2014 (12) TMI 1145 - AT - Income Tax

Disallowance of depreciation - depreciation on assets - Held that - Following decision of assessee's own previous case 2015 (1) TMI 310 - ITAT CHENNAI - No infirmity in the order of the Commissioner of Income-tax (Appeals) - Decided against Revenue.

Summary

Issues:
Claim of depreciation by a trust - Double deduction - Cash expenditure - Application of funds - Allowability of depreciation in case of trusts - Interpretation of Income-tax Act provisions.

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai involved the Revenue challenging the order of the Commissioner of Income-tax (Appeals) regarding the claim of depreciation by a trust for the assessment year 2010-11. The only issue raised by the Revenue was the allowance of depreciation to the assessee by the Commissioner of Income-tax (Appeals).

The assessee, a trust registered under section 12A of the Income-tax Act, filed its return of income for the relevant assessment year declaring a taxable income as "nil". However, the Assessing Officer disallowed the claim of depreciation amounting to Rs. 12,29,42,255 on the grounds that depreciation is not a cash expenditure and remains with the trust, leading to double deduction. The Commissioner of Income-tax (Appeals) allowed the claim following a decision of the Tribunal in the assessee's own case for the previous assessment year, which the Revenue contested before the Tribunal.

The Revenue argued that depreciation cannot be considered as expenditure for trusts as it does not involve cash outflow, and the entire cost of fixed assets is already considered as application of funds. The Revenue relied on a Supreme Court decision to support its stance. On the other hand, the assessee's representative supported the order of the Commissioner of Income-tax (Appeals) by citing previous favorable decisions and contending that the claim of depreciation does not lead to double deduction.

After considering the submissions and examining relevant decisions, the Tribunal noted that the issue had already been adjudicated in the assessee's favor by a co-ordinate Bench in a previous case. The Tribunal referred to various judgments to conclude that in the case of trusts registered under section 12A, the claim of depreciation does not amount to double deduction. The Tribunal also highlighted a High Court decision emphasizing that claiming depreciation for exempt income does not lead to double deduction.

The Tribunal distinguished the Revenue's reliance on a Supreme Court decision by clarifying that the present case involves a claim of depreciation on assets owned by the trust, which has been consistently upheld by High Courts as not constituting double deduction. Therefore, the Tribunal dismissed the Revenue's appeal, finding no infirmity in the order of the Commissioner of Income-tax (Appeals).