Tribunal allows charitable trust's claim for depreciation on hospital equipment

The Tribunal upheld the Commissioner of Income Tax (Appeals) decision allowing a charitable trust's claim for additional depreciation on hospital equipment. The Tribunal emphasized the need to compute income on commercial principles and noted that the equipment couldn't be sold as scrap due to Government Rules. The Court found the claim valid under Section 32(1)(iii) of the Income Tax Act, dismissing Revenue's objection on claim nomenclature. The appeal was dismissed in favor of the Respondent, as the issue raised did not present a substantial legal concern.

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Issues:
Challenge to Tribunal's order on additional depreciation claimed by a charitable trust for hospital equipments.

Analysis:
1. Additional Depreciation Claim: The Respondent, a charitable trust running a hospital, claimed additional depreciation of Rs. 83.15 lakhs on hospital equipments that had completed their useful life of 10 years. The Assessing Officer disallowed this claim, stating that the assets should be sold as scrap when outlived their useful life. The disallowed amount was added to the income in the Assessment Order dated 18th December, 2009.

2. Appeal to CIT(A): The Respondent appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the appeal on 15th March, 2011. The CIT(A) held that the income of the Trust should be computed on commercial principles, as established in previous judgments. Consequently, the claim of additional depreciation was allowed.

3. Tribunal's Decision: The Respondent further appealed to the Tribunal, which upheld the order of the CIT(A) on 20th October, 2014. The Tribunal noted that the additional depreciation was claimed for hospital equipments that couldn't be sold as scrap due to Government Rules. The Tribunal dismissed the Revenue's appeal, emphasizing the need to compute income on commercial principles, as per established legal precedents.

4. Legal Provisions: The Court observed that Section 32(1)(iii) of the Income Tax Act deals with depreciation on plant and machinery. It allows for depreciation when assets are discarded or destroyed, and the written down value is written off in the books of account. In this case, since the hospital equipments couldn't be sold as scrap, and were written off in the books, the Respondent was entitled to claim depreciation.

5. Conclusion: The Court found that the Respondent's claim for additional depreciation was valid, as it was in line with commercial principles and the provisions of the Income Tax Act. The objection raised by the Revenue regarding the nomenclature of the claim was deemed irrelevant. The Court dismissed the appeal, stating that the question raised did not give rise to any substantial legal issue and upheld the decision in favor of the Respondent.

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