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2016 (12) TMI 676 - AT - Income TaxDisallowance of depreciation to assessee trust - double deduction - Held that - Tribunal in the case of Accion Technical Advisors India Vs. The Asst. Director of Income-Tax (Exemptions), Bangalore (2015 (11) TMI 634 - ITAT BANGALORE ), held that the assessee was entitled to the benefit of depreciation irrespective whether the cost of the said asset on which the depreciation is claimed has been allowed as an application of income in the previous years. The tribunal had taken note of the amendment effected by the Finance (No. 2) Act, 2014 w.e.f 1.4.2015 and held the amendment is prospective and does not have application for the years prior to AY 2015-16. - Decided in favour of assessee
Issues:
Disallowance of depreciation on assets claimed as application of income. Analysis: The appeal was against the CIT(A)'s order confirming the AO's disallowance of depreciation on assets claimed as application of income. The assessee, a religious trust, filed its return for AY 2012-13 claiming depreciation on assets worth ?34,31,683. The AO disallowed the depreciation, citing double deduction as the cost of assets was allowed as application of income. The CIT(A) upheld the AO's decision. The assessee argued that a tribunal order favored their case, stating that depreciation should be allowed regardless of the cost being treated as application of income. The tribunal agreed, considering a 2014 amendment as prospective and not applicable for prior years. Referring to various judgments, including the decision of the Hon'ble Karnataka High Court, the tribunal concluded that depreciation for charitable trusts is necessary to compute income under section 11(1) and does not amount to double benefit. The tribunal directed the AO to grant the claimed depreciation, allowing the appeal. In conclusion, the tribunal allowed the appeal, directing the AO to grant the depreciation claimed by the assessee on assets despite the cost being treated as application of income. The decision was based on legal precedents and interpretations of relevant tax laws for charitable trusts, ensuring that depreciation is a legitimate deduction for computing income under section 11(1) without constituting a double benefit.
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