2012 (5) TMI 663 - AT - Income Tax

Trust's Appeal Granted for Depreciation Deduction: Precedents Upheld

Services Association of Seventh Day Adventists P. Ltd Versus The Income Tax Officer (OSD) Exemptions, Chennai

Services Association of Seventh Day Adventists P. Ltd Versus The Income Tax Officer (OSD) Exemptions, Chennai - TMI Issues Involved:1. Denial of deduction for depreciation while computing income under Section 11 of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Denial of Deduction for Depreciation:Facts of the Case:The assessee, a trust, appealed against the CIT(A)-XII, Chennai's order dated 18.10.2011, which denied the deduction for depreciation on assets amounting to Rs. 57,09,195/- while computing income under Section 11 of the Income-tax Act, 1961. The Assessing Officer (AO) disallowed the depreciation on the grounds that the assessee had already claimed the full cost of additions to movable assets as an application of income towards the trust's charitable purposes. Allowing depreciation on the same assets would amount to a double deduction.CIT(A)'s Decision:The CIT(A) upheld the AO's decision, stating that under Section 11, even capital expenditure amounts to an application of income of the trust. Allowing further depreciation would result in an extra or double deduction, which is not permitted under the Income-tax Act. The CIT(A) relied on the Supreme Court's decision in Escorts Ltd vs UOI, 199 ITR 43, where it was held that an assessee should not be allowed to claim two deductions on capital expenditure on scientific research.Assessee's Argument:The assessee's representative argued that the issue was no longer res integra, citing the Chennai 'B' Bench of the Tribunal's decision in M/s Tamilnadu Cricket Association vs The Dy. CIT(Exemptions), which allowed depreciation under similar facts. The representative also referenced the decision of the Punjab & Haryana High Court in CIT v. Tiny Tots Education Society (330 ITR 21), which supported the claim for depreciation.Tribunal's Analysis:The Tribunal reviewed the orders and submissions. It noted that the question of whether depreciation can be claimed as an application of income under Section 11 had been resolved in favor of the assessee by the Punjab & Haryana High Court in Tiny Tots Education Society. The Tribunal also referred to its own decision in Sri Mariamman Educational Health and Charitable Trust, which followed the Bombay High Court's ruling in CIT vs. Institute of Banking Personal Selection (264 ITR 110). In these precedents, it was established that depreciation on assets, the cost of which had been fully allowed as an application of income under Section 11, could still be claimed.Conclusion:The Tribunal concluded that the issue was fully covered in favor of the assessee, with no contrary material or higher court orders presented by the Revenue. Therefore, it set aside the orders of the lower authorities and directed the AO to allow the claim for depreciation of Rs. 57,09,195/-. The appeal of the assessee was allowed, and no other grounds were argued or pressed during the hearing.Final Order:The appeal of the assessee was allowed, and the order was pronounced on Friday, the 11th of May, 2012, at Chennai.