2014 (10) TMI 540 - HC - Income Tax

Claim of depreciation on immovable property capital expenditure on the relevant assets has already been allowed as application of income - double deduction - Held that - the full expenditure has been allowed in the year of acquisition of assets really means that the amount spent on acquiring the assets had been treated as application of income of the Trust in the year in which the income was spent in acquiring these assets - This does not mean that in computing of this income from those assets in subsequent years, the depreciation in respect of those assets cannot be taken into account relying upon Commissioner of Income Tax v/s Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY High Court - merely because a different argument is now canvassed and not in the same manner as it was canvassed before the Division Bench and not dealt with accordingly, will not enable the Revenue to submit that these binding judgments should be brushed aside - accepting the argument of Mr.Tejveer Singh would precisely amount to this act the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
Appeal against Tribunal's order on depreciation claim in Income Tax Appeal for Assessment Year 2005-2006.

Analysis:
1. The Revenue appealed against the Tribunal's order regarding the depreciation claim on immovable property. The Commissioner of Income Tax (Appeals) had earlier confirmed the order. The Revenue argued that depreciation on the property could not be allowed as the capital expenditure had already been claimed in previous years. The claim was made under Section 11 of the Income Tax Act, which deals with income from property held for charitable or religious purposes.

2. The Tribunal and the Commissioner of Income Tax (Appeals) concluded that allowing depreciation would result in double deduction since the capital expenditure had already been accounted for in previous years. The Revenue's argument was similar to past cases where it was held that depreciation on assets can be claimed even if the full expenditure was allowed in the year of acquisition. The Tribunal referenced specific provisions of the Income Tax Act and previous judgments to support its decision.

3. The Tribunal cited the case law of Director of Income Tax (Exemption) v/s Framjee Cawasjee Institute and Commissioner of Income Tax v/s Institute of Banking Personnel Selection to explain that depreciation can be a legitimate deduction in computing the real income of a Trust. These cases clarified that normal depreciation can be considered under general principles or Section 11(1)(a) of the Income Tax Act, even if Section 32 is not applicable. The judgments emphasized computing Trust income on commercial principles after allowing for normal depreciation.

4. The argument presented by the Revenue in this case was deemed similar to past cases and did not warrant overturning the Tribunal's decision. The Court rejected the Revenue's plea, stating that the conclusions of the Tribunal and the Commissioner of Income Tax (Appeals) were legally sound and did not show any error or perversity. The Appeal was dismissed, and no costs were awarded.