Commissioner of Income Tax vs Upasana Hospital and Nursing Home

S. Sankarasubban, J.

At the instance of the Commissioner, Thiruvananthapuram, the following questions of law referred to this court :

"Whether, on the facts and in the circumstances of the case, on a fair reading of item (ii)(2) of Appendix-I read with rule 5 of the Income Tax Rules, the Tribunal is right in law and fact in holding.

(i) Whether the hospital is a welfare centre or not is a debatable issue and not free from doubt ?

(ii) the assessing officer was not justified in allowing depreciation at the lower rate of 10 per cent ?

(iii) the Commissioner (Appeals) was justified in cancelling the order passed by the assessing officer u/s 154 of the Income Tax Act ?

The revenue is the petitioner. The assessment years are 1984-85 and 1985-86. The common ground involved in these cases is whether the assessee is entitled to allowance of depreciation on furniture at 10 per cent.

The assessee is a partnership firm running a hospital and a nursing home at Quilon. For the years 1984-85 and 1985-86, the assessing officer allowed depreciation on furniture and fittings at 15 per cent. Later, it was restricted to 10 per cent. Accordingly, an order was passed u/s 154 of the Income Tax Act allowing depreciation at 10 per cent. The matter was taken before the Commissioner (Appeals). The Commissioner (Appeals) agreed with the assessees representative that the rate of depreciation applicable in the case of a hospital was a debatable issue and so the assessing officer was not justified in revising the assessment u/s 154. The orders passed u/s 154 of the Income Tax Act in respect of the assessment years 1984-85 and 1985-86 were accordingly cancelled by the first appellate authority.

Against the above orders, the revenue preferred an appeal before the Tribunal. The Tribunal took the view that the question whether hospital was entitled to rebate at 15 per cent or 10 per cent was not free from doubt and hence dismissed the appeal filed by the revenue. In Income Tax Reference No. 48 of 1999, [reported as Commissioner of Income Tax Vs. Upasana Hospital and Nursing Home, we have taken the view that the hospital does not come within the meaning of "welfare centre". Hence, we are of the view that the furniture in the hospital are entitled to depreciation only at 10 per cent.

In the above view of the matter, question No. (i) is answered against the assessee, question No. (ii) is answered in the negative and against the assessee and question No. (iii) is answered in the positive and against the assessee.

Income Tax Reference are disposed of as above.