Every time I happen to read this case law, I crack up. Not for the apparent reason that a person like me has ended up reading these, but for the way the Honorable Courts of Law in India have snubbed the petitioners who have been cheeky and over smart.
It will not be something new for my reader if he/she is familiar with lots of Fiscal law disputes and judgements. The Indian Courts of Law are notorious for whacking the concerned Departments for having deviated from sensible lines of common sense in many instances.
This particular case is about a Lawyer who chooses to be cheeky and at the end gets paid back with interest by the High court.
In Income Tax Act, people who are carrying on any business or are practising their profession are allowed to subtract the expenses that they incur for the purposes of that particular business from the income that they have earned from that business. So in effect, the net income will be lesser and consequently tax outflow will be less. Please note that the expenses must have been incurred for the purposes of their business and not for any other purpose.
Now,back to our story
So this lawyer had to undergo a heart surgery and paid quite a huge sum of money for that. He claims that expense as Expense incurred for the profession, since,you know, heart is a very important part for his survival which,in turn contributes towards the successful conduct of his profession. So he is justified in treating it as Plant and Machinery.
This case ended up in being considered in the Honorable High Court. The Court observed that a healthy heart is absolutely necessary for anybody and not just a lawyer. Moreover, if he has to claim this as a business expense, he must have assigned a value to it and included it in the Financials in early years. So right now he is not justified in claiming the expense as business expense.
So much for being cheeky,eh?? :))