2016 (1) TMI 454 - AT - Income Tax

Depreciation claim by trust - Held that - All the material facts relevant thereto are similar to the case of AP Olympic Association, Hyderabad for AY. 2008-09 (2014 (2) TMI 988 - ITAT HYDERABAD), we respectfully follow the decision rendered by the Co-ordinate Bench of this Tribunal in the said case, and direct the Assessing Officer to allow the claim of assessee for depreciation in respect of the assets, the cost of which was claimed by the assessee as application of income. - Decided in favour of assessee.

Summary

Issues Involved:
1. Eligibility for depreciation on assets where the cost of acquisition has already been claimed as an application of income.

Issue-wise Detailed Analysis:

1. Eligibility for Depreciation on Assets:
The central issue in these appeals is whether the assessee is eligible for depreciation on assets where the cost of acquisition has already been claimed as an application of income. Both parties agreed that this issue is covered against the Revenue by the orders of the Co-ordinate Bench in ITA No. 939/Hyd/2015 dated 14-10-2015. The Revenue relied on the decision of the Hon'ble Kerala High Court in the case of Lissie Medical Institutions Vs. CIT [348 ITR 344 (Kerala)] to support their contentions.

Tribunal's Consideration:
The Tribunal considered the rival contentions and saw no reason to interfere with the order of the CIT(A) allowing the claim of depreciation. The Co-ordinate Bench in the assessee's own case for the AY 2010-11 in ITA No. 939/Hyd/2015 dated 14-10-2015 had already considered the issue in detail and held in favor of the assessee by discussing all relevant aspects and case laws elaborately.

Relevant Case Laws and Principles:
- The Tribunal in the case of AP Olympic Association, Hyderabad for AY 2008-09 in ITA No.1272/Hyd/2013 had decided a similar issue in favor of the assessee. It was noted that the income of a charitable institution has to be computed under ordinary principles of commercial accounting, and depreciation has to be allowed on depreciable assets held by a charitable institution to arrive at the income required to be applied for charitable purposes.
- The Hon'ble Kerala High Court in Lissie Medical Institutions vs. CIT opined that there could be revenue leakage and generation of black money if depreciation was allowed, thus ruling in favor of the Revenue.
- However, decisions from other High Courts, including the Hon'ble Punjab and Haryana High Court in CIT vs. Manav Mangal Society and CIT vs. Market Committee, Pipli, supported the allowance of depreciation.
- The Hon'ble Delhi High Court in DIT vs. Vishwa Jagriti Mission and other High Courts like Gujarat, Madhya Pradesh, and Andhra Pradesh held that depreciation is a necessary deduction on commercial principles.

Conclusion:
The Tribunal, following the majority opinion of various High Courts and the principles laid down by the Hon'ble Delhi High Court, directed the Assessing Officer to allow the claim of the assessee for depreciation in respect of the assets, the cost of which was claimed by the assessee as an application of income. The objection raised by the Revenue was already considered and found unpersuasive by the coordinate bench.

Final Order:
In the result, both appeals of the Revenue were dismissed, and the order pronounced in the open Court on 18th November 2015.