, Circle-1(1)(2), Ahmedabad for the Assessment Year 2012-13.

Since both the appeals relate to the same assessee, hence the same are heard analogously and are being disposed of by a common order.

2. ITA No. 3213/Ahd/2016 for A.Y. 2012-13 : Assessee has filed following grounds of appeal:

(1) “The Learned Commissioner (Appeal) failed to understand the facts and circumstances of the ease and the provisions of law.

(2) The Learned Commissioner (Appeal) erred in fact and in law in confirming disallowance of Rs.2,65.40,195/ u/s 40A(2)(b) of the Income 'fax Act. 1961 considering it as diversion of income by the appellant to CCCPL and from CCCPL to ('( ('PL's directors.

(3) The Learned Commissioner (Appeal) erred in fact and in law in confirming the disallowance of Rs.35,825/- being 0.5% of average investments as administrative expenditure u/s 14A of Income Tax Act by applying rule 8D though assessee has not incurred such expenditure.

(4) The Learned Commissioner (Appeal) erred in fact and in law in confirming the disallowance of Rs.134863/- being late payment of employee’s contribution to PF/ESIC u/s 2(24)(x) of Income Tax Act though there is no substantial delay.

(5) The Learned Commissioner (Appeal) erred in fact and in law in not adjudicating the additional ground of appeal raised vide letter dated 26/10/2015:

"The Learned Assessing Officer erred in fact and in law in adding back Rs.35,825/- as disallowance u/s 14A of the Income Tax Act, 1961 while calculating Book Profit for the purpose of MAT u/s 115JB of Income Tax Act, 1961 even though Scope section 14A is limited it to the Chapter VI i.e. Section 15 to 59 of the Income Tax Act, 1961.”

(6) Your Appellant preys for appropriate relief on above grounds of appeal.

(7) Your appellant craves leave to add. alter, amend, substitute or withdraw any of the grounds of appeal stated hereinabove.”

3. Ground No.1, 6 & 7 These grounds of appeal are general in nature, hence, no order need to be passed.

4. Ground No.2 The assessee has challenged the order passed by the Learned CIT(A) in confirming disallowance u/s 40A(2)(b) of the Act of Rs.2,65,40,195/- considering it as diversion of income to CCCPL and from CCCPL to CCCPL’s director.

5. During the course of assessment proceeding, it was found that the assessee has claimed payment of Rs.2,65,10,492/- to CCCPL as research fees in support of which the assessee provided a copy of Memorandum of Understanding (MOU) entered into by and between the two corporate companies i.e. the assessee and the CCCPL. It further appears from the said MOU that CCCPL would render and conduct all their Health care and Clinical research services and engagements at CIMS. Upon verification of balance sheet and Profit and Loss account of CCCPL for A.Y. 2012-13 it was found that CCCPL has no asset for research work, neither has debited any research expenditure. The assessee, however, sought to justify such payment as reasonable only on the basis of the MOU. When the assessee was directed to clarify as to how the research work for which payment has been claimed to have been made by the assessee and that too for its business activity, following explanation was rendered by and under a letter dated 21.02.2015 by the assessee:

"It is to be noted that assessee has paid Rs.26510492/- to Clinical Care Consultant Pvt. Ltd. for service received from CCCPL regarding research expense. Research expense is paid as per service mentioned in MOU rendered by Clinical Care Consultant Pvt. Ltd. Copy of MOU is enclosed as per Annexure-2. The above payment is included in the payment of professional fees Rs. 175097905/- reported in audit report u/s. 44B. The breakup of professional fees is as under:

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