2023 (7) TMI 1321 - AT - Income Tax

Depreciation Claim of trust - purchase of assets taken by the assessee as application of Income u/s 11 - claim disallowed by the AO observing that it would amount to double deduction - HELD THAT - We note that the case of the assessee is prior to 01.04.2015, therefore, the assessee is eligible for claim as application of income on the depreciation charged on fixed assets, even if the assessee has already claimed application of income on the fixed assets in the year of purchase. This issue has been settled in the case of CIT v. Rajasthan Gujarati Charitable Foundation, Poona 2017 (12) TMI 1067 - SUPREME COURT as decided that the amendment made as prospective in nature. Respectfully following the above judgment, accordingly we allow ground No. 1 of the assessee. Corpus fund - as per the assessee, it is towards building corpus fund and not part of the total income, whereas the authorities below considered it as a general receipt of the assessee trust. Since the assessee did not appear before the CIT(A) and substantiate its case, therefore we remit this issue to the CIT(A) for fresh consideration and decision as per law. Loss on sale of asset - Lower authorities have held that the assessee has not incurred any actual expenditure, therefore, they have not allowed application of income. We note that it is not clear from the orders of revenue authorities, whether the loss suffered on the sale of fixed asset is claimed as application of income in the year of purchase of such assets and further whether depreciation is claimed on such assets and/or the depreciation has been claimed as application of income. If yes, then the assessee will not get benefit of application of income in the year of loss suffered on sale of such assets. Therefore, this issue is also remitted back to the file of CIT(A) for verification and fresh decision as per law. Disallowance of claim as application of income towards refund of caution money to the students which was received by the assessee at the time of admission of students for want of proper details - assessee is directed to provide the necessary details for proof of payments which could not be produced before the AO. We remit this issue to the CIT(A) for fresh consideration and decision as per law.

Summary

Issues involved:
- Depreciation
- Building of Corpus Fund
- Loss on Sale of Assets
- Refund of Caution Fees

Depreciation:
The assessee claimed depreciation of Rs. 31,97,283 which was disallowed by the AO on the grounds of double deduction since the application of income was already claimed at the time of asset purchase. However, the ITAT Bangalore allowed the claim based on the decision in CIT v. Rajasthan & Gujarati Charitable Foundation, Poona, [2018] 89 taxmann.com 127 (SC), stating that the assessee is eligible for the claim even if application of income was previously made on the fixed assets.

Building of Corpus Fund:
The AO treated Rs. 1,05,92,266 as a general receipt instead of a building corpus fund, as claimed by the assessee. Since the assessee did not appear before the CIT(A) to substantiate the claim, the ITAT remitted this issue back to the CIT(A) for fresh consideration and decision according to the law.

Loss on Sale of Assets:
The AO disallowed the claim of Rs. 52,413 for loss on the sale of assets, stating that no actual expenditure was incurred. The ITAT found ambiguity in the orders regarding whether the loss on the sale of fixed assets was previously claimed as application of income and whether depreciation was also claimed. The issue was remitted back to the CIT(A) for verification and a fresh decision in accordance with the law.

Refund of Caution Fees:
The AO rejected the claim of Rs. 58,000 as application of income towards refund of caution money to students due to lack of proper details. The ITAT directed the assessee to provide necessary proof of payments and remitted the issue back to the CIT(A) for a fresh decision in compliance with the law.

In conclusion, the ITAT Bangalore partly allowed the appeal of the assessee, with ground No. 1 being allowed, and ground Nos. 2, 3, 4 being remitted back to the CIT(A) for further consideration. The assessee was granted the opportunity to substantiate their case in these matters.