2016 (7) TMI 1330 - AT - Income Tax

Computation of deductible income u/s 10(29) - computation after excluding depreciation as part of the expenditure and taking gross receipts from warehousing and CFS/ICD or not - Held that - Depreciation was an allowance and not expenditure. The Ld. CIT (DR) has not been able to displace the ratio of these cases. Thus, on consideration, we find that for the purpose of Section 10(29) depreciation does not par take the character of expenditure for the purposes of apportionment. Therefore, we are in agreement with the findings of the Ld. CIT (A) on this issue and we decline to interfere. See Vishnu Anant Mahajan vs. ACIT 2012 (6) TMI 297 - ITAT, Ahmedabad . Appeals of the Department dismissed.

Summary

Issues:
Interpretation of deductible income under section 10(29) of the Income Tax Act, 1961.

Analysis:
The judgment pertains to five appeals by the Department on the issue of whether the deductible income under section 10(29) should be computed after excluding depreciation as part of the expenditure and considering gross receipts from warehousing and CFS/ICD. The Assessing Officer (AO) argued that depreciation, being a business expense, should be included in the computation to reduce the tax liability of the assessee. However, the Ld. AR contended that depreciation is an allowance, not expenditure, citing the decision in Nectar Beverages P. Ltd. vs. DCIT 314 ITR 314 by the Apex Court.

The Tribunal considered the argument and referred to the case of Hoshang D. Nanavati in ITA No. 3567/Mum/2007, which clarified that Section 14A deals with expenditure, not statutory allowances. This decision was supported by the ITAT Ahmedabad Special Bench in Vishnu Anant Mahajan vs. ACIT in ITA No. 3002/Ahd./2009, affirming that depreciation is an allowance, not expenditure. Despite the Ld. CIT DR's submission, the Tribunal upheld that depreciation does not qualify as expenditure for the purpose of apportionment under Section 10(29). Consequently, the Tribunal agreed with the Ld. CIT (A)'s findings and dismissed all five appeals by the Department.

In conclusion, the Tribunal's judgment clarified the treatment of depreciation in computing deductible income under section 10(29) of the Income Tax Act, emphasizing that depreciation is an allowance and not expenditure. The decision was based on precedents and established legal interpretations, ultimately leading to the dismissal of the Department's appeals.