2021 (7) TMI 65 - HC - Income Tax

Court affirms Revenue's loss in depreciation claim dispute for Assessment Year 2009-2010

The Court upheld the decisions against the Revenue in a case involving a challenge to the order passed by the Income Tax Appellate Tribunal regarding a ... Assessment of trust - depreciation on assets as “application of income towards charitable purpose” - AO disallowed the claim of the assessee on the ground that it amounts to giving deductions/exemptions twice - HELD THAT:- As decided in M/S. NATIONAL COLLEGE COUNCIL, TEPPAKULAM, TIRUCHIRAPALLI. [2021 (4) TMI 469 - MADRAS HIGH COURT] substantial questions of law, which have been framed in these appeals, have been answered against the Revenue as relying on RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA [2017 (12) TMI 1067 - SUPREME COURT]. - Decided against revenue. Issues:1. Challenge to order passed by Income Tax Appellate Tribunal regarding depreciation claim for Assessment Year 2009-2010.2. Allowability of depreciation as application of income towards charitable purposes.3. Entitlement to claim depreciation on assets despite treating cost of purchase as application of income under Section 11.4. Possibility of double deduction due to allowing depreciation claim on assets already considered as application of income towards trust's object.Analysis:1. The case involves a challenge to the order passed by the Income Tax Appellate Tribunal concerning the depreciation claim for the Assessment Year 2009-2010. The respondent, a Trust registered under section 12A of the Income Tax Act, claimed depreciation on assets amounting to Rs. 8,95,08,744 as 'application of income towards charitable purpose' and deduction under section 11. The Assessing Officer disallowed the claim, alleging it would result in double deductions/exemptions. The Commissioner of Income Tax (Appeals) allowed the appeal, leading to the Revenue's appeal before the Tribunal, which upheld the CIT (Appeals) decision, prompting the current appeal by the Revenue.2. The substantial questions of law admitted for consideration revolve around the allowability of depreciation as part of income application for charitable objects. The Tribunal's decision to permit depreciation as an application of income is being challenged. The first question queries the correctness of allowing depreciation as an application of income towards charitable purposes. The second question pertains to the entitlement of the assessee to claim depreciation on assets even if the asset purchase cost was treated as application of income under Section 11. The third question addresses the concern of potential double deduction due to allowing depreciation on assets already considered as part of income application for the trust's objective.3. During the hearing, the Senior Standing Counsel for the appellant acknowledged that similar substantial questions of law had been previously decided against the Revenue by a Division Bench in a common judgment. Referring to the Supreme Court's decision in CIT Vs. Rajasthan and Gujarati Charitable Foundation, the Counsel highlighted that the Division Bench had dismissed appeals related to the same assessee following the Supreme Court's ruling. The Counsel further pointed out that a recent judgment had reiterated the dismissal of appeals against the Revenue on similar grounds. Consequently, the Counsel conceded that the questions of law in the present appeal are answered against the Revenue, leading to the dismissal of the Tax Case Appeal without costs.4. The Court, considering the precedent set by previous judgments and the consistent dismissal of appeals against the Revenue on similar issues, upheld the decisions against the Revenue. Citing the recent judgment and the prior Division Bench ruling, the Court concluded that the questions of law raised in the appeal were answered against the Revenue. Therefore, the Court dismissed the Tax Case Appeal, aligning with the established legal interpretations and precedents without imposing costs on either party.