2012 (9) TMI 179 - AT - Income Tax

Claim of depreciation as well as application of income of the trust as per Section 11 - Held that - As decided in CIT vs. Market Committee, Pipli 2010 (7) TMI 374 - PUNJAB AND HARYANA HIGH COURT the assessee is not claiming double deduction on account of depreciation as has been suggested by counsel for the Revenue. The income of the assesse being exempt, the assesse 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 - in favour of assessee. Decision in Escorts Ltd vs Union of India (1992 (10) TMI 1 - SUPREME COURT) distinguished. Decision in Escorts Ltd not to be applicable to the situation where depreciation was claimed by a charitable institution in determining percentage of funds applied for the purposes of charitable objects.

Summary

Issues:
The judgment involves the issue of whether capital expenditure should be treated as application of income of the Trust under Section 11, and if allowing depreciation would amount to double deduction, as well as the computation of income of the trust after providing for normal depreciation on commercial principles.

Analysis:
The appeals were filed against separate orders of the CIT(A)-XII, Chennai, where the assessee claimed common grounds of appeal in both assessment years. The primary issue in both years was the CIT(A) holding that capital expenditure should be treated as application of income of the Trust under Section 11, and allowing depreciation would amount to double deduction. The assessee argued that the income of the trust should be computed after providing for normal depreciation on commercial principles, citing various judicial decisions supporting their claim.

The Assessing Officer disallowed the assessee's claim of depreciation, stating that the entire investment in fixed assets was considered as application of income, leading to double deduction if depreciation was allowed. The CIT(A) upheld the Assessing Officer's decision, prompting the assessee to appeal. The assessee presented judgments from the P&H High Court and the Chennai Tribunal supporting their position that allowing depreciation to the trust would not result in double deduction.

After considering the submissions and relevant case law, the ITAT Chennai concurred with the decisions of the P&H High Court and the Chennai Tribunal. They held that the assessee was not claiming double deduction but seeking to reduce depreciation from income to determine the percentage of funds to be applied for trust purposes. As the issue was conclusively covered in favor of the assessee, the ITAT directed the Assessing Officer to allow the claim of depreciation for both assessment years, ultimately allowing the appeals of the assessee.

In conclusion, the ITAT Chennai dismissed the appeals of the Revenue, upholding the orders of the CIT(A) and allowing the claim of depreciation for the assessee in both assessment years, based on the established legal principles and precedents cited during the proceedings.