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2011 (2) TMI 1401 - AT - Income TaxAssessment of trust - Deduction of depreciation in computing the income - Amounts to double deduction or not? - proper deduction in computing income of a charitable institution or not - HELD THAT - As relying on TINY TOTS EDUCATION SOCIETY 2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT where it was held that the income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. Appeals of the assessee are allowed.
Issues Involved:
1. Depreciation as a deduction for charitable institutions. 2. Application of Supreme Court decisions to charitable institutions. 3. Jurisdictional High Court decisions on depreciation for charitable institutions. 4. Carry forward of excess application to subsequent years. Issue-wise Detailed Analysis: 1. Depreciation as a Deduction for Charitable Institutions: The primary issue in these appeals was whether depreciation could be claimed as a deduction by a charitable institution when computing income under section 11(1) of the Income Tax Act. The CIT(A) had rejected the assessee's claim for depreciation, which was upheld by the Assessing Officer. The assessee argued that various High Courts had held that depreciation is a proper deduction for charitable institutions. The Tribunal found that similar issues had been decided in favor of the assessee in previous cases, including decisions by the Tribunal and the Hon'ble Punjab & Haryana High Court. The Tribunal concluded that the assessee is eligible for the claim of depreciation on assets, even if the cost of those assets had been fully allowed as an application of income in past years. 2. Application of Supreme Court Decisions to Charitable Institutions: The CIT(A) had relied on Supreme Court decisions in Escorts Ltd. v. Union of India and CIT v. Hico Products P Ltd., which were interpreted to mean that double deduction should not be allowed. However, the assessee contended that these decisions were not applicable to charitable institutions assessed under the special provisions of sections 11 to 13. The Tribunal agreed with the assessee, referencing the Bombay High Court's decision in CIT v. Institute of Banking, which upheld the allowance of depreciation claims for charitable institutions even after the Supreme Court's decisions. 3. Jurisdictional High Court Decisions on Depreciation for Charitable Institutions: The assessee argued that the CIT(A) should have followed the decision of the Jurisdictional High Court in Govindu Naicker Estate v. CIT and other High Court decisions, which allowed the benefit of depreciation for charitable institutions. The Tribunal noted that the issue was covered by the decision of the Bombay High Court and the Hon'ble Punjab & Haryana High Court, which supported the assessee's claim for depreciation. The Tribunal found no contrary material or higher court orders presented by the Department to dispute these decisions. 4. Carry Forward of Excess Application to Subsequent Years: The assessee also raised the issue of carrying forward excess application of income to subsequent years. The Tribunal did not specifically address this issue in detail, but by allowing the appeals of the assessee and directing the Assessing Officer to allow the depreciation claims, it implicitly supported the broader interpretation of income application for charitable purposes, which could include carrying forward excess application. Conclusion: The Tribunal allowed all three appeals of the assessee, directing the Assessing Officer to allow the claims for depreciation. The Tribunal's decision was based on precedents from the Bombay High Court and the Punjab & Haryana High Court, which had ruled in favor of allowing depreciation for charitable institutions. The Tribunal found that the Department had not provided any contrary material or higher court decisions to dispute these precedents. The order was pronounced soon after the conclusion of the hearing on 02.02.2011.
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