Shanti Bhushan Vs CIT (Supreme Court of India)
A prolonged legal battle initiated by eminent late lawyer Shanti Bhushan, who sought to claim the expenses for his coronary bypass surgery as a tax-deductible business expenditure, concluded in the Supreme Court after his demise. The case, which travelled through various judicial levels, centred on the novel legal question of whether a human organ, specifically the heart, could be considered a ‘plant’ under the Income Tax Act, 1961, and if its repair could be claimed as a business expense.
The matter was finally disposed of by the Supreme Court in 2024, which noted that the appellant, Mr. Bhushan, had passed away in 2023. His legal heirs communicated their decision not to pursue the litigation further, leading the apex court to declare the appeal as having become infructuous.
The core of the legal debate unfolded in the Delhi High Court, which heard a reference on the question: “whether…the expenses incurred by the assessee on coronary by-pass operation should have been allowed as a allowable deduction either under Section 31 or Section 37 of the I. T. Act, 1961?”
Also Read: Professional’s heart surgery expense not deductible under Income Tax: Delhi HC
The Arguments
For the assessment year 1983-84, Mr. Bhushan had claimed a deduction of Rs. 1,74,000 incurred on a bypass surgery in Houston, USA. His primary argument was under Section 31 of the Income Tax Act, which permits deductions for expenses on “current repairs” of machinery or plant. Mr. Bhushan contended that his heart was integral to his professional activities as a lawyer and, therefore, should be treated as a ‘plant’. To support his claim, he demonstrated a significant increase in his professional income post-surgery, arguing this proved the expenditure was a matter of professional expediency.
In the alternative, he argued the expense should be allowed under Section 37 of the Act, which allows for deductions on expenditure laid out “wholly and exclusively for the purposes of the business or profession.”
Lower Authorities’ Stance
The Assessing Officer (AO) rejected both arguments. The AO determined the expenditure was personal in nature, as it is a moral obligation for any individual, regardless of their profession, to maintain their health. The AO distinguished the case from precedents where a company bore an employee’s medical costs, noting that Mr. Bhushan was an individual incurring costs for himself. Regarding the Section 31 claim, the AO found that a human body cannot be equated with a ‘plant’ as it is not an asset recorded in a balance sheet with an acquisition cost. This view was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (Tribunal).
The Tribunal, applying a “functional test,” concluded that while a guitarist’s fingers or a singer’s vocal cords could arguably be ‘tools of the trade’, the heart is essential for life itself and not specifically a tool for a lawyer’s profession.
Delhi High Court’s Analysis and Judicial Precedents
The Delhi High Court undertook a detailed examination of the legal precedents cited by Mr. Bhushan.
