2017 (3) TMI 896

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....15 2008-09   2. Though substantial questions of law raised in all these appeals are same, but since there is difference of amount mentioned in the different appeals, we reproduce respective substantial questions of law involved in all these appeals as under: Income Tax Appeal No. 102 of 2015: (1) Whether Tribunal is justified in law and on facts in deleting addition of Rs. 1,66,49,749/- made by the Assessing Officer on account of dis-allowance of depreciation without appreciating the facts that entire cost of capital expenditure has already been allowed as deduction under Section 11 of Act, 1961, against the income of trust in respective years and therefore, allowance of revenue expenditure under Section 11 of the Act, 1961 on assets which had already been claimed and allowed as deduction on account of expenditure, tantamount double deduction. (2) Whether the Tribunal is justified in law and on facts in deleting the addition of Rs. 1,66,49,749/- made by the Assessing Officer on account of dis-allowance of depreciation without appreciating the fact that the Assessee Society is claiming expedition under Section 11 of Act, 1961. Income....

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....s granted registration under Section 12A of Act, 1961, and running several educational institutions in State of U.P. In A.Ys. 2006-07 and 2007-08, Assessee claimed expenditure as well as depreciation on such capital expenditure. Assessing Officer (hereinafter referred to as "A.O.") disallowed depreciation observing that once entire cost of capital assets has already been allowed as deduction against income of Trust in respective years, no depreciation on such capital assets can be allowed for the purpose of computing deduction against revenue expenditure. It would amount to double deduction which is not permissible. He also disallowed payment of scholarship to one Adheesh Bhagat on the ground that it was not for charitable purpose and it would be considered as income of Assessee. 5. Commissioner of Income Tax (Appeals) II, Kanpur (hereinafter referred to as "CIT(A)") allowed appeal preferred by Assessee on both the aforesaid aspects. Revenue's appeal before Tribunal succeeded so far as issue of Scholarship paid to Mr. Adheesh Bhagat is concerned, but on the question of depreciation of capital assets, it failed. 6. Income Tax Appeal No. 41 of 2016 is in relation to Institu....

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....sk for a deduction, in five consecutive years of expenditure he has incurred on the acquisition of the Asset. The question arose whether both these deductions could have been allowed simultaneously to an Assessee. Court considered pari materia provision of Act, 1961. Under Act, 1961, depreciation is dealt with by Section 32. Section 32(1)(ii) allow depreciation at a percentage of written down value of certain capital assets employed in the business. The topic of "scientific research expenditure" is dealt with by Section 35. Court answered the question observing that both deductions simultaneously cannot be allowed by reading relevant provisions namely Section 10(2)(vi) and Section 10(2)(xiv) of Act, 1922 and Section 32(1)(ii) and 35(2)(iv) of Act, 1961. 8. The aforesaid judgment may help Revenue only if we may find that Section 11 allows some kind of deduction from income of Assessee of previous years. However, Section 11(1) states that the kind of income mentioned in various sub-clauses of Section 11(1) shall not be included in total income of previous year of person in receipt of income. Expression "total income" has been defined under Section 2(45) of Act, 1961 and the word "....

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.... out that there is an amendment in Section 11 inserting Sub-section (6) by Finance Act (No. 2) of 2014, with effect from 01.04.2015, which reads as under: "(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without 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." 13. Memorandum explaining the provision made in Finance Bill for the aforesaid amendment shows that in order to exclude deduction, specific declaration was made by insertion of aforesaid sub-section in Section 11. The said Memorandum reads as under: "The second issue which has arisen is that the existing scheme of section 11 as well as section 10(23C) provides exemption in respect of income when it is applied to acquire a capital asset. Subsequently, while computing the income for purposes of these sections, notional deduction by way of depreciation etc. is claimed and such amount of notional deduction remains to be applied for ch....