TaxTMI 
TaxTMI 
2016 (12) TMI 687
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....sing Officer has observed that the assessee, in the computation of income, deducted depreciation on assets amounting to Rs..11,47.32.701/- from the gross receipts, claiming it as application of income for charitable purposes. The Assessing Officer was of the opinion that depreciation cannot be claimed as application of income in view of the decision of the Hon'ble High Court in the case of M/s. Lissie Medical Institutions v. CIT 348 ITR 344 and the clarification given by the CBDT before the High Court in this case. When confronted with this view, the assessee's representative submitted before the Assessing Officer that the depreciation on assets was earlier allowed in the assessment for the previous year and that assessment had reached finality. However, a revised working on depreciation on cost of assets claimed as expenditure during the assessment in year in question was submitted before the Assessing Officer, according to which depreciation of Rs..1,90,17,900/- was claimed as depreciation on assets acquired during financial year 2011-12. The Assessing Officer has refused to allow claim of this depreciation towards application of income following the above decision of Ker....
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....ciation in respect of its asset, which was used as a tool for carrying out its object. Depreciation is provided under Section 32 of the Act, which reads as follows:- "DEPRECIATION 32 (1) In respect of depreciation of-- (i) buildings, machinery, plant or furniture being tangible assets ; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession the following deductions shall be allowed-- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed. (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that no deduction shall be allowed under this clause in respect of--(a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 5but before the 1st day of April, 2001, un....
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....heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "roadroller" shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988). Provided also that, in respect of the previous year relevant to the assessment year commencing on the 1st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991. Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or knowhow, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section....
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....hips and aircraft), which has been acquired and installed after the 31st day of March, 2005, by an assessee engaged in the business of manufacture or production of any article or thing, a further sum equal to twenty per cent. of the actual cost of such machinery or plant shall be allowed as deduction under clause (ii) : Provided that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect, as if for the words "twenty per cent.", the words "thirtyfive per cent." had been substituted : Provided further no deduction shall be allowed in respect of- (A) any machinery or plant which, b....
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....n company or in a scheme of amalgamation of a banking company, as referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), with a banking institution as referred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act, of any asset by the banking company to the banking institution. (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub-section (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years....
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.... which is used for the business or profession of the assessee. Therefore, the assessee is not eligible for depreciation under Section 32 of the Income-tax Act. 8. The Ld. Counsel for the assessee has also clarified that the assessee is not claiming depreciation under Section 32 of the Act. According to the Ld. counsel, the assessee is claiming depreciation on the commercial principle. On a query from the Bench what is meant by "commercial principle"?, he clarified that computation of income of the Trust in a customary method of accountancy. On a query from the Bench, the Ld. Counsel has also clarified that there is no conflict between the customary way of computation of income and provisions of Section 32 of the Act. This Tribunal is of the considered opinion that Section 32 provides for depreciation only in respect of the asset which is used for the purpose of business or profession. The commercial principle of computing income or the customary practice of computing income may also provide for depreciation only in respect of computing business or professional income. 9. Income-tax Act provides for procedure and method for computing income under different heads. Depreciation is....
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....actice. Therefore, this Tribunal is of the considered opinion that Section 32 will prevail over the customary practice or commercial principle. Hence, the assessee is not eligible for depreciation in respect of building, plant, machinery, etc. which are not used for the purpose of business or profession. 11. Even assuming for argument sake that the assessee was doing business, then the assessee is not eligible for exemption under Section 11 of the Act and as rightly submitted by the Ld. Departmental Representative, the registration under Section 12AA of the Act has to be cancelled under Section 12AA(3) of the Act. Moreover, the assessee will not be eligible for exemption under Section 11 of the Act if it is carrying on any business activity. Therefore, this Tribunal is of the considered opinion that the assessee is not eligible for depreciation. 12. As rightly submitted by the Ld. Departmental Representative, in view of Section 11(4) & (4A) of the Act, if the property held under trust is a business undertaking, then the income of the business undertaking, which was so held as property held under trust, has to be computed by applying the provisions of Income-tax Act under Chapte....