I.T.O WD - 55(1) ,KOLKATA., KOLKATA vs. DR SUDHIR KUMAR GHOSH, KOLKATA

ORDER Per Shri Mahavir Singh, JM:

Both these appeals by revenue are arising out of separate orders of CIT(A)- XXXVI, Kolkata in Appeal Nos.478 & 477/CIT(A)-XXXVI/Kol/ITO,Wd-55(1)/2011-12 dated 01.02.2013 and 05.02.2013. Assessments were framed by ITO, Ward-55(1), Kolkata u/s. 144/147 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Years 2006-07 and 2007-08 vide his separate orders dated 30.12.2011.

2. The only common issue in these two appeals of revenue is against the order of CIT(A) in deleting the disallowance of expenses made by AO treating the income from Sanjeebani Clinic Pvt. Ltd., Dremaland Nursing Home and Nirnoy and Nirnoy Diagnostic Centre as income from business instead of AO treating the same as income from other sources. For this, revenue has raised following three grounds: “1. On the facts and circumstances of the case the Ld. CIT(A) is not justified by allowing certain disallowances made by AO in the case of M/s. Sanjeebani without stating any reason for rejecting the findings of AO and merely relying on the submission of the assessee who himself admitted huge expenditure as bogus at the time of appeal.

3. Briefly stated facts are that the assessee’s one unit Nirnoy Nursing Home & Diagnostic Centre at APC Road, Kolkata was given to one Dr. Arun Kumar Agarwal for 2 & 871/K/2013 Dr. Sudhir Kr. Ghosh AY 2006-07 & 2007-08 his clinic along with premises and infrastructure i.e. equipments etc. on rent as per agreement. The assessee received a sum of Rs.50,000/- per month. According to AO, since the letting out of machinery appears to be inseparable from that premises, the receipt at the best can be treated as composite rent u/s. 57(2)(iii) of the Act but cannot be termed the same as business receipt. The AO bifurcated rental part and rent on hiring of machinery etc. i.e. infrastructure and disallowed the expenses and added a sum of Rs.5,30,420/-. Similar is the situation in the case of Sanjeevani Clinic Pvt. Ltd. wherein the assessee in the P&L Account after claiming all sorts of business expenses returned income was declared at Rs.2,27,279/-. According to AO, the assessee received a sum of Rs.3,20,000/- per month which was specifically bifurcated under the two heads as rent from nursing home/polyclinic/medicine shop at Rs.1,70,000/- and rent/service charges for furniture and hospital equipment at Rs.1,50,000/-. According to AO, the rent/service charges for furniture and hospital equipment cannot be treated as business income, as it is income from other sources and accordingly, after disallowing the expenses assessed the income at Rs.16,51,207/- from the above unit. Similarly, the AO also disallowed the expenses and treated the hire charges for Dreamland Nursing Home at Rs.4,14,058/- from Sanjibani Rs.16,51,207 and Nirnoy Rs.5,30,420/- as income of the assessee. Aggrieved against the disallowance of expenses and treating the income as income from other sources u/s. 56(2)(iii) of the Act, assessee preferred appeal before CIT(A). The CIT(A) allowed the maintenance expenses and ambulance charges in respect to Sanjibani Clinic by observing as under: “Submission of AR, ground of appeal and assessment order were duly considered. As submitted above appellant himself disallowed many of the expenses. Still some of the expenses like repair and maintenance charges of Rs.2,92,340/-, ambulance repairing charges of Rs.84,600/- have not been disallowed by AO. As they are not part of machine rent agreement, they are also disallowed. Balance of expenses are allowed as incidental to the earning of rental income on machine and part of them are as per agreement.” Similarly, the CIT(A) in Dreamland’s case allowed the salary and wages expenses at Rs.84,000/- by observing as under: “Submission of AR, ground of appeal and assessment order were duly considered. Appellant has himself disallowed advertisement charges, donation and subscription of 10% vehicle upkeep and excess depreciation claim. However, salary and wages of Rs.84,000/- as 3 & 871/K/2013 Dr. Sudhir Kr. Ghosh AY 2006-07 & 2007-08 disallowed by AO is sustained as not related rental income on equipment. There is no need to incur such expenses of earning rent on machines. Apart from these other expenses are allowed.” Identically, the CIT(A) in the case of Nirnoy and Nirnoy Diagnostic Centre also allowed various expenses by observing as under: “The submission of the AR, ground of appeal

and assessment order were duly considered. Appellant has himself disallowed expenses related to vehicle upkeep and excess claim of depreciation. Other expenses claimed are normal business expenses incurred on earning such hire charges. Same are allowable. Hence expenses related to AC and refrigerator maintenance, electric maintenance, donation, consultancy charges, advertisement charges, building repair and maintenance, staff salary are allowed.” Aggrieved, revenue is in appeal before us.

4. We have heard rival submissions and gone through facts and circumstances of the case. We find from the above that the assessee in all the three units has made an agreement for rent of building as well as rent for infrastructure i.e. facilities including various equipments and charged rent and composite income was declared as income from business. The CIT(A) bifurcated the income into two heads i.e. rental income under the head income from house property on all the three units but assessed the income from leasing of machinery and other equipments as income from business. We find that the assessee’s proprietary concern M/s. EMS is separate Profit Centre of Dreamland Nursing Home. Several Medical Practitioners used to visit this unit for consultation at his well equipped chambers. EMS was not let out to any single Individual Doctor but several Doctors used to visit EMS for consultation of OPD (Out Door Patients). Patients were taken care by the Assessee and his personnel. Assessee used to collect fees from patients and that is why Collection Charges have been credited to Profit and Loss Account. Expenditure in the nature of Electricity, Telephone, receptionist, cleaning, waiting room for outdoor patients expenditure etc. were incurred for this unit exclusively for business exigency. Hence amount received from this unit is purely in the nature of business and the related expenditures are made for deriving this business income. In this circumstances income from M/s. E M S is to be treated as Business Income and not as Rental Income or otherwise. In view of the above facts and circumstances, we are of the view that the CIT (A) has rightly treated the rent received on leasing of infrastructure facilities to doctors as business income. Hence, we confirm the order of CIT (A) on this issue. Both the appeals 4 & 871/K/2013 Dr. Sudhir Kr. Ghosh AY 2006-07 & 2007-08 of revenue are identical on facts and circumstances, and taking a consistent view, we dismiss both the appeals of revenue. 5. In the result, both the appeals of revenue are dismissed. 6. Order is pronounced in the open court on 04.12.2015. Sd/- Sd/- (M. Balaganesh) (Mahavir Singh) Accountant Member Judicial Member Dated : 04th December, 2015 Jd. Sr. P.S Copy of the order forwarded to: