The Bangalore bench of the ITAT, in a significant ruling on medical tourism, has held that the advance from overseas patients cannot be treated as capital receipts since the same cannot remain perpetually so and even after passage of 46 months.
The assessee, a practicing doctor challenged the order of the Assessing Officer argued that the amount received as advance from overseas patients is wrongly treated as revenue by the Officer. Such advances include sum of amounts wrongly classified as gifts.
The assessee contended that with the development of medical tourism in India a very large number of patients and their relatives take advantage of the advance medical facilities available in Indian hospital and with doctors practicing in India. Many patients come India on their own and many come through a large number of agents, who puts them in touch with the hospitals, doctors etc., arrange their arrangements such as visas, accommodation in India and appointments with the Doctors. The patients who come through these agents are often completely unknown to the Doctors who often do not know the where about of them. When they came they pay the requisite fee for treatment which may last for entire duration of their treatment. The entire treatment is collected in advance and usually in the form of cash. That is why there is an item called advance received from patients in the balance sheet. As and when the treatment is complete the advance will be treated as income/ revenue receipt, by transfer from the balance sheet to the Profit & Loss account. The assessee also furnished the particulars of the advance received for treatment.
A bench of Shri. Chandra Poojari, Accountant Member and Smt. Beena Pillai, Judicial Member found that the issues raised by the assessee are., (i) The advances are recognized as revenue in subsequent years. (ii) The cost of expenditure towards these patients are capitalized and adjusted in the year of revenue recognition.
Remanding the matter back to the files of the AO, to once again carry out a detailed verification in respect of the various evidences that were filed, the Tribunal observed that “The advance received from patients cannot remain perpetually so and even after passage of 46 months, it has not been recognized as revenue. Hence the claim of the assessee that the receipts are capital in nature may not be entertained.”
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