2014 (2) TMI 1348 - AT - Income Tax

ITAT Upholds CIT(A) on Depreciation Disallowance & Deficit Treatment under Income Tax Act

The DDIT (E) 11 (2), Mumbai Versus Aditya Birla Foundation

The ITAT dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decision on disallowance of depreciation under section 11(1) of the Income Tax Act, ... Depreciation to assessee trust - Allowability of depreciation of capital asset acquired for the purpose of carrying out charitable activities and set off of deficit of earlier years against the income of current year - Held that:- The assessee is claimed for setting off of excess income over expenditure against the deficit of earlier years is correct. No illegality or infirmity in the order passed by DIT. See COMMISSIONER OF INCOME-TAX VERSUS INSTITUTE OF BANKING PERSONNEL SELECTION [2003 (7) TMI 52 - BOMBAY HIGH COURT] - Decided against revenue. Allowance of carry forward deficit - Held that:- There is no error on the part of the CIT(A) in following the decision of the Hon'ble Bombay High Court in the case of Institute of Banking Personnel Selection [2003 (7) TMI 52 - BOMBAY HIGH COURT] and allowing the stand of the assessee. Issues:1. Disallowance of depreciation under section 11(1) of the Income Tax Act, 1961.2. Allowance of carry forward deficit and its treatment.Issue 1: Disallowance of depreciation under section 11(1) of the Income Tax Act, 1961:The appeal was filed by the Revenue against the order passed by Ld. CIT(A)-1 Mumbai for the assessment year 2009-10. The Revenue challenged the direction to allow the claim of depreciation amounting to Rs. 3,75,52,814, citing the decision of the Hon'ble Bombay High Court in the case of CIT vs. Institute of Banking Personnel Services. The Revenue contended that allowing depreciation would lead to double deduction, referencing the judgment of the Hon'ble Supreme Court in the case of Escorts Ltd. vs. Union of India. The assessee, a trust registered under section 12A of the Act, argued that disallowing depreciation was incorrect. Ld. CIT(A) deleted the addition of depreciation based on the Bombay High Court's decision. The Revenue raised grounds to contest this decision, emphasizing the Supreme Court's judgment. However, the ITAT declined to interfere, stating that the issue was covered by the Bombay High Court's decision, and dismissed the Revenue's grounds.Issue 2: Allowance of carry forward deficit and its treatment:The Revenue also challenged the direction of Ld. CIT(A) regarding the allowance of carrying forward a deficit of Rs. 3,92,18,813. Ld. CIT(A) held that the deficit should be considered in light of the Bombay High Court's decision and allowed the capital expenditure to the extent of surplus, with the remaining balance to be carried forward. The Revenue objected to this direction, arguing that the deficit should not be considered for carry forward. The ITAT noted that this issue was covered by the Bombay High Court's decision in the case of CIT vs. Institute of Banking Personnel and another subsequent decision. The Revenue's appeal was dismissed as the matter was already settled by the High Court's decisions. Therefore, the ITAT found no merit in the Revenue's grounds and dismissed them, ultimately upholding the decision of Ld. CIT(A).In conclusion, the ITAT dismissed the appeal filed by the Revenue, upholding the decision of Ld. CIT(A) regarding the disallowance of depreciation and the treatment of the carry forward deficit. The judgment was pronounced on 27/02/2014.