The Income Tax Appellate Tribunal (ITAT), Delhi Bench, delivered a crucial judgment on September 22, 2021, in the case of ITA 185/DEL/2019. This case, involving the Escorts Heart Institute & Research Centre Ltd., New Delhi, and the Addl. CIT, Special Range-3, New Delhi, centers on the appropriate rates of depreciation for medical equipment for the assessment year 2010-11.
The dispute arose when the Additional Commissioner of Income Tax challenged the depreciation rates applied to certain medical equipment, which were not deemed as life-saving, thus altering the depreciation rate from 40% to 15%. The case was escalated from the initial assessments through to the ITAT after a rectification order and subsequent appeals.
The ITAT’s ruling focused on whether the adjustments made by the Assessing Officer under Section 154 for depreciation rates constituted a ‘mistake apparent from the record.’ The tribunal, aligning with previous ITAT decisions and High Court guidelines, underscored that such determinations of depreciation were inherently debatable and thus not rectifiable under the said section.
This judgment not only impacts the tax liabilities for Escorts Heart Institute but also sets a precedent for how depreciation on medical equipment should be handled, particularly when the classification of equipment as ‘life-saving’ is in question. It reinforces the judiciary’s stance on the meticulous examination required in tax rectifications and the limitations of Section 154.
The ITAT’s decision in ITA 185/DEL/2019 is a landmark in tax jurisprudence concerning the depreciation of medical equipment, emphasizing the need for careful legal and factual analysis in tax assessments. This case serves as a reference point for similar disputes and underscores the complexity of tax laws concerning medical infrastructures.
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