2012 (10) TMI 752 - AT - Income Tax

Tribunal allows appeal for depreciation claim under Income Tax Act

The Tribunal allowed the appeal and upheld the assessee's claim for depreciation of Rs. 57,90,275. The Tribunal relied on consistent judicial precedents ... Disallowance of depreciation in case of Trust – Whether depreciation can be claimed on asset whose full cost of addition has claimed as application of income u/s 11 – AO argued that depreciation on the same assets amounts to double deduction – Held that:- Following the decision of the Tribunal in the assessee’s own case that full expenditure had been allowed in the year of acquisition of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as “application of income” of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. Appeal decides in favour of assessee Issues Involved:1. Disallowance of the claim of depreciation of Rs. 57,90,275/-.Issue-wise Detailed Analysis:Disallowance of the Claim of Depreciation of Rs. 57,90,275/-The core issue in this appeal pertains to the disallowance of a depreciation claim amounting to Rs. 57,90,275/- by the assessee, a trust enjoying benefits 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 addition to movable assets as an application of income towards the trust's charitable objectives. Consequently, claiming depreciation on the same assets would amount to a double deduction. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision.Upon appeal to the Tribunal, the assessee's counsel argued that this issue had already been resolved in the assessee's favor for the assessment year 2006-07 in ITA No. 1853/Mds/2011 dated 11-05-2012. The counsel for the Revenue (DR) conceded that the issue was indeed covered in favor of the assessee in its own case.The Tribunal examined the records and previous rulings, particularly the decision in the case of M/s. Tamilnadu Cricket Association v. The Dy. CIT (Exemptions) in ITA No. 1851/Mds/2011 for the assessment year 2007-08 dated 10-04-2012. It was noted that the Chennai 'B' Bench of the Tribunal had allowed the depreciation claim by observing that the issue was no longer res integra. The Tribunal had previously ruled in favor of the assessee in similar cases, such as the Sri Mariamman Educational Health and Charitable Trust v. ACIT, based on the precedent set by the Hon'ble Punjab & Haryana High Court in CIT v. Tiny Tots Education Society (330 ITR 21).The Tribunal reiterated that the question of whether depreciation could be claimed as utilization for the purpose of applying Section 11 of the Act had been resolved in favor of the assessee by the Hon'ble Punjab & Haryana High Court. The Tribunal had consistently followed this ruling in subsequent cases, including the case of Sri Mariamman Educational Health and Charitable Trust, where it was held that the claim of depreciation did not amount to double deduction.The Tribunal referenced the Bombay High Court's decision in CIT v. Institute of Banking Personal Selection (264 ITR 110), which supported the view that depreciation on assets, the cost of which had been fully allowed as an application of income under Section 11 in past years, should be allowed. This principle was further upheld by the Punjab & Haryana High Court in CIT v. Tiny Tots Education Society, distinguishing it from the Supreme Court's ruling in Escorts Ltd., which dealt with a different context.Given the consistent judicial precedents and the lack of any contrary higher court rulings presented by the Revenue, the Tribunal decided to set aside the orders of the lower authorities. The Tribunal directed the AO to allow the assessee's claim for depreciation of Rs. 57,90,275/- while computing its exemption under Section 11 of the Act.In conclusion, the appeal was allowed, and the assessee's claim for depreciation was upheld.