TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 345
X X X X Extracts X X X X
X X X X Extracts X X X X
....d 24..12.2013 determining the total income of Rs. 5,43,970/-. While doing so, the AO had disallowed the depreciation of Rs. 5,44,481/- claimed by the assessee by stating that purchase of the asset has been treated as application of income, hence the claim of depreciation would amount to double deduction while granting exemption u/s.11 of the Act. Against this, the assessee carried the appeal before the Ld.CIT(A). 4. On appeal Ld.CIT(A) observed that once the investment in fixed asset is claimed as application of income, correspondingly the depreciation cannot be allowed. For this purpose he relied on the various judgemnets of the Tribunal. Against this, the assessee is in appeal before us. 5. Before us, the ld.A.R placed reliance on the judgement of Karnataka High Court in the case of Pr.CIT Vs. Sri Adhichunchungiri Shikshana Trust Adichunchungiri Kshetra Nagamangala Taluk Mandya in ITA No.384 of 2016 vide order dated 28th June 2016 wherein held that the assessee is entitled for claiming depreciation on capital assets, even though in earlier year the cost of fixed asset is allowed as an application of income and provisions of the section 11(6) of the Act is prospective nature and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f less than one hundred and eighty days in that previous year, the deduction under this sub-section in respect of such asset shall be restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (i) 6or clause (ii) or clause (iia), as the case may be: Provided also that where an asset referred to in clause (iia) or the first proviso to clause (iia), as the case may be, is acquired by the assessee during the previous year and is put to use for the purposes of business for a period of less than one hundred and eighty days in that previous year, and the deduction under this sub-section in respect of such asset is restricted to fifty per cent. of the amount calculated at the percentage prescribed for an asset under clause (iia) for that previous year, then, the deduction for the balance fifty per cent. of the amount calculated at the percentage prescribed for such asset under clause (iia) shall be allowed under this sub-section in the immediately succeeding previous year in respect of such asset : Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998, but bef....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... be, in the ratio of the number of days for which the assets were used by them. Explanation 1.- Where the business or profession of the assessee is carried on in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work, in or in relation to, and by way of renovation or extension of, or improvement to, the building, then, the provisions of this clause shall apply as if the said structure or work is a building owned by the assessee. Explanation 2.- For the purposes of this sub-section "written down value of the block of assets" shall have the same meaning as in clause (c) of sub-section (6) of section 43; Explanation 3.- For the purposes of this sub-section, 10the expressions "assets" shall mean-- (a) tangible assets, being buildings, machinery, plant or furniture ; (b) intangible assets, being know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature. Explanation 4.- For the purposes of this....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (iii) in the case of any building, machinery, plant or furniture in respect of which depreciation is claimed and allowed under clause (i) and which is sold, discarded, demolished or destroyed in the previous year (other than the previous year in which it is first brought into use), the amount by which the moneys payable in respect of such building, machinery, plant or furniture, together with the amount of scrap value, if any, fall short of the written down value thereof : Provided that such deficiency is actually written off in the books of the assessee. Explanation For the purposes of this clause,-- (1) "moneys payable" in respect of any building, machinery, plant or furniture includes-- (a) any insurance, salvage or compensation moneys payable in respect thereof ; (b) where the building, machinery, plant or furniture is sold, the price for which it is sold, so, however, that where the actual cost of a motor car is, in accordance with the proviso to clause (1) of section 43, taken to be twenty-five thousand rupees, the moneys payable in respect of such motor car shall be taken to be a sum which bears to the amount for which the motor car is sold or, as the case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e years during the life time of the machinery. In other words, the value of the asset, machinery, etc. reduced pro tanto. This Tribunal is of the considered opinion that the depreciation is spread over during the effective life time of the machinery or asset, etc. used for business by allowing the same as deduction on notional basis. The amount of depreciation allowed in a particular year is intended to represent the life of the machinery such as expenditure during the above said period. In other words, the value of the machinery was spread over for the effective life time of the asset and a provision was made by way of notional deduction to replace the machinery after expiry of its entire life time. Therefore, the Legislature provided depreciation under Section 32 of the Act as an incentive/allowance to the asset which was used for the business or profession. This can be construed as reduction in value in the balance sheet while computing the income from business or profession. 7. Section 32(1) of the Act clearly says that the asset owned wholly or partly by the assessee and "used for the purpose of business or profession". In view of the language employed by the Parliament, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion or accumulation as provided under the scheme of the Act. The charitable institution under the scheme of Income-tax Act is on a different footing. The entire income of the assessee-trust from the property held under trust do not form part of total income under Section 11 of the Act provided the same is applied for charitable object. Section 11 of the Act also provides for accumulation of 15% of income for future application for the object of the trust. Therefore, the business and charitable institution are two different categories in the scheme of Incometax Act. This Tribunal is of the considered opinion that the customary way of computing income or the commercial principle of computing income cannot override the specific provision of Income-tax Act. The Income-tax Act does not provide for allowing depreciation other than the asset which was used for business or profession. There is no other provision in the Incometax Act other than Section 32 of the Act for allowing depreciation. Therefore, the claim of the assessee that the depreciation has to be allowed on commercial principle or customary principle of computation of income is contrary to the specific provision, namely, Sect....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for carrying out the object of the charitable institution, such activity cannot be construed as a business or profession of the assessee. Therefore, Section 32 of the Act is not applicable in this case. 13. We have carefully gone through all the judgments and decisions cited by the Ld.counsel for the assessee, which are as under:- 1. DIT v. VishwaJagriti Mission (2012) 73 DTR (Del) 195 2. CIT v. Market Committee, Pipli (2011) 330 ITR 16 (P&H) 3. CIT v. Society of Sisters of St.Anne (1984) 146 ITR 28 (Kar) 4. CIT v. Bhoruka Public Welfare Trust (1999) 240 ITR 513 (Cal) 5. CIT v. Tiny Tots Education Society (2011) 330 ITR 21 (P&H) 6. CIT v. ShethManilalRanchhoddasVishramBhavan Trust (1992) 198 ITR 598 (Guj) 7. CIT v. Raipur Pallottine Society (1989) 180 ITR 579 (MP) 8. CIT v. Institute of Banking Personnel Selection (2003) 264 ITR 110 (Bom) 9. DIT(E) v. FramjeeCawasjee Institute (1993) 109 CTR (Bom) 463 10. DDIT v. Lakshmi Saraswathi Educational Trust ITA No.452/Mds/2014 Chennai ITAT 11. Apollo Hospitals Educational Trust v. DCIT ITA No.2090/Mds/2012 Chennai ITAT 12. Services Association of Seventh Day Adventists Pvt. Ltd. v. ITO ITA No.1853/Mds....