2014 (7) TMI 1102 - AT - Income Tax

Depreciation on assets treated as application of income - Held that - Following decision of ITO (Exemption) v. J. D. Tytler School Society 2014 (1) TMI 974 - ITAT DELHI - no reason to interfere with the same - Decided against Revenue.

Summary

Issues:
- Disallowance of depreciation claimed by the assessee.
- Interpretation of whether claiming depreciation amounts to double deduction.

Analysis:
1. Disallowed Depreciation Claim:
The case involved an appeal by the Department against the order of the Commissioner of Income-tax (Appeals) concerning the assessment year 2008-09. The assessee, registered under section 12A, had claimed depreciation on fixed assets amounting to Rs. 58,65,877. The Assessing Officer disallowed this claim citing a Tribunal decision that allowing depreciation on capital expenditure applied for trust purposes would result in double deduction. However, the assessee argued that depreciation should be reduced from income to determine the trust's applicable funds percentage. The Commissioner of Income-tax (Appeals) allowed the appeal based on precedents like the decision of the Punjab and Haryana High Court in CIT v. Tiny Tots Education Society.

2. Precedents and Tribunal Decisions:
The assessee relied on various decisions, including ITO v. Dr. Khera Charitable Trust, CIT v. Bhopal Campion School Society, and ITO (Exemption) v. J. D. Tytler School Society. The Commissioner of Income-tax (Appeals) also considered the decision of the Income-tax Appellate Tribunal in the case of Dr. Khera Charitable Trust and the Punjab and Haryana High Court's ruling in CIT v. Tiny Tots Education Society. These decisions supported the assessee's argument that claiming depreciation did not result in double deduction but was essential for determining the trust's applicable funds percentage.

3. Judgment and Conclusion:
After reviewing the submissions and precedents, the Tribunal found the issue in favor of the assessee, as supported by the decisions relied upon. Specifically, the Tribunal referred to the case of ITO (Exemption) v. J. D. Tytler School Society, where it was held that depreciation had to be allowed as it was not a case of double deduction. Consequently, the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) and dismissed the Department's appeal, upholding the allowance of depreciation claimed by the assessee. The judgment was pronounced on July 11, 2014.