TaxTMI 
TaxTMI 
2016 (6) TMI 256
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....g Officer (AO) of the Assessee completed the assessment u/s.143(3) of the Act, determining total income of the Assessee at Rs. 41,615/-. The Assessee had claimed depreciation of Rs. 68,43,455/- as allowable expenditure against receipts of the Assessee during the previous year. The same was allowed by the AO in the assessment completed u/s.143(3) of the Act by order dated 30.6.2014. 3. The CIT (E), Kolkata, the respondent herein was of the view that the aforesaid order of the AO allowing depreciation of Rs. 68,43,455/- as allowable expenditure against receipts of the Assessee during the previous year was erroneous and prejudicial to the interest of the revenue. According to the respondent depreciation was claimed on assets whose cost of acquisition in the previous year in which it was acquired had been claimed by the assessee as capital expenditure and as application of funds towards the objects of the trust and allowed as such in such assessments. According to the respondent, allowing depreciation on the very same assets the cost of acquisition was allowed as application of funds for charitable purpose would amount to allowing double deduction, once at the time of acquisition of t....
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....already been recovered by way of exemption as application of income amounts to double deduction and double benefit on the same asset. The respondent referred to the decision of the of Hon'ble High Court of Kerala in the case of DDIT(E) v. Lissie Medical Institutions, 348 ITR 344 (Ker) wherein it was held that allowing depreciation of a depreciable asset when the cost of acquisition of depreciable asset was allowed as application of income for charitable purpose amounts to double depreciation and therefore depreciation cannot be allowed. The respondent also distinguished the cases cited by the Assessee as follows: "3.11 Let us now discuss the High Court orders stated that claim of depreciation is allowable even if the cost of the assets are taken as application. Such cases are mentioned in SI no. [ix] to (xi) under Para 3.8. The Ld. A/R placed reliance on 2 cases this list. 3.12. In the case of DIT(E) vs. Framjee Cawasjee Institute (supra) and CIT vs. Institute of Banking Personnel Selection [supra) [relied upon by the Ld. A/R] the Honble Mumbai High Court held that depreciation is allowable to tile charitable trusts even if the cost of such assets has been treated as appli....
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.... ITR 110 {Mumbai} [2004] ii. CIT Vs. Market Committee, Pipli reported in 330 ITR 16 (Punjab & Haryana) [2011 ] iii. CIT vs. Trustee of H.E.H. Nizam's Supplemental Religious Endowment Trust reported in 127 ITR 378 (A.P.) [1981] iv. ClT vs. Rcao Bahadur Calavala Cunnan Chetty Charities reported in [1982) 135 ITR 485 [Mad} v. ClT vs. Bhoruka Public Welfare Trust reported in 240 ITR 513 (Cal) [19991 vi. CIT vs. Jayashree Chaity Trust reported in 159 ITR 280 (Co') [1986] vii. Escorts Ltd.( J.K. Synthetics Ltd.) vs Union of India 199 ITR 43 (SC) (1993) It is noted that in any of the case mentioned above, other than Institute of Banking Personnel Selection (supra), Market Committee, Pipli (supra), and Escorts Ltd. (supra), the issue at hand was not the situation where claim depreciation leads to double deduction. The cases of Lissie Medical Institutions vs. Commissioner of Income Tax (supra) and Chiranjiv Charitable Trust (supra) were neither referred to nor discussed. Further, although the name of Escorts Ltd. (supra) was mentioned in the list of cases referred to, not a single line of discussion was made on this case in the body of the order. The detail of t....
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....s it stood prior to 1- 4-1980 ) which provided that where capital expenditure is incurred on carrying out scientific research after the 31st day of March 1967, the whole of such capital expenditure incurred in any previous year shall be deducted for that previous year. The Assessees after getting deduction of entire capital expenditure as deduction u/s.35(2)(iv) of the Act were also claiming simultaneously allowance or deduction in respect of the same expenditure once again under section 32 of the Act on account of depreciation on the very same asset. There was a controversy as to whether such a claim for depreciation was valid or not. Finance (No. 2) Act, 1980 intervened. It amended section 35(2)(iv) to read as follows: "(iv) where a deduction is allowed for any previous year under this section in respect of expenditure represented wholly or partly by an asset, no deduction shall be allowed under clauses (i), (ii), (iia ), (iii) and (vi) of sub-section (1) of section 32 for the same or any other previous year in respect of that asset;" The question before the Hon'ble Court was whether no Legislature could have at all intended a double deduction in regard to the same business o....
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....eciation on the assets which was rightly allowed by the AO. 4. For that on the facts and circumstances of the case the disallowance made by the CIT may be deleted. 5. For that on the facts and in the circumstances of the case the assessee may be awarded the cost of appeal for not following the principles settled by the Jurisdictional High Court. 6. For that on the facts and circumstances of the case the order of the ClT(E) be modified and the assessee be given the relief prayed for. 7. For that the assesee craves leave to add, alter or amend any ground before or at the time of hearing." 10. We have heard the submissions of the ld. DR, who relied on the order of respondent. The learned counsel for the Assessee reiterated the stand of the Assessee as reflected in the reply to the show cause notice u/s.263 of the Act. 11. We have considered the rival submissions. If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. Since income for the pu....
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....Court in the case of Jyotirmai Club (supra) has also taken the same view. In the case of Siliguri Vs. Siliguri Regulated Market Committee (supra), the Hon'ble Jurisdictional High Court has also taken the same view. The respondent has however observed in his order that the Calcutta High Court in the aforesaid decisions has not properly considered the decision in the case of Escorts Ltd.(supra). Such observations in our view would not be appropriate and cannot be the basis not to follow the decision of Hon'ble High Court. 12. In view of the aforesaid decisions on the issue, we are of the view that the order of the respondent cannot be sustained. The amendment by the Finance Act (No.2), 2014 by insertion of Sec.11(6) of the Act specifically providing for not allowing any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year was admittedly effective only from 1.4.2014 and did not apply to AY 12-13. 13. Section 263 of the Act confers powers on the CIT which are in the nature of supervisory powers in order to protect the interest of t....