TaxTMI 
TaxTMI 
2021 (5) TMI 358
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....hearing. 2. Briefly stated facts of the case are that the assessee society is registered under section 12A of the Income-tax Act, 1961 (in short 'the Act') with effect from 16/10/2008. The aims and objects of the society include develop and prescribe for a wide spectrum of courses of study for purpose of general vocational and continuing education. For the year under consideration, the assessee filed return of income on 30/09/2012 declaring nil income. The return of income filed by the assessee was selected for scrutiny assessment. The scrutiny assessment under section 143(3) of the Act was completed on 26/03/2015, wherein, depreciation of Rs. 2,59,19,069/- and carry forward of the deficit of Rs. 22,14,49,902/- was declined to the assessee by the Assessing Officer. The assessee preferred appeal before the Ld. CIT(A), who allowed both above claim of the assessee following judicial precedents. Aggrieved, with the finding of the Ld. CIT(A), the Revenue is in appeal before the Income Tax Appellate Tribunal [in short 'the Tribunal'] raising the grounds as reproduced above. 3. Before us, none appeared on behalf of the assessee. 4. We have heard submission of the learned Departmental ....
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.... depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under section 11 in the same or any other previous year. Para 7.5 of the said Explanatory Notes is reproduced as under: "7.5 The second issue which had arisen was that the existing scheme of section 11 as well as section 10(23C) of the Incometax Act provided 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. was being claimed and such amount of notional deduction was not being applied for charitable purpose. As a result, double benefit was being claimed by the trusts and institutions. Therefore, these proihsions were required to be rationalized to ensure that double benefit is not claimed and such notional amount does not get excluded from the condition of application of income for charitable purpose." 4.1.5 There are many conflicting judgments of various Hon'ble High Courts, including of the jurisdictional High Court, both in favour and against allowability of depreciation. The Hon'ble Delhi High Court, in ....
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....9;). For this reason, in the previous year to the year with which we are concerned and in which year the depreciation was claimed, the entire expenditure incurred for acquisition of capital assets was treated as application of income for charitable puruposes under Section 11(1)(a) of the Act. The view taken by the Assessing Officer in disallowing the depreciation which was claimed under Section 32 of the Act was that once the capital expenditure is treated as application of income for charitable purposes, the assessees had virtually enjoyed a 100 per cent write off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee. Though it appears that in most of these cases, the CIT (Appeals) had affirmed the view, but the ITAT reversed the same and the High Courts have accepted the decision of the ITAT thereby dismissing the appeals of the Income Tax Department. From the judgments of the High Courts, it can be discerned that the High Courts have primarily followed the judgment of the Bombay High Court in 'Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS)' [(2003) 131 Taxman 386 (Bombay)]. In ....
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....ue that section 32of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived form building, plant and machinery and furniture was liable to be computed in normal commercial manner although the Trust may not be carrying on any business and the assets in respect whereof depreciation is claimed may not be business assets. In all such cases, section 32 of the Income Tax Act providing for depreciation for computation of income derived from business or profession is not applicable. However, the income of the Trust is required to be computed under section 11 on commercial principles after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view of the aforesatated judgment of the Bombay High Curt, we answer question No. 1 in the affirmative i.e., in favour of the assessee and against the Department. 4. Question No. 2 herein is identical to the question which was raised before the Bombay High Court in the case of Director of Income-tax (Exemption) v. FramjeeCawasjee Institute [1993] 109 CTR 463. In that case, the facts were as follows: The ....