These are appeals of assessee challenging similar but separate orders dated 7-2-2001 of CIT(A)-II, Hyderabad, as erroneous. 2. Facts of case in brief are that: Assessee is partnership firm carrying on business in running nursing home. While framing assessment for years under appeal, Assessing Officer noted that assessee's gross receipts from carrying on of profession exceeded limit of Rs. 10 lakhs prescribed under clause (b) of section 44AB, it ought to have got its accounts audited. As assessee failed to do so, he initiated proceedings for levy of penalty under section 271B. Contesting penalty proposed, assessee contended that receipts of nursing home consisted of only room rents, theatre rent, pre and post operative nursing care, whereas professional fee is charged by surgeons and doctors treating patients, and same is not part of income of nursing home. That being so, nursing home does not have any professional income, so as to fall within ambit of clause (b) of section 44AB, and as its gross receipts from business are below limit of Rs. 40 lakhs set in clause (a) of section 44AB, it is not required to get its accounts audited as prescribed in that section. While maintaining these contentions, assessee also raised plea that it was under bona fide impression that it was not covered by provisions of section 44AB. However, when assessee was advised to get books audited, to avoid protracted litigation, it ultimately got books of account audited on 21-1-2000, though with some delay, which again, is for good and sufficient reasons. Not convinced with explanation of assessee, Assessing Officer levied penalties under section 271B of Rs. 12,364 for assessment year 1998-99 and of Rs. 15,809 for assessment year 1999-2000. On appeal, CIT(A) observing that nursing home normally caters to needs of patients, and is run by professionals like doctors indicates beyond reasonable doubt that activity of nursing home is nothing but profession, held that person handling such profession is required to get its accounts audited, if turnover exceeds Rs. 10 lakhs. He accordingly confirmed penalties under section 271B levied by Assessing Officer for both years, for failure on part of assessee to comply with provisions of section 44AB. Aggrieved by orders of CIT(A), assessee preferred present appeals before us. 3. learned counsel for assessee submitted in common that: Appellate Commissioner has erred in confirming penalties of Rs. 12,369 for assessment year 1998-99 and of Rs. 15,809 for assessment year 1999- 2000, levied by Assessing Officer. assessee is carrying on business activity and total receipts are less than Rs. 40 lakhs and therefore, provisions of section 44AB are not attracted to these cases of assessee. question is whether activity of running nursing home constitutes business o r profession. activity of nursing home is not merely professional, but includes business aspects as well. It is not necessary that nursing home should be run by professionals only, as any one can carry on business of running nursing home engaging services of professionals. Indeed and in fact, in instant case, only one out of three partners of assessee-firm is doctor. Further, nursing home, as it is, is not Member of Indian Medical Association. It is not that doctors alone can start nursing home, as stated by Department, as there is no such requirement under law that only doctors should run hospital. Hospital is commercial activity. Indeed and in fact, firm is now not carrying on business, having been closed. Assessee is under bona fide impression that its activities amount to business and not profession. Hence books of account were not audited. Even on that count, there was reasonable cause for failure on part of assessee, and as such penalties impugned herein, are liable to be cancelled. Reliance is placed on Indian Medical Association (IMA) v. V.P. Shantha AIR 1996 SC 550. 4. On other hand, learned representative for Revenue countered, to say in brief, by defending orders impugned, besides highlighting that: combined reading of definitions of terms 'business' under section 2(13), 'person' under section 2(31) of Act clearly indicate that assessee-firm also constitutes 'person' as defined in section 2(31), and activities carried on by it also constitute 'profession', as defined in section 2(36). activity of nursing home is distinct from any business, commerce or trade and any person cannot run hospital. Nursing home is vocation, and it cannot be business. Profession includes vocation. That being so, since gross receipts of assessee exceeded limit of Rs. 10 lakhs prescribed, provisions of section 44AB are attracted to case of assessee, and for failure of assessee, penalties under section 271B were correctly levied. 5.1 Rival submissions heard and relevant orders read, including order o f Tribunal relied upon by assessee. We find that there is substantial force in stand of assessee unlike defence of Revenue in this appeal, for reasons following: 5.2 question before us is as to whether assessee-nursing home is covered by provisions of section 44AB. At outset, we may extract relevant portion of provisions of section 44AB- "44AB. Every person,- (a) carrying on business shall, if his total sales, turnover or gross receipts as case may be in business exceed or exceeds forty lakhs in any previous year; or (b) carrying on profession shall, if his gross receipts in profession exceed ten lakh rupees in any previous year; or (c) get his accounts of such previous year audited by accountant before specified date and furnish by that date report of such audit in prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed;" 5.3 There is no doubt that assessee, which is partnership firm, is 'person' within meaning of section 2(31), but dispute is whether assessee-firm is 'carrying on business' as contemplated under clause (a); or 'carrying on profession' as contemplated under clause (b) of section 44AB extracted above. According to assessee, its activities constitute 'business' and hence limit of Rs. 40 lakhs prescribed in clause (a) above applies. However, since its gross receipts were less than Rs. 40 lakhs, mandatory requirements of section 44AB of getting accounts audited, etc. do not apply to it. On other hand, it is contention of Revenue that activities of nursing home in providing medical care and nursing required by patients, which require specialized professional skill and knowledge, constitute 'profession' and as such ceiling of Rs. 10 lakhs prescribed in clause (b) of 'profession' and as such ceiling of Rs. 10 lakhs prescribed in clause (b) of section 44AB applies, and consequently, it is liable to comply with mandatory requirements of getting its accounts audited, etc. as contemplated under section 44AB. 5.4 Thus, question for consideration before us narrows down to find out as to whether activities of assessee constitute 'business' or 'profession'. Assessing Officer for arriving at conclusion that activities of nursing home constitute 'profession' has relied on guidelines laid down by Apex Court in case of V.P. Shantha (supra), wherein it was observed that occupations which are regarded as professions have following four characteristics- "(i) nature of work which skilled and specialized and substantial part is mental rather than manual; (ii) commitment to moral principles which go beyond general duty of honesty and wider duty to community which may transcend duty to particular client or patient; (iii) professional association which regulates admission and seeks to uphold standards of profession through professional codes on matters of conduct and ethics; and (iv) high status in community." He held that above four characteristics are applicable to nursing home and as such income from nursing home is definitely considered as professional income. We are afraid, we cannot uphold this finding of Assessing Officer for reasons discussed hereunder. 5.5 Disputing above findings of Assessing Officer, assessee contends that it is surgeons and doctors, who treat patients, have professional knowledge, qualification and skill to render professional service and receive professional fees from patients, whereas running nursing home, as such, does not have any of above attributes, nor is it recognized by Indian Medical Association. assessee further contends that it is only room rent, operation theatre rent and nursing charges that are accounted for in its books of account, whereas professional fees for services rendered by surgeons and doctors who treat patients are directly received by them. assessee further more contends that nursing home need not necessarily be run by doctors, but there is no legal bar on same being run by non-doctors, by engaging services of doctors. 5.6 There is very narrow demarcation between profession and business. word "profession" is of wider scope than "business". What may not amount to business may amount to 'profession' and what may not amount to 'profession' may amount to 'vocation' and what may not amount to vocation may amount to occupation. 'profession' in present use of language involves idea of occupation requiring either purely intellectual or if any manual skill, as in painting and sculpture, or surgery, skill controlled by intellectual skill of operator, as distinguished from occupation which is substantially production or sale, or arrangement for production or sale of commodities. Bringing out distinction between business and profession, Rajasthan High Court in case of CIT v. Bhagwan Broker Agency [1995] 212 ITR 133 held as follows- "The word "business" has been defined under clause (13) of section 2 of Income-tax Act, 1961, to include any trade, commerce or manufacture or any adventure or concern in nature of trade, commerce or manufacture. word "profession" has been defined in section 2(36) to include vocation, which refers to way of living and not necessarily course of activity indulged in, for earning one's livelihood or making any income. "Business" is term with wider import than "profession". All professions are businesses but all businesses are not professions. There should be some special qualification of person apart from skill and ability which is required in carrying on any activity which could be considered as profession. This could be by having education in particular system either in college or university or it may be even by experience. . . ." 