2013 (2) TMI 910 - AT - Income Tax

Trust's Depreciation Claim Upheld by Tribunal, No Double Deduction Ruled

The appeal of the Revenue was dismissed as the Tribunal upheld the CIT(A)'s decision to allow the claim of depreciation to the assessee-trust, ruling that ... - Issues Involved:1. Whether the CIT(A) erred in allowing the claim of depreciation as 'application of income on stated charitable objects.'Summary:Issue 1: Allowing Depreciation as Application of Income on Charitable ObjectsThe sole issue in the present appeal of the Revenue is that the CIT(A) erred in allowing the claim of depreciation to the assessee by holding it to be as application of income on stated charitable objects.The brief facts of the case are that the assessee-trust is running various educational institutions. The assessee filed return of income for assessment year 2009-10 and claimed depreciation of Rs. 1,43,50,288/- out of the gross receipts received by the Trust of Rs. 8,62,75,057/-. The Assessing Officer disallowed the claim of depreciation by observing that for the purpose of computing the income of the Trust and its application to the extent of 85%, any deduction/allowances falling u/s 14 to 80VVA cannot be considered. Under the provisions of section 11, even the capital expenditure in entirety incurred by the trust is allowable as deduction. Hence, any further allowance by way of depreciation will result in double deduction. The Assessing Officer relied on the decision of the Hon'ble Supreme Court in the case of Escorts Ltd. vs Union of India, 199 ITR 43 and the decision of the Hon'ble Madras High Court in the case of CIT vs Rao Bahadur Calavala Cunnan Chetty Charities, 135 ITR 485.On appeal, the CIT(A) allowed the claim of depreciation to the assessee and while doing so, he has held that the Escorts case cited by the department is distinguishable and not applicable in relation to the trust and there is no double deduction of depreciation and capital expenditure on fixed assets in respect of trust. The CIT(A) relied on various judicial decisions including the Punjab and Haryana High Court in the case of CIT Vs Market Committee, Pipli (2011) 330 ITR 16 (P & H) and the ITAT 'C' Bench, Chennai in the case of GKR Charities Vs DDIT (Exemptions)-1, Chennai.The Tribunal, after hearing the rival submissions and perusing the orders of the lower authorities and materials available on record, found that the issue is squarely covered in favour of the assessee by various judicial decisions. The Tribunal referred to the decisions of the Hon'ble P&H High Court in the case of Market Committee, Pipli and the Hon'ble Delhi High Court in the case of Director of Income Tax vs Vishwa Jagriti Mission, 2012-TIOL-271-HC-DEL-IT, which held that allowing depreciation to the assessee trust would not amount to double deduction.Further, the Tribunal noted that the Hon'ble Supreme Court's decision in Escorts Ltd. vs Union of India is not applicable to the present case as it was concerned with a business entity and not a charitable trust. The Tribunal concluded that there is no double deduction claimed by the assessee as canvassed by the Revenue.Respectfully following the above quoted decisions of the High Courts and the Tribunal, the Tribunal upheld the order of the CIT(A) and dismissed the appeal of the Revenue being devoid of any merits.In the result, the appeal of the Revenue is dismissed.Order pronounced on Friday, the 22nd of February, 2013, at Chennai.