2014 (1) TMI 599

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....lating to the quantum of application of income eligible for deduction u/s. 11 of the Act. In the cross objections, both the assessees are supporting the decision rendered by Ld CIT(A). 4. The facts relating to the issue are stated in brief. During the course of assessment proceedings, the Assessing officer noticed that both the assessees have claimed depreciation as deduction while computing the income under section 11 of the Income Tax Act. The AO, by placing reliance on the decision of the co-ordinate Bench of the Tribunal rendered in the case of Lissie Medical Institutions (I.T.A. No. 1010/Coch/2008 and C.O. No. 06/Coch/2009), held that both the assessees are not entitled for deduction of depreciation on the cost of assets, which have already been allowed as deduction as application of income. Accordingly, the Assessing officer disallowed the depreciation claimed by both the assessees. In the appellate proceedings, the Ld. CIT(A) noticed that the decision rendered in the case of Lissie Medical Institutions, has been upheld by the Hon'ble Jurisdictional Kerala High Court. The Ld. CIT(A) has extracted the following observations made by the Hon'ble High Court in the above said cas....

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.... has consistently following the same method of accounting. There is no change, for the year under appeal. It has revised its total income and written back the depreciation for this year and even for the previous assessment years right from A.Y. 2005-06. That being the case, the Assessing officer should have gone through the same and verified the veracity of that computation and then arrived at a reasonable conclusion. This has not been done. The contention of the appellant is that it has prepared the revised computation of total income and revised statement of depreciation in accordance with the direction of the jurisdictional High Court, viz. "It is for the assessee to write back depreciation and if done the Assessing officer will modify the assessment determining higher income and allow recomputed income with the depreciation written back by the assessee to be carried forward for subsequent years for application for charitable purposes." 13. In view of the aforesaid discussion, I direct the Assessing officer to verify the correctness of the revised computation of total income and revised computation of depreciation prepared by the assessee claiming depreciation at Rs. 1,45,11,9....

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....the assessing officer had disallowed the claim of depreciation by holding that the assessee is not entitled to claim depreciation on those assets whose cost of acquisition was claimed as application of income of the charitable trust for charitable purposes, as it would result in double deduction of capital expenditure. The view of the AO was upheld by the Tribunal by following the decision of Hon'ble Supreme Court in the case of Escorts ltd & Others Vs. Union of India, reported in 199 ITR 43. The assessee challenged the order of the Tribunal and the Hon'ble High Court upheld the order of the Tribunal with the following observations:- "For the foregoing reasons, we dispose of the appeal by confirming the order of the Tribunal. However, as rightly pointed out by the counsel for the assessee the system of allowing depreciation was followed by the assessee for several years and it was consistent with the view taken by several High Courts in India in the decisions above cited. We find force in this contention because assessee cannot be taken by surprise by disallowing depreciation which was being allowed for several years and to demand tax for one year after making disallowance. We fee....

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....e to interpret that the Ld CIT(A) has also given directions similar to that given by the Hon'ble High Court in the case of Lissie Medical Institutions. 9. However, in the case of Shanti Sadan Society (supra), this bench of Tribunal has already taken a view that the Tribunal is not empowered to give any similar directions as that given by the Hon'ble High Court in the case of M/s Lissie Medical Institutions. Accordingly, in our view, the ld CIT(A) is also not empowered to give identical directions. Accordingly, we set aside the order of Ld CIT(A) to the extent it relates to allowing of accumulation u/s 11(2) of the depreciation of earlier years that became disallowable. 10. We notice that the assessees have revised depreciation workings since assessment year 2005-06 onwards. It is pertinent to note that the assessee has not revised the return of income filed by it for those years. The Ld A.R fairly conceded that the return of income shall prevail over the revised workings. Accordingly, in our view, the AO can ignore the revised workings furnished by the assessee for assessment years 2005-06 to asst. year 20008-09, since they have been filed without filing corresponding revised ret....