2013 (4) TMI 771 - AT - Income Tax

Depreciation in case of trusts - whether it amounts to double deduction or not? - Held that - There are two different court judgments one favoring and one against assessee. Thus faced with this situation, we draw support from the case law CIT Vs. Vegetable Products (1973 (1) TMI 1 - SUPREME Court) holding that in case of divergent judicial precedents, the one which favours the assessee has to be adopted and confirm the CIT(A) s findings allowing the claim of depreciation holding it as application of income on stated charitable objects - Decided in favour of assessee.

Summary

Issues:
Appeals by Revenue regarding depreciation in trust cases.

Analysis:
The judgment by the Appellate Tribunal ITAT Chennai involved appeals by the Revenue from separate orders of the Commissioner of Income Tax (Appeals) pertaining to different assessees for the assessment year 2009-2010 under section 143(3) of the Income Tax Act 1961. The main issue in all cases was the claim of depreciation in the case of a trust. The Tribunal decided to address all appeals together due to the common issue. The Revenue contended that allowing depreciation on trust assets would result in double deduction, citing legal arguments and judgments. The assessees, on the other hand, presented case law supporting the Commissioner's orders and argued against the appeals. The Tribunal considered the arguments from both parties and examined the case files of the three trusts involved.

The Assessing Officers had rejected the depreciation claims of the trusts, stating that under section 11 of the Act, capital expenditure incurred by a trust is deductible, leading to potential double deduction if depreciation is also allowed. However, the Commissioner of Income Tax (Appeals) relied on precedents from the Punjab and Haryana High Court to support the allowance of depreciation claims by the trusts, emphasizing that such claims do not result in double deduction. The Tribunal noted the disagreement between the Kerala High Court's decision, referenced by the Revenue, and the Punjab and Haryana High Court decisions favored by the assessees.

In light of conflicting judicial precedents, the Tribunal applied the principle from the case law CIT Vs. Vegetable Products, holding that in cases of divergent precedents, the one favoring the assessee should be adopted. Consequently, the Tribunal dismissed the appeals by the Revenue, upholding the findings of the Commissioner of Income Tax (Appeals) in allowing the depreciation claims of the trusts. The judgment was pronounced in open court on a specified date in Chennai, with instructions to place a copy of the order on relevant case files.