2019 (1) TMI 991 - AT - Income Tax

Appellate Tribunal allows depreciation claim for charity assets but dismisses other issues raised by assessee

M/s. Durgoji Gopal Rao Educational and Charitable Trust Versus The Assistant Commissioner of Income Tax, Circle – 2 [1], Davangere.

The Appellate Tribunal partially allowed the assessee's appeal by permitting the claim for depreciation on assets applied towards charitable purposes for ... Disallowance of Depreciation to assessee trust - whether capital expenditure was already allowed as application towards charitable purposes and allowance of depreciation thereon would amount to double deduction - Held that:- Apex Court in CIT Vs. Rajasthan and Gujarati Charitable Foundation (2017 (12) TMI 1067 - SUPREME COURT) has held that the assessee – trust is entitled to depreciation u/s 32 of the Act on assets whose cost has been allowed as application towards charitable purposes u/s 11(1)(a) of the Act - the amendment in section 11(6) of the Act brought about by Finance (No.2) Act, 2014 which became effective from Assessment Year 2015-16 and prohibited the allowance of depreciation in such cases, is prospective in nature. Thus the assessee is entitled to be allowed depreciation u/s 32 on assets whose cost has been allowed as application towards charitable purposes. - Decided in favour of assessee. Issues:1. Disallowance of Depreciation2. Disallowance of Donation3. Exclusion of loans raised from the extent of application4. Violation of principles of natural justiceIssue 1: Disallowance of DepreciationThe assessee-trust filed an appeal against the order of assessment for Assessment Year 2010-11, challenging the disallowance of depreciation amounting to Rs. 10,04,041. The authorities contended that allowing depreciation on assets whose cost was already allowed as application towards charitable purposes would result in double deduction. The assessee relied on the decision of the Hon'ble Apex Court in a similar case. The Tribunal noted that the Apex Court had held that a trust is entitled to depreciation on assets whose cost was applied towards charitable purposes, and that the amendment prohibiting such allowance was prospective. Consequently, the Tribunal allowed the depreciation claim, directing the Assessing Officer to act accordingly.Issue 2: Disallowance of DonationThe assessee also contested the disallowance of Rs. 23,175 claimed as an application in respect of a donation given. However, the judgment did not provide detailed analysis or resolution regarding this specific issue.Issue 3: Exclusion of Loans from ApplicationThe assessee raised a ground challenging the exclusion of loans raised from the extent of application made. However, the judgment did not elaborate on the arguments or the decision regarding this issue.Issue 4: Violation of Principles of Natural JusticeThe assessee contended that the CIT(A) disposed of the appeal without allowing a sufficient opportunity to represent the case, alleging a violation of natural justice. The Tribunal dismissed this ground as not being pressed by the assessee during the appeal.In conclusion, the Appellate Tribunal, in the case under consideration, allowed the assessee's appeal partially by permitting the claim for depreciation on assets applied towards charitable purposes. However, the judgment did not provide detailed analysis or resolution for the other issues raised by the assessee.