Income Tax cases are often sordid matters involving deceit, dishonesty and general untasteful behavior. Once in a blue moon though, one may stumble upon a heartwarming story in tax, like the case of Shanti Bhushan vs. CIT.

The eminent lawyer Shanti Bhushan, in this particular case, claimed that the expense of having a coronary surgery should be allowed as a deduction under section 31 and 37 of the Income Tax Act. He argued that his heart was in the nature of a plant which enabled him to carry out his business and profession, and the surgery was akin to carrying out repairs in a plant, and hence the expenses should be allowed as a deduction in terms of section 31 of the Act. Alternatively, he contended that since the heart surgery was done to ensure that his business continued without a hitch, it could be said to be expenditure incurred wholly or exclusively for his business and therefore would be a deductible under Section 37 of the Act.

Prima facie, it may seem that the assessee raised a fairly frivolous claim regarding the heart being a “plant” helped him carry out his business. However, an analysis of the judgments cited in the case would show that this claim is not so outlandish so as to be summarily dismissed.

One of the first issues which must be addressed in a case like this is: “Whether a living thing can be categorized as a plant?”

Shanti Bhushan cited the case of Yarmouth vs. France to forward this contention. In Yarmouth, a horse was held to be a “plant” for the purpose of a business carrying goods from a wharf to the storehouse, since it was essential for carrying out the stated business. This definition of plant, though unconventional, correctly captures the essence of its applicability, which is to say something used for the carrying out of business. A quick search on our database at Riverus showed that the Yarmouth case has been referred to by Indian courts 59 times, and the definition given therein is has been accepted multiple times. Interestingly, this definition of plant was also held to be correct by the Supreme Court in the case of Scientific Engineering House (P) Ltd. vs CIT, a case which was instrumental in deciding Shanti Bhushan’s case, as we shall see subsequently.

Now that it has been established that a living thing can, in fact, be categorised as a plant, it begs askance as to why the Delhi High Court did not permit the assessee’s claim. The HC took a three-pronged approach to shoot down Shanti Bhushan’s innovative and curious appeal.

Firstly, on section 37, the court held that the expenditure incurred was not wholly and exclusively for the business of the assessee. The surgery would have increase Mr. Bhushan’s efficiency and longevity in general, and hence would not be allowed as an expenditure under this section. The assessee relied on the case of Mehboob Productions Pvt. Ltd. Vs. CIT, wherein a medical expense was allowed under Section 37. However, the HC distinguished the said case on the fact that the expense therein was incurred while the director was on a business trip and hence it could be said that the expense was wholly for the purpose of assessee’s business.

The disallowance under Section 31 presents a more interesting approach. Primarily, the court held that the heart of the assessee could not be held to be a plant, notwithstanding the decision in Yarmouth, since if it was to be considered a plant it would necessarily be an asset and would have to have a cost of acquisition and be reflected in the books of account of the assessee. Secondly, the heart could also not be said to be a plant since it was not a tool used by the assessee in his profession. The court applied the functionality test, which had been laid down in the case of Scientific Engineering, and held that the general well-being of the heart could not be equated to it being used as a tool in the assessee’s profession.

While the fact that a well-functioning heart is a sine qua non for a human being to exist irrespective of their vocation is obvious, the court did not address the contention of the assessee that the heart surgery seemed to have had a marked effect on his performance in his profession. The assessee claimed that he was unable to undertake taxing work before the surgery. Post it, his earnings increased almost 3 fold. This seems to indicate that his heart, or rather the state of it, did play an instrumental role in determining how effectively he could carry out his duties in his profession. Hence, an argument could be made that the heart was indeed akin to a tool which the assessee needed to carry out his business efficiently and hence its “repair” via surgery should be allowable as a deduction under Section 31. The ITAT in its judgment in the same case had in fact noted that a musician could possibly claim the expenditure incurred for repairing her fingers, or a vocalist her vocal cords, as a deduction.

The case would still be bound to fail on account of the court’s characterization of a plant as an asset and the lack thereof in this case, but showing a direct nexus between the well-being of the heart and the ability of the assessee to work might have, at a stretch, satisfied the functionality test laid down by Scientific Engineering. However, that was not to be, and the assessee’s appeal was dismissed in a heart-breaking fashion by the assessee.

Author : Siddharth Sharma

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