2015 (1) TMI 515 - AT - Income Tax

Revision u/s 263 - higher depreciation on hospital equipment - assessee in the present case is an educational society - Held that - We uphold the impugned order of the learned Commissioner holding the orders of the Assessing Officer passed under S.143(3) read with S.153A of the Act for the years under consideration, to be erroneous and prejudicial to the interests of the Revenue on the issues of allowing higher depreciation on furniture as well as on the issue of allowing claim of the assessee for higher depreciation on hospital equipment and for unsecured loans without making proper and adequate enquiries. We however, set aside the impugned order of the learned Commissioner on the issue of corpus receipts by holding that he was not justified in treating the orders of the Assessing Officer in not bringing to tax the corpus receipts in the hands of the assessee as erroneous and prejudicial to the interests of the Revenue - Decided partly in favour of assessee for assessment years 2006-07 to 2010-11 whereas the appeals of the assessee for assessment years 2004-05 and 2005-06 are dismissed.

Summary

Issues Involved:
1. Claiming of Depreciation on Hospital Equipment
2. Unsecured Loans
3. Corpus Receipts
4. Depreciation on Furniture
5. Under Assessment of Income

Detailed Analysis:
1. Claiming of Depreciation on Hospital Equipment:
The assessee, an educational society running a medical college and hospital, claimed depreciation at a higher rate of 40% on hospital equipment for the assessment years 2004-05 to 2010-11. The Commissioner found that only specific life-saving medical equipment were eligible for 40% depreciation, and the Assessing Officer (AO) failed to segregate the items accordingly. The Tribunal upheld the Commissioner's decision, noting that the AO allowed the claim without proper and adequate enquiry, making the assessments erroneous and prejudicial to the interests of the Revenue.

2. Unsecured Loans:
The Commissioner identified that the AO accepted substantial unsecured loans for the assessment years 2004-05 to 2007-08 and 2009-10 without obtaining confirmations from the lenders. The Tribunal agreed with the Commissioner, stating that the AO's failure to verify the unsecured loans made the assessments erroneous and prejudicial to the interests of the Revenue. The assessee's claim that confirmations were submitted was unsubstantiated.

3. Corpus Receipts:
The Commissioner noted that the AO did not bring the corpus receipts to tax after rejecting the assessee's claim under sections 10(23C)(vi) and 11. The assessee argued that corpus donations are exempt from tax, supported by the Tribunal's decision granting registration under section 12A, which was upheld by the Andhra Pradesh High Court. The Tribunal set aside the Commissioner's order on this issue, holding that the Commissioner was not justified in treating the AO's orders as erroneous and prejudicial to the interests of the Revenue.

4. Depreciation on Furniture:
The Commissioner found that the AO allowed depreciation on furniture at a higher rate of 15% instead of the applicable 10% for the assessment years 2006-07 and from 2008-09 to 2010-11. The Tribunal upheld the Commissioner's decision, agreeing that the AO's allowance of higher depreciation without proper verification was erroneous and prejudicial to the interests of the Revenue.

5. Under Assessment of Income:
For the assessment year 2010-11, the Commissioner pointed out that the AO erred in determining the excess of income over expenditure. The Tribunal did not specifically address this issue in detail but upheld the Commissioner's overall finding of errors in the AO's assessments.

Conclusion:
The Tribunal upheld the Commissioner's order under section 263, holding the AO's assessments for the years under consideration to be erroneous and prejudicial to the interests of the Revenue on the issues of higher depreciation on furniture and hospital equipment, and unsecured loans. However, it set aside the Commissioner's order on the issue of corpus receipts. The appeals for the assessment years 2006-07 to 2010-11 were partly allowed, while those for 2004-05 and 2005-06 were dismissed.