5.7 Added to thin margin of difference between profession and business, there is one more factor that complicates issue of determining whether particular activity constitutes 'business' or 'profession'. That is, there is no bar that prohibits business being carried on by professional. Thus, professional may carry on his activities on commercial lines, by expanding his base and hiring services of several professionals and non-professionals. In these days of advanced science and ebullient development commensurate with need of community, society and country, centrifuged activity, though related to profession as such, may not in given case be interpreted as wooden exercise thereof, if other compelling and surrounding circumstances need expansive understanding of it in commercial way. expert professional, if he has inclination, capacity and zeal to expand his activity, may do so. As result thereof, he might tread into arena of business activity. Such composite activity is conceivable and indeed plausible in modern days. If, for instance, expert equips himself with plant and machinery with which, he, with aid of his professional skill and in collaboration with qualified assistant, is able to turn out activity which is not strictly professional activity but savours of commercial activity as well, it is case of commercial activity telescoped to professional activity and amounts to 'business'. In these days of even corporate hospitals rendering medical services on commercial lines, it is too late in day for revenue to contend that activities of hospital/nursing home, carried on by partnership firm, did not constitute 'business' but 'profession'. 5.8 Considering totality of facts and entirety of circumstances of instant case in light of above discussion, we find merit in above contentions of assessee. One important aspect to be remembered is that what is assessed here is 'Nursing Home', partnership firm, which is distinct assessable entity distinct from professionals who run it or engaged by it. Added to it, it is contention of assessee, uncontroverted by Department, that it is only room rent, operation theatre rent and nursing charges that are accounted for in books of assessee, whereas fee for professional services rendered by surgeons and doctors, are directly received by them from patients. Therefore, what is earned by assessee- firm in course of business is for letting out facilities possessed by it as nursing home and for provision of nursing and other supportive services provided by it to patients who take treatment from doctors in nursing home. Therefore, activities of nursing home constitute business and not profession. 5.9 We are fortified in this behalf by decision of Hon'ble Madras High Court in case of Dr. P. Vadamalayan v. CIT [1969] 74 ITR 94, wherein considering case of assessee, who is doctor by profession maintaining and running nursing home, in which he installed certain medical equipment and claimed development rebate on value thereof, it was held as follows- "Held, carrying on of nursing home by assessee as part of profession was of commercial nature and combined activities of assessee constituted "business" and assessee was entitled to development rebate. If assessee, who is professional and expert, contemporaneously carries on trade which is annexed to exercise of such profession and if, by doing so, he can take advantage of provision in fiscal Act by claiming allowance or rebate, and if such claim carries lighter burden of tax, then he has right to take advantage of same. definition of 'business', being inclusive definition and not being exhaustive, is indicative of extension and expansion and not restriction." 5.10 Similarly, in case of CIT v. Dr. V.K. Ramachandran [1981] 128 ITR 727. Hon'ble Madras High Court held as follows: "Held, that even professional activity could be tinged with commercial character, if indicia of commerce are manifest in it. way in which assessee carried on X-Ray activity was in no way different from non- qualified person carrying on radiological institute. mere fact that professional man had as adjunct to his professional activities, such institute did not disable him from running it as commercial venture and earning income therefrom." 5.11 Similarly in case of Natvarlal Ambalal Dave v. CIT [1997] 225 ITR 936 (Guj.), considering admissibility of investment allowance on X-ray machines, Hon'ble Gujarat High Court held that merely because person happens to be Hon'ble Gujarat High Court held that merely because person happens to be professionally qualified doctor, it cannot be said that such person's activity cannot be treated as activity of carrying on business. professional activity can also be characterized as activity of carrying on business if it is carried on like commercial activity. 5.12 In light of above discussion, we hold that activities of nursing home in instant case constitute business activity, and since turnover of assessee during years under appeal was below limit of Rs. 40 lakhs prescribed in clause (a) of section 44AB, assessee was not required for years under appeal, to get its accounts audited in terms of section 44AB. 5.13 In any event, there is also reasonable cause for default on part of assessee in complying with provisions of section 44AB inasmuch as it was under bona fide belief that its activities amount to 'business' under clause (a) and did not constitute 'profession' under clause (b) of section 44AB. bona fide nature of assessee's default is evident from consistent stand of assessee right from beginning in respect of assessment year 1998-99; and act of assessee in causing belated compliance with section 44AB by getting its accounts audited, though belatedly, in respect of assessment year 1999-2000 notwithstanding its stand that its activities constitute 'business' and it was not obliged to get its accounts audited in terms of section 44AB as its turnover was less than Rs. 40 lakhs. That being so, even on that count, as there was reasonable cause for default on part of assessee, in form of bona fide belief nursed by it that it was not covered by provisions of section 44AB, it is not fit case for levy of penalty under section 271B of Act. 5.14 For foregoing reasons, penalties levied under section 271B of Act for assessment years 1998-99 and 1999-2000 are cancelled. 6. In result, both appeals of assessee are allowed. *** SHALINI HOSPITALS v. ASSISTANT COMMISSIONER OF INCOME TAX