SC to decide if expenditure on surgery could get exemption under tax laws

Supreme Court to decide on whether expenses for a surgery can be deducted as a professional expense from taxable income. Court admitted appeal of noted senior advocate Shanti Bhushan. Bhushan has raised the question saying that he underwent a byepass surgery saying that it was to carry on his profession in an efficient manner

The events leading to the case are as follows.

In the assessment year 1983-84, Shanti Bhushan had filed an income tax return declaring a total income of Rs 2,15,520/-. This return was later revised and in that, he had claimed as expense a sum of Rs. 1,74,000/- incurred by him on coronarysurgery performed on him in Houston, USA.


Mr. Bhushan claimed waiver under Section 31 of the Income Tax Act (IT Act) which, inter-alia permits deduction of expenditure incurred on current repairs of plant. His stand was that a human heart is in the nature of a ‘plant’ and therefore the expenditure incurred by him on the coronary surgery was akin to expenses incurred on current repairs of a plant.


The Assessing Officer rejected the claim under Section 31 and Section 37 of the I.T. Act. An appeal was filed before the Commissioner of Income Tax (CIT) against the order of the Assessing Officer. The CIT upheld the order of the Assessing Officer. Aggrieved by this, further appeal was filed before the Income Tax Appellate Tribunal (ITAT) by Shanthi Bhushan.


The Tribunal also rejected the claim under Section 31 relying on the test laid down by the Gujarat High Court in the case of CIT vs. Elecon Engineering Co. Ltd. (1974) 96 ITR 672 (Guj.). It said “for the expenses incurred on the repair of the plant to be allowed, the assessee would have to demonstrably show that the plant was used as a “tool” with which he carried out his business or professional activity.”

The Tribunal came to the conclusion that the assessee could not have demonstrated that heart was used as a “tool of his trade” since the heart was even otherwise an organ, essential for normal and healthy functioning of a human body, and not necessarily for a professional, such as a lawyer.


An appeal was filed before the Delhi High Court, which was also rejected. The court held that “Firstly if the heart of a human being, as in the case of theassessee, were to be considered a plant, it would necessarily mean that it is an asset which should have found a mention in the assessee’s balance sheet of the previous year in issue, as also, in the earlier years. Apart from the fact that this is admittedly not so, the difficulty that the assessee would face in showing the same in his books of accounts would be of arriving at thecost of acquisition of such an asset. Therefore, in our view before expenses on repair of plant are admitted as a deduction, the plant would necessarily have to be reflectedas an asset in the books of accounts. The second ground on which, we are persuaded by the counsel for the revenue not to accept the assessee’s claim is that, even if one were to give the widest meaning to the word ‘plant’ under Section 31 of the IT Act, human heart would still not fall within the definition of the word plant.”


The Delhi High Court observed that “the question raised is the product of experience, deftness and obvious artfulness of the petitioner who is a seasoned, experienced and an eminent Advocate of the country.” Wewill have to wait and watch if Shanthi Bhushan will prefer an appeal to the Apex Court against the Delhi HC’s order.