Tribunal upholds depreciation for charities, allows carry forward. Precedents & law support decision.

The Tribunal dismissed the appeal, upholding the grant of depreciation to charitable institutions and confirming the entitlement to carry forward depreciation. The judgment emphasized the legality of claiming depreciation despite capital expenditure being treated as income application for charitable purposes, aligning with established precedents and legislative amendments. The decision was based on principles established by the Hon'ble Supreme Court, affirming the CIT(A)'s order in favor of the assessee regarding the disallowance of depreciation under Section 32 of the Income-tax Act, 1961 for the assessment year 2012-13.

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Issues Involved:
Appeal against CIT(A)'s order on assessment under Section 143(3) of the Income-tax Act, 1961 for the assessment year 2012-13.

Analysis:

Issue 1: Depreciation Disallowance
The Assessing Officer's grievance was regarding the disallowance of depreciation amounting to Rs. 66,11,344 by the CIT(A). The Hon'ble Supreme Court had addressed similar cases where the Income Tax Department challenged the grant of depreciation to charitable institutions under Section 32 of the Act. The Court clarified that treating capital expenditure as application of income for charitable purposes did not preclude claiming depreciation. Referring to precedents, including the Bombay High Court's ruling, the Court emphasized that depreciation is a legitimate deduction for computing real income, even for charitable trusts. The Court upheld the view that depreciation can be claimed irrespective of assets being treated as application of income under Section 11. Consequently, the Tribunal affirmed the CIT(A)'s decision in favor of the assessee.

Issue 2: Legislative Amendment and Depreciation Carry Forward
The judgment highlighted a legislative amendment in Section 11(6) of the Act, effective from Assessment Year 2015-2016, addressing the issue of depreciation for charitable institutions. The Delhi High Court clarified that the amendment is prospective. Moreover, the Tribunal reiterated that once depreciation is allowed, the assessee is entitled to carry forward the depreciation. Citing the consistency of views across various High Courts, except for a dissenting opinion from the High Court of Kerala, the Tribunal dismissed the appeal, aligning with the principles established by the Hon'ble Supreme Court and confirming the CIT(A)'s order.

In conclusion, the Tribunal dismissed the appeal based on the principles laid down by the Hon'ble Supreme Court, affirming the grant of depreciation to charitable institutions and the entitlement to carry forward depreciation. The judgment emphasized the legality of claiming depreciation despite capital expenditure being treated as income application for charitable purposes, in line with established precedents and legislative amendments.

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