Claim of deduction by assessee under section 35AD of the Income Tax Act

This judgement concerns Narayana Hrudayalaya Ltd.'s claim for a deduction under Section 35AD of the Income Tax Act for the assessment year 2014-15. The company, engaged in hospital services, had paid significant sums for the right to operate and manage hospitals. The Tribunal considered whether these payments constituted capital expenditure or were eligible for amortisation and subsequent deduction.

IN THE INCOME TAX APPELLATE TRIBUNAL
‘C’ BENCH : BANGALORE
BEFORE SHRI. B. R. BASKARAN, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
ITA No.1679/BANG/2019
Assessment Year : 2014 – 15

M/s Narayana Hrudayalaya
Ltd.,
(formerly known as Narayana
Hrudayalaya Pvt. Ltd.,)
No.258/A,
Bommasandar Industrial Area,
Anekal Taluk,
Bengaluru-560 099.
PAN – AABCN 1685 J

APPELLANT

vs

The Asst. Commissioner of
Income-tax,
Circle-2(3)(1),
Bengaluru.

RESPONDENT

ITA No.1684 & 1685/BANG/2019
Assessment Year : 2014 – 15

The Dy. Commissioner of
Income-tax,
Circle-2(3)(1),
Bengaluru.

APPELLANT

vs

M/s Narayana Hrudayalaya
Pvt. Ltd.,
No.258/A,
Bommasandar Industrial
Area,
Anekal Taluk,
Bengaluru-560 099.
PAN – AABCN 1685 J

RESPONDENT

Assessee by : Shri V Narendra Sharma, Advocate
Revenue by : Shri Pradeep Kumar, CIT
Date of Hearing : 11-08-2021
Date of Pronouncement : 24-08-2021

The assessee is a company registered under the Companies Act and is engaged in the business of hospital services in thename and style of M/s Narayana Hrudayalaya Pvt. Ltd. For the years under consideration, assessee filed its return of income on the specified dates. Assessee was also subjected to book profits, however as taxes under normal provisions were higher than the book profit, assessee paid the taxes as per the normal provisions of the Act.

2. We observe that assessee obtained right to operate and manage Asian Heart Foundation by virtue of an agreement dated 20/01/2008 for 25 years, for which sum of ? 22.16 crore was paid by assessee. Assessee amortised the said amount over the lease period.

3. The Ld.DR submitted that assessee has paid sum of ? 46.25 lakhs for acquiring the rights to operate and manage the said hospital vide agreement dated 23/07/2011 for a period of 20 years. He submitted that this payment has led to acquisition of an asset and therefore deserves to be capitalised.

4. Accordingly this ground raised by assessee stands allowed for statistical purposes. In the result appeals filed by revenue stands partly allowed and appeal filed by assessee stands allowed for statistical purposes.
Order pronounced in the open court on 24th Aug, 2021.
 

Please find attached the enclosed file for the full judgement