2019 (9) TMI 485 - AT - Income Tax

Tribunal upholds CIT (A)'s decision on depreciation & exemptions under Income Tax Act

The Tribunal upheld the CIT (A)'s decision to allow depreciation claimed by the assessee and grant exemptions under section 11(1)(a) of the Income Tax ... Depreciation to assessee trust - whether the assessee is entitled to 100% deduction of the capital expenditure as well as depreciation thereon under the provisions of section 11(1)(a)? - AO disallowed the claim for depreciation on the assets of such Institutions, on the basis that once the capital expenditure to acquire assets is treated as the application of income for charitable purposes; the Institutions had virtually enjoyed a 100% write-off of the cost of assets - HELD THAT:- There remains no doubt that the assessee besides the cost of capital expenditure is also entitled to the depreciation while working out the income of the charitable institution having valid registration under section 12A of the Act. There is an amendment u/s 11(6) which restricts the claim of the assessee for both the benefit/deduction, i.e. capital expenditure as well as depreciation thereon. As such as per the amendment the assessee is entitled to the deduction on account of depreciation in respect of such capital expenditures which were not claimed as 100% deduction u/s 11(1)(a). This amendment is applicable with effect from 1.4.2015 and the year under consideration before us is the assessment year 2013-14. Thus this amendment is not applicable for the year under consideration. No infirmity in the order of the learned CIT-A. Accordingly, we decline to interfere in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Grant of exemptions to the assessee u/s 11(1)(a) treating the activity of the trust as in the interest of charity - HELD THAT:- Issue regarding the activity of the trust is not arising from the order of the authorities below. As such we are of the view the activities carried out by the assessee had not been doubted. Thus it can be inferred that the assessee is engaged in the charitable activity as envisaged under section 2(15). Once the activities are charitable in nature then, the assessee is entitled to a deduction under section 11(1)(a). No infirmity in the direction provided by the learned CIT (A). The learned DR has also not brought anything on record contrary to the finding of the learned CIT (A). Therefore we do not find any reason to interfere in the order of the learned CIT (A). Hence the ground of appeal of the Revenue is dismissed. Issues Involved:1. Allowance of depreciation claimed by the assessee.2. Granting exemptions to the assessee under section 11(1)(a) of the Income Tax Act.Issue 1 - Allowance of Depreciation Claimed by the Assessee:The Revenue contested the allowance of depreciation amounting to Rs. 11,05,73,991 by the assessee, arguing that it constituted double deduction as 100% deduction was already allowed as application of income. The AO disallowed the depreciation claimed by the assessee, leading to an appeal before the CIT (A). The CIT (A) considered the provisions of section 11 to 13 of the Act applicable to charitable institutions and allowed the appeal, citing previous years' treatment of depreciation. The Tribunal analyzed whether the assessee was entitled to 100% deduction of capital expenditure and depreciation under section 11(1)(a) of the Act. It referenced a Supreme Court case to support the allowance of depreciation on assets acquired by charitable institutions. The Tribunal noted an amendment restricting deductions but deemed it inapplicable for the assessment year 2013-14. Consequently, the Tribunal upheld the CIT (A)'s decision, dismissing the Revenue's appeal.Issue 2 - Granting Exemptions to the Assessee under Section 11(1)(a) of the Act:The Revenue challenged the CIT (A)'s direction to grant exemptions to the assessee under section 11(1)(a) of the Act, regarding the trust's charitable activities. The Tribunal observed that the nature of the trust's activities was not in question, indicating its charitable nature under section 2(15) of the Act. As the activities were charitable, the Tribunal affirmed the CIT (A)'s decision, finding no contradictory evidence presented by the Revenue. Consequently, the Tribunal dismissed the Revenue's appeal on this ground.The judgment concluded by dismissing the appeal of the Revenue, with the Tribunal finding no need for separate adjudication on the last issue presented.