Depreciation is an allowance, not expenditure, for tax deduction. Tribunal dismisses appeals.

The Tribunal held that depreciation is an allowance, not expenditure, in computing deductible income under section 10(29) of the Income Tax Act. Relying on precedents, the Tribunal dismissed all five appeals by the Department, affirming that depreciation should not be included in the computation to reduce the tax liability of the assessee.

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Issues:
Interpretation of deductible income under section 10(29) of the Income Tax Act, 1961.

Analysis:
The judgment pertains to five appeals by the Department on the issue of whether the deductible income under section 10(29) should be computed after excluding depreciation as part of the expenditure and considering gross receipts from warehousing and CFS/ICD. The Assessing Officer (AO) argued that depreciation, being a business expense, should be included in the computation to reduce the tax liability of the assessee. However, the Ld. AR contended that depreciation is an allowance, not expenditure, citing the decision in Nectar Beverages P. Ltd. vs. DCIT 314 ITR 314 by the Apex Court.

The Tribunal considered the argument and referred to the case of Hoshang D. Nanavati in ITA No. 3567/Mum/2007, which clarified that Section 14A deals with expenditure, not statutory allowances. This decision was supported by the ITAT Ahmedabad Special Bench in Vishnu Anant Mahajan vs. ACIT in ITA No. 3002/Ahd./2009, affirming that depreciation is an allowance, not expenditure. Despite the Ld. CIT DR's submission, the Tribunal upheld that depreciation does not qualify as expenditure for the purpose of apportionment under Section 10(29). Consequently, the Tribunal agreed with the Ld. CIT (A)'s findings and dismissed all five appeals by the Department.

In conclusion, the Tribunal's judgment clarified the treatment of depreciation in computing deductible income under section 10(29) of the Income Tax Act, emphasizing that depreciation is an allowance and not expenditure. The decision was based on precedents and established legal interpretations, ultimately leading to the dismissal of the Department's appeals.

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