2018 (8) TMI 924 - HC - Income Tax

Court quashes assessment order due to unjustified reopening based on depreciation claim

The High Court set aside the order reopening the assessment for Assessment Year 2010-11 of a charitable trust based on depreciation claimed. The court ... Reopening of assessment u/s 147 - claim of deprecation u/s 32 while claiming exemption u/s 11 - double claim of deduction / eemption - Held that:- this writ petition is allowed and the impugned proceedings are set aside, since the impugned reopening was made only on the ground that depreciation claimed by the petitioner was not allowable, while the said question was answered against the Revenue in the above said ruling of the Supreme Court [2017 (12) TMI 1067 - SUPREME COURT] in respect of the Assessment Years prior to 2015-16. - Decided in favor of assessee. Issues:Challenge to the order of reopening assessment based on depreciation claimed by a charitable trust for Assessment Year 2010-11.Analysis:The petitioner, a public charitable trust, challenged the order of the first respondent reopening the assessment for the Assessment Year 2010-11 based on the claim of depreciation not in line with judicial rulings. The petitioner contended that the depreciation claimed was thoroughly considered during scrutiny under Section 143(3) and reopening after four years was untenable. The first respondent's reason for reopening was based on the decision of the Hon'ble Supreme Court in Escorts Limited, followed by the High Court of Kerala in M/s.Lissie Medical Institutions. The petitioner argued that the decision in Escorts Limited was available during the previous assessment and the reopening was a change of opinion. The High Court granted an interim stay on the impugned order, noting that the petitioner made a prima facie case for the stay.The subsequent judgment by the Hon'ble Supreme Court in Commissioner of Income Tax vs. Rajasthan and Gujarati Foundation overruled the decision in M/s.Lissie Medical Institutions, stating that depreciation is allowable to charitable trusts even if the entire expenditure for capital assets is treated as application of income. The insertion of Section 11(6) was effective only from Assessment Year 2015-16, not applicable to the present case of Assessment Year 2010-11. The respondents accepted that the issue for the Assessment Year 2010-11 was in favor of the petitioner based on the Supreme Court's ruling. A Division Bench of the High Court also found in favor of the petitioner in a similar case. Consequently, the writ petition was allowed, and the impugned proceedings were set aside as the reopening was solely based on disallowance of depreciation, which was resolved in favor of the petitioner by the Supreme Court's ruling for years prior to 2015-16.