2015 (7) TMI 1206 - AT - Income Tax

Claim of depreciation by assessee trust - Held that - The assessee was entitled for the claim of depreciation. The assessee has been getting the benefit of depreciation in all previous years and therefore as a matter of principle of consistency the assessee should be eligible to get the benefit of depreciation in this year as well and for this purpose derive support from the judgment of Hon ble Supreme Court in the case of CIT v. Excel Industries Pvt. Ltd. 2013 (10) TMI 324 - SUPREME COURT Provisions of the benefit of carry forward of deficit - Held that - The issue of excess application of earlier years to be carried forward is decided in favour of the appellant in the decision of the higher judicial forums as referred and relied by the appellant. Therefore respectfully following the decisions relied upon by the appellant and applicable under the facts and circumstances of the case Ground No.4 is allowed. However the AO is directed to verify the claim of C/f. of earlier year deficits that such amounts are part of excess expenditure of earlier years and such amounts are liable to be considered as part of application of income in the respective years. It may further be verified that such excess expenditure of earlier years claimed is out of income of the respective years.

Summary

Issues Involved:
1. Disallowance of depreciation on fixed assets.
2. Carry forward of deficit and set off against subsequent years' income.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Fixed Assets:
The primary contention was whether the assessee trust could claim depreciation on fixed assets when the capital expenditure on those assets had already been claimed as an application of income under section 11(1) of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed the depreciation, arguing it would amount to double deduction. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the depreciation, relying on the judgment of the Bombay High Court in CIT vs. Institute of Banking Personnel Selection (264 ITR 110), which supported the assessee's claim. The Revenue argued that this judgment did not consider the Supreme Court's decision in Escorts Ltd. vs. UOI (199 ITR 43), which prohibits double deduction. The Revenue also cited judgments from the Delhi High Court (Charanjiv Charitable Trust) and Kerala High Court (Lissie Medical Institutions) supporting disallowance. However, the Tribunal upheld the CIT(A)'s decision, emphasizing the binding nature of the jurisdictional High Court's ruling and the principle of consistency, as the assessee had been allowed such depreciation in previous years. The Tribunal also noted that the amendment to section 11 by Finance Act 2014, which disallows such depreciation, is prospective and not applicable to the assessment years in question.

2. Carry Forward of Deficit and Set Off Against Subsequent Years' Income:
The second issue was whether the assessee could carry forward the deficit of Rs. 3,22,34,482 and set it off against future income. The CIT(A) allowed this, referencing higher judicial forums' decisions. The Tribunal upheld this decision, citing the Bombay High Court's judgment in CIT vs. Institute of Banking Personnel (264 ITR 110), which supports the carry forward of deficits. The Tribunal found no contrary judgments from the Revenue and confirmed the CIT(A)'s order, allowing the carry forward and set off of the deficit.

Conclusion:
The Tribunal dismissed all appeals by the Revenue, upholding the CIT(A)'s decisions on both issues. The Tribunal emphasized the binding nature of jurisdictional High Court rulings and the principle of consistency in tax assessments. The order was pronounced in July 2015.