Trust Property: Tribunal upholds depreciation disallowance for AY 2007-08, clarifies no double deduction

The Tribunal upheld the order of the ld. CIT(A) regarding the disallowance of depreciation for the assessment year 2007-08. It held that income from property held under trust should be computed based on commercial principles, allowing for depreciation. The Tribunal clarified that granting exemption under section 11 and depreciation under section 32 does not result in double deduction. The decision was based on previous judgments and the independent applicability of the relevant sections of the Income Tax Act, 1961.

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Issues involved:
Challenge to correctness of order dated 17th January, 2013 passed by the ld. CIT(A) for assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2007-08 regarding disallowance of depreciation, availability of depreciation for charitable trust, and correctness of the order of the Assessing Officer.

Analysis:

Issue 1: Disallowance of depreciation
The Assessing Officer challenged the correctness of the order passed by the ld. CIT(A) regarding the disallowance of depreciation amounting to Rs. 18,93,672. The Tribunal observed that the issue was already covered in favor of the assessee by a co-ordinate bench's decision in the assessee's own case for the assessment year 2009-10. The Tribunal referred to previous judgments by the Gujarat High Court and the Bombay High Court, emphasizing that income from property held under trust should be computed based on commercial principles, allowing for depreciation. The Tribunal held that granting of exemption under section 11 and depreciation under section 32 does not amount to double deduction. Therefore, the Tribunal upheld the order of the ld. CIT(A) regarding the disallowance of depreciation.

Issue 2: Availability of depreciation for charitable trust
The Assessing Officer raised a question on whether a charitable trust, whose income is not assessable under the head "Profit and Gains from business and profession," could claim deduction of depreciation under section 32 of the Income Tax Act, 1961. The Tribunal cited a decision by a co-ordinate bench in a previous case, where it was held that income from property held under trust should be computed on commercial principles, allowing for depreciation. The Tribunal further explained that sections 11(1)(a) and 32 of the Act apply independently under different circumstances. Therefore, the availability of depreciation for a charitable trust is determined based on fulfilling the conditions stipulated in the respective sections.

Issue 3: Correctness of the Assessing Officer's order
The Assessing Officer contended that the ld. CIT(A) erred in allowing the appeal of the assessee and should have upheld the order of the Assessing Officer. However, based on the decisions of the Tribunal and higher judiciary authorities, the Tribunal approved the order of the ld. CIT(A) and declined to interfere in the matter. The Tribunal dismissed the appeal, affirming the decision in favor of the assessee.

In conclusion, the Tribunal dismissed the appeal, upholding the order of the ld. CIT(A) regarding the disallowance of depreciation and the availability of depreciation for a charitable trust. The Tribunal's decision was based on previous judgments and the independent applicability of sections 11(1)(a) and 32 of the Income Tax Act, 1961.

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