Shanti Bhushan to move SC on I-T deduction for heart surgery

Eminent lawyer Shanti Bhushan, who is making headlines as member of the Lok Pal Bill drafting committee, is also busy in something really close to his heart. He has decided to move the Supreme Court seeking income tax deduction for expenses incurred on heart surgery.

Though the Delhi high court on Wednesday dismissed his plea, Bhushan hasn't lost heart. He says he suffered a heart attack due to professional work and the expenditure incurred by him on a heart operation must be deductible under Section 31 of the Income Tax (I-T) Act.

Bhushan's claim is based on the grounds that the heart is a "plant" and the expenditure has been incurred on "current repairs". He also claimed that his professional receipts rose substantially after the operation and the expenditure was "wholly & exclusively" for his profession and deductible under Section 37(1) of the I-T Act.

Bhushan told Business Standard, "Monetarily, the impact of the high court order will be negligible. I file a return for some Rs 10-15 crore annually and minor surgery costs will not affect me. But I would take the matter to the apex court for my principles."

Dismissing his plea, the high court noted that "if the heart 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. This was not done and cannot be done as the 'cost of acquisition' of such an asset cannot be determined, and, even if the widest meaning to the word 'plant' is given, the heart does not satisfy the 'functionality' test, because while the heart is necessary for survival, it does not mean it is used as a 'tool' for trade or professional activity."

The high court further said that the claim under Section 37(1) was not acceptable as the expenditure was not incurred wholly and exclusively for the assessee's profession. There was no direct or immediate nexus between the expenses incurred by the assessee and his efficiency in the professional field per se, it said.

Although Bhushan is of the view that the high court's review and judgment are comprehensive, he says the court has committed an error.

"It is a comprehensive but controversial judgment. If the court says that the heart should have been mentioned in previous years' accounts as an asset, I say that it is not a 'purchased asset' but a 'God-given gift.' If the asset is given free, the cost of repairs should be allowed to be deducted," said Bhushan.

If the apex court rules in Bhushan's favour, it will become law and hence all expenses on such heart surgeries by professionals will be tax-deductible. It's a different matter that the finance minister may lose heart over the impact it will have on direct tax revenues.