2012 (9) TMI 370 - AT - Income Tax

Tribunal remands CIT(A)'s decision lacking analysis on proviso to Income-tax Act

ADIT(E) Versus AUTOMOTIVE COMPONENT

ADIT(E) Versus AUTOMOTIVE COMPONENT - TMI Issues Involved:1. Whether the assessee trust is entitled to claim depreciation as an application of income when the entire cost of acquisition of capital assets has already been claimed as an application of income.Issue-wise Detailed Analysis:1. Entitlement to Depreciation as Application of Income:Facts and Arguments:- The assessee, providing consultancy of automotive components, filed a return declaring an income of Rs. 1,92,16,940/- and was selected for scrutiny.- Although registered under section 12A of the Income-tax Act, 1961, the assessee did not claim exemption under section 11 due to the proviso to section 2(15) introduced by the Finance Act, 2009.- The Assessing Officer (AO) disallowed the claim for depreciation, relying on the Supreme Court decision in Escorts Ltd. vs. Union of India, arguing that the entire cost had already been claimed as an application of income in the preceding years.CIT(A) Decision:- The CIT(A) allowed the claim of the assessee, relying on the ITAT, Delhi Bench decisions in Dr. R.L. Khera Charitable Trust and International Goudia Vedanta Trust, and the Punjab & Haryana High Court decision in CIT vs. M/s Tiny Tots Education Society.Revenue's Appeal:- The Revenue contended that the CIT(A) erred in allowing depreciation as an application of income, supporting the AO's decision with the ITAT Cochin Bench decision in DDIT(E) vs. Adi Sankara Trust.Tribunal's Analysis:- The Tribunal noted that the assessee did not claim benefits under sections 11 and 12, declared income under 'Profits and Gains of the Business or Profession,' and filed an audit report under section 44AB.- The Tribunal reviewed various High Court decisions cited by the assessee, which allowed depreciation to be deducted to preserve the corpus of the trust and determine the income available for charitable purposes.- However, the Tribunal emphasized that these decisions did not consider the proviso to section 2(15) of the Act and the assessee's own declaration of income under business profits.Supreme Court Reference:- The Tribunal referred to the Supreme Court decision in Escorts Limited, which held that no double deduction is permissible for the same expenditure under different sections of the Act.Conclusion and Directions:- The Tribunal found the CIT(A)'s order lacked proper analysis and reasoning, failing to address the impact of the proviso to section 2(15).- The Tribunal set aside the CIT(A)'s order and remanded the matter for fresh consideration, directing the CIT(A) to pass a reasoned order in compliance with section 250(6) of the Act, considering the first proviso to section 2(15) and the assessee's non-claim of benefits under sections 11 and 12.2. Additional Grounds:- No additional grounds were raised, and the residuary ground was dismissed.Final Judgment:- The appeal was allowed for statistical purposes, and the matter was remanded to the CIT(A) for a fresh decision in accordance with the Tribunal's observations and legal requirements.