2013 (5) TMI 934 - AT - Income Tax

Summary

Issues involved: Appeal against order allowing depreciation on fixed assets, accumulation of income, carry forward of deficit.

Depreciation on fixed assets:
The department appealed against the allowance of depreciation on fixed assets by the CIT(A) for assessment year 2007-08. The appellant trust claimed depreciation as application of income under section 11(1)(a) of the Income Tax Act to avail exemption. The AO disallowed the claim citing a previous judgment, but the CIT(A) allowed it based on commercial principles and judicial precedents. The Tribunal upheld the CIT(A)'s decision, noting that the department's reliance on a specific case was not applicable to the current scenario. The Tribunal found no reason to interfere with the CIT(A)'s order and rejected the department's appeal on this ground.

Accumulation of income:
Regarding the accumulation of income issue, the AO denied the accumulation as there was no surplus left after the entire income was spent by the trust. The trust argued that there is no legal bar to accumulating income even in case of a deficit. The CIT(A) agreed with the trust, citing relevant legal provisions and court judgments supporting the accumulation of income. The Tribunal upheld the CIT(A)'s decision, emphasizing that the trust was entitled to accumulate income as per the law, and rejected the department's appeal on this ground.

Carry forward of deficit:
The department contested the allowance of carry forward of deficit and set off against subsequent years' income, claiming it would result in double deduction. The CIT(A) allowed the claim based on commercial principles and the decision of the Bombay High Court. The Tribunal upheld the CIT(A)'s decision, stating that adjusting expenses against income in subsequent years is a valid application of income for charitable purposes. Consequently, the Tribunal rejected the department's appeal on this ground as well.

Separate Judgment:
The Tribunal also noted that the assessee had filed a cross objection, which was dismissed as not pressed during the hearing. Ultimately, both the appeal filed by the revenue and the cross objection filed by the assessee were dismissed, affirming the decisions of the CIT(A) on all the issues raised in the appeal.