High Court affirms depreciation as allowance, not expense under Income Tax Act

The High Court dismissed Revenue's appeals against the ITAT's order, focusing on the computation of deductible income under Section 10(29) of the Income Tax Act. The Court upheld that depreciation should be considered an allowance, not an expense, in line with Supreme Court precedents. Relying on decisions in Nectar Beverages Pvt. Ltd. and CIT v. Anand Theatres, the Court found no legal error in treating depreciation as an allowance. As no substantial legal question arose, the appeals were dismissed, with related applications addressed accordingly.

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Issues:
1. Appeal by Revenue under Section 260A of the Income Tax Act against ITAT's order.
2. Interpretation of deductible income under Section 10(29) of the Act.
3. Whether depreciation should be considered as an expense or an allowance.
4. Application of Supreme Court judgments in Nectar Beverages Pvt. Ltd. and CIT v. Anand Theatres.

Analysis:
1. The High Court considered five appeals filed by the Revenue against the ITAT's common order for various Assessment Years. The main issue was whether ITAT erred in confirming the CIT (A)'s decision regarding the computation of deductible income under Section 10(29) of the Income Tax Act.

2. The Revenue argued that depreciation should be treated as an expense, reducing the tax liability of the Assessee. Both CIT (A) and ITAT, however, relied on the Supreme Court's decision in Nectar Beverages Pvt. Ltd., which emphasized the nature of depreciation not being a loss, expenditure, or trading liability.

3. The Court examined the Supreme Court's analysis in Nectar Beverages Pvt. Ltd., highlighting that depreciation, by its nature, is not a loss, expenditure, or trading liability. The Assessee contended that depreciation is an allowance, not an expense, for the purpose of Section 10(29) of the Act, which the Court accepted.

4. Additionally, the Court referenced another Supreme Court decision in CIT v. Anand Theatres, which explained that depreciation represents the diminution in value of a capital asset to reflect the true picture of the business's real income. The Court concluded that neither CIT (A) nor ITAT committed any legal error in treating depreciation as an allowance for Section 10(29) purposes.

5. Consequently, the Court dismissed the appeals, stating that no substantial question of law arose from the ITAT's order. The applications related to exemptions and delays in refiling were allowed or disposed of accordingly.

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