Depreciation for charitable trusts upheld on assets treated as application of income where favourable precedent governs.

Depreciation remained allowable to a charitable trust on assets whose acquisition cost had already been treated as application of income under section 11 of the Income-tax Act, 1961. The appellate authority followed existing tribunal precedent and applied the rule that, where conflicting judicial views exist, the interpretation favourable to the assessee should be adopted. As the Revenue did not identify any distinguishing factual feature or contrary jurisdictional High Court decision, the depreciation claim was upheld notwithstanding the earlier treatment of the asset cost as application of income.

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Issues: Whether depreciation is allowable to a charitable trust on assets whose cost had already been treated as application of income under section 11 of the Income-tax Act, 1961.

Analysis: The appellate authority allowed the depreciation claim on the basis of existing tribunal precedent. It noted that where conflicting judicial views exist, the view favourable to the assessee is to be preferred. The Revenue did not show any distinguishing feature on facts or rely on any contrary jurisdictional High Court ruling. The allowance of depreciation was therefore upheld notwithstanding the earlier treatment of the asset cost as application of income.

Conclusion: The claim for depreciation was held allowable in favour of the assessee.

Ratio Decidendi: Where a charitable trust has treated the cost of assets as application of income under section 11, depreciation on those very assets may still be allowed when supported by the view favourable to the assessee in the face of divergent precedents.

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