2012 (3) TMI 513 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of income amount and claim of depreciation amount by the Assessing Officer.

Deletion of income amount: The Assessing Officer raised two grounds of appeal regarding the deletion of an amount from the income of the assessee. The issue was whether the assessee had properly exercised its option u/s 11(1) to defer the amount to the succeeding year. The Tribunal referred to a case decided by the Hon'ble High Court of Bombay which emphasized that income of a charitable trust should be computed on commercial principles, including allowing for normal depreciation. The Tribunal, following the High Court's order, dismissed the appeal filed by the AO.

Claim of depreciation amount: The second issue was related to the claim of depreciation amounting to a specific sum on assets whose cost had already been allowed as application. The Tribunal considered the principles laid down by the High Court regarding the computation of income derived from trust property on commercial principles. It was noted that normal depreciation can be a legitimate deduction even if the trust is not engaged in business activities. The Tribunal upheld the claim of depreciation, stating that it should be deducted from the income to arrive at any surplus to be taxed.

Conclusion: The Tribunal, in line with the High Court's decision, dismissed the appeal filed by the Assessing Officer based on the principles of computing income for charitable trusts on commercial principles and allowing for normal depreciation.