2016 (8) TMI 1405 - AT - Income Tax

Accumulation of income u/s. 11(2) - Held that - As find that assessee has given a notice of accumulation of funds, but the AO did not take cognizance of this fact and has made the addition; whereas the CIT(Appeals) has examined the issue in detail in the light of various judicial pronouncements and since find no infirmity in the order of CIT(Appeals), thus confirm the same. Disallowance of depreciation claimed by the assessee trust - Held that - CIT(Appeals) has decided the issue in the light of judgments of various High Courts in which it has been held that depreciation is exhaustion of effective life of a fixed asset owing to its use or obsolescence. It is computed as part of the cost of asset which will not be recovered when the asset is put to use. Even the Hon ble Bombay High Court has held that depreciation should be allowed even on assets received on transfer on which no cost was borne by the assessee trust. CIT(Appeals) has properly adjudicated the issue and no interference is called for. - Decided against revenue

Summary

Issues Involved:
1. Deletion of addition of ?43,48,792/- by accepting Form No. 10 and Form No. 10B as additional evidence in violation of Rule 46A of the Income Tax Rules, 1962.
2. Deletion of addition of ?43,48,792/- despite the assessee's claim of no accumulated amount under Section 11(2) in the last 10 years.
3. Deletion of addition of ?43,48,792/- despite the assessee not producing Form No. 10 and Form No. 10B during assessment proceedings.
4. Deletion of addition of ?8,13,513/- on account of depreciation claimed by the assessee despite claiming 100% deduction towards capital expenditure.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?43,48,792/- by Accepting Form No. 10 and Form No. 10B as Additional Evidence:
The revenue contended that the Commissioner of Income Tax (Appeals) [CIT(A)] erred in law and on facts by accepting Form No. 10 and Form No. 10B as additional evidence without giving reasonable opportunity to the Assessing Officer (AO) as per Rule 46A(3) of the Income Tax Rules, 1962. The CIT(A) re-examined the claim and found that Form 10 and Form 10B were duly submitted for the accumulation of income under Section 11(2) before the completion of assessment proceedings. The CIT(A) relied on the judgment of the Hon'ble Gujarat High Court in the case of CIT vs. Mayur Foundation, where it was held that the assessment proceedings are pending till the appeal is heard and disposed of by the Tribunal. Thus, the CIT(A) concluded that the addition made by the AO could not be sustained.

2. Deletion of Addition of ?43,48,792/- Despite the Assessee's Claim of No Accumulated Amount:
The AO noted that the assessee had not submitted Form 10 for the accumulation of income under Section 11(2) of the Act and made an addition of ?43,48,798. The CIT(A) found that the assessee had filed Form 10 on 9.3.2013, well within the time limit specified under the provisions of Section 11 of the Act. The CIT(A) concluded that since the assessee complied with all conditions prescribed under Section 11 by filing Form 10 within the prescribed time and depositing the accumulated sum in a nationalized bank, no addition should be made.

3. Deletion of Addition of ?43,48,792/- Despite Not Producing Form No. 10 and Form No. 10B During Assessment Proceedings:
The CIT(A) observed that Form No. 10 was filed before ITO-I, Bahraich, on 26.06.2013, and both Form No. 10 and Form No. 10B were filed during appellate proceedings. The CIT(A) relied on various judicial pronouncements, including the Hon'ble Gujarat High Court's decision in CIT vs. Mayur Foundation, which allowed the submission of Form 10 till the appeal is pending before the Tribunal. The CIT(A) deleted the addition as the forms were submitted before the completion of assessment proceedings.

4. Deletion of Addition of ?8,13,513/- on Account of Depreciation:
The AO disallowed the depreciation claim of ?8,13,513/- on the grounds that the assessee had already claimed 100% deduction towards capital expenditure. The CIT(A) allowed the depreciation claim, citing judgments from various High Courts, including the Hon'ble Bombay High Court in CIT vs. Framjee Cawasjee Institute and CIT vs. Institute of Banking Personnel Selection, which held that depreciation should be allowed even if the capital value of the assets had been allowed as a deduction under Section 11. The CIT(A) concluded that depreciation is an allowable deduction for computing the income of charitable institutions.

Conclusion:
The Tribunal, after examining the order of the lower authorities and the submissions, found no infirmity in the order of the CIT(A). The Tribunal confirmed the CIT(A)'s decision to delete the additions and allowed the depreciation claim, relying on various judicial pronouncements. The appeal of the revenue was dismissed, and the order of the CIT(A) was upheld.