2011 (4) TMI 75 - HC - Income Tax

Allowable expenditure - charitable purposes as defined in section 2(15) of the Income-tax Act - expenditure of Rs.9, 56, 027/- claimed to have been contributed to HSAM Board under statutory obligation by virtue of Section 27 of the Punjab Agricultural Produce Market Act 1961 is allowable Depreciation on fixed asset - the assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for the Revenue. The income of the assessee being exempt the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. (See The Commissioner of Income Tax Karnal v. Market Committee Pipli - 2010 -TMI - 202247 - Punjab and Haryana High Court)

Issues:
1. Allowability of expenditure contributed to HSAM Board under statutory obligation.
2. Allowability of depreciation on fixed assets for charitable trust/institution.
3. Double deduction on depreciation for capital expenditure.

Issue 1:
The appeal questioned the justification of the Income Tax Appellate Tribunal (ITAT) in allowing the expenditure of Rs.9,56,027 contributed to HSAM Board under statutory obligation. The primary concern was whether the expenditure was actually incurred and if it could be considered falling within the ambit of application of income for charitable purposes as defined in section 2(15) of the Income-tax Act. The appellant contended that no evidence was produced by the assessee to prove the actual expenditure incurred. However, the learned counsel for the appellant acknowledged that the issue was already decided against the revenue by a previous judgment of the Court in a similar case. Consequently, the Court dismissed the appeal on this issue.

Issue 2:
The second issue raised was regarding the allowability of depreciation on fixed assets for a charitable trust or institution. The appellant questioned the ITAT's decision to allow depreciation, arguing that when income is computed as per the provisions of sections 11 to 13 of the Income Tax Act, the question of depreciation should not arise. This is because capital expenditure is considered as the application of income, leaving no assets/Written Down Value (WDV) for claiming depreciation. The Court noted that a similar issue had been previously addressed in a judgment dated 5.7.2010 in a different case, where the Court ruled in favor of allowing depreciation. Therefore, based on the precedent, the Court dismissed the appeal on this issue as well.

Issue 3:
The final issue concerned the ITAT's decision to uphold the order of the Commissioner of Income Tax (CIT) to allow double deduction on depreciation for capital expenditure. The appellant argued that the statute should not permit an assessee to claim two deductions on the same expenditure unless there is a clear statutory indication to the contrary. The Court referred to a previous judgment in Escorts Limited Vs UOI (199-ITR-43) where it was held that without a clear statutory indication, the statute should not be interpreted to allow multiple deductions on the same expenditure. Since the issue was already addressed in a previous judgment dated 5.7.2010, the Court dismissed the appeal on this issue as well.

In conclusion, the High Court dismissed the appeal filed by the revenue under Section 260-A of the Income Tax Act, 1961, against the ITAT's order. The Court based its decision on the previous judgments that had already settled the issues raised in the appeal.

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