2015 (6) TMI 1099 - AT - Income Tax

Depreciation claim on assets of trust already been claimed as application of income u/s. 11 - Held that - In the earlier years identical issue has been decided in favour of the assessee by the Tribunal. We find that the Hon ble Bombay High Court had also decided the issue in favour of the assessee for the assessment year 2007-08 wherein as directed to allow depreciation claimed by the appellant. - Decided in favour of assessee

Summary

Issues:
1. Allowance of depreciation on fixed assets.
2. Double deduction concern.
3. Set off of deficit against income.

Analysis:

Issue 1: Allowance of depreciation on fixed assets
The Assessing Officer (AO) challenged the order of the Commissioner of Income Tax (Appeals) directing the AO to allow depreciation on fixed assets. The AO argued that the capital expenditure incurred on acquiring the assets had already been claimed as application of income under section 11 of the Income-tax Act, 1961. However, during the hearing, it was noted that similar issues had been decided in favor of the assessee by the Tribunal in earlier years and by the Bombay High Court for the assessment year 2007-08. The Tribunal upheld the decision of the CIT(A) based on the High Court's ruling, allowing depreciation and rejecting the AO's appeal.

Issue 2: Double deduction concern
The AO contended that allowing depreciation would result in double deduction, citing precedents like Escorts Ltd. v. Union of India and J.K. Synthetics v. Union of India. However, the Tribunal and the High Court had previously ruled in favor of the assessee on similar grounds, emphasizing that allowing depreciation did not amount to double deduction. The Tribunal's decision was based on consistency with past rulings and the legal position established by the High Court.

Issue 3: Set off of deficit against income
Another argument raised by the AO was regarding the set off of a deficit arising from expenditure out of income on which exemption had already been claimed. The AO claimed that allowing the set off would result in double deduction, referring to the same precedents. However, the Tribunal, following the decisions of the CIT(A) and the High Court, dismissed the AO's appeal, stating that the views taken were in line with previous rulings and there was no infirmity in the order passed by the CIT(A).

In conclusion, the Tribunal upheld the decision of the CIT(A) to allow depreciation on fixed assets, rejecting the AO's appeal based on the consistency of rulings with past decisions and the legal position established by the High Court. The appeal filed by the AO was dismissed, and the order was pronounced in open court on June 16, 2015.