Depreciation for charitable trusts remains allowable on commercial principles, and section 11(6) applies prospectively only.

Depreciation is allowable to a charitable trust on capital assets even where the acquisition cost was earlier treated as application of income, because income under section 11 is computed on commercial principles and depreciation is a real outgoing needed to preserve the corpus and determine amounts available for application. The Tribunal distinguished the scientific research context and accepted that section 11(6), inserted by the Finance (No. 2) Act, 2014, applies prospectively from 1 April 2015. Depreciation was therefore upheld for the year under appeal, and the Revenue's challenge failed.

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Issues: Whether depreciation is allowable to a charitable trust on capital assets whose acquisition had already been treated as application of income, and whether section 11(6) of the Income-tax Act, 1961 operates retrospectively.

Analysis: The Tribunal followed the jurisdictional High Court decision holding that, for charitable trusts, income is to be computed on commercial principles and depreciation represents a real outgoing necessary to preserve the corpus and determine the income available for application. The Tribunal distinguished the rule against double deduction applied in the scientific research context and accepted that the later insertion of section 11(6) by the Finance (No. 2) Act, 2014 was intended to operate from 1 April 2015, not retrospectively.

Conclusion: Depreciation remained allowable to the assessee for the year under appeal, and section 11(6) did not apply retrospectively; the Revenue's challenge failed.

Final Conclusion: The allowance of depreciation to the charitable assessee was upheld and the Revenue's appeal was dismissed.

Ratio Decidendi: In computing the income of a charitable trust under section 11, depreciation on capital assets is allowable on commercial principles notwithstanding that the cost of acquisition was earlier treated as application of income, and section 11(6) operates prospectively from 1 April 2015.

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