Tribunal affirms depreciation as legitimate deduction in income tax calculation

The Tribunal upheld the CIT(A)'s decision regarding the deletion of depreciation addition under section 11 of the Income Tax Act, 1961. The department's appeal was dismissed, affirming that depreciation is a legitimate deduction in computing the assessee's real income, in line with precedents set by the Bombay High Court and the Punjab & Haryana High Court. The decision emphasized that claiming both capital expenditure and depreciation would amount to double deduction, as established in relevant case law.

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Issues involved: Appeal by department regarding deletion of depreciation addition u/s 11 of Income Tax Act, 1961.

Issue 1 - Depreciation disallowance: The department appealed against the deletion of depreciation addition of Rs. 58,24,330/- made on account of disallowance of depreciation, arguing that the assets were already claimed as expenses and depreciation was in addition to capital expenditure. The Assessing Officer disallowed the depreciation as the assets were allowed as application of income under section 11 of the Act. The CIT(A) allowed the claim based on a Bombay High Court judgment, which held that both capital expenditure and depreciation were allowable. The Supreme Court's decision in Escorts Ltd. vs. Union of India was cited, stating that double deduction cannot be claimed. The Tribunal affirmed the CIT(A)'s decision based on the judgments of Bombay High Court and Punjab & Haryana High Court, dismissing the appeal by the revenue.

Conclusion: The Tribunal upheld the CIT(A)'s decision, stating that depreciation is a legitimate deduction in computing the real income of the assessee, following the principles established by the Bombay High Court and the Punjab & Haryana High Court.

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