2018 (7) TMI 1166 - AT - Income Tax

Disallowance of depreciation on fixed asset acquired by the assessee-society - Held that - In the instant case, the provisions of section 11(6) are not applicable as the same will be applicable from AY 2015-16. For the impunged assessment year, respectively following the decision case of Commissioner of Income Tax-III, Pune vs. Rajasthan & Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT the assessee trust is held eligible to claim depreciation. - Decided in favour of assessee

Summary

Issues Involved:
Disallowance of depreciation on fixed asset acquired by the assessee trust.

Analysis:
The appeal was filed against the disallowance of depreciation on a fixed asset acquired by the assessee trust. The Assessing Officer disallowed the depreciation as the entire cost of the asset had been claimed as application of income in earlier years under section 11 of the Act. The assessee contended that the matter was covered by decisions of various High Courts, but the CIT(A) confirmed the disallowance citing an SLP admitted by the Supreme Court against decisions of various High Courts, including the Rajasthan High Court.

During the hearing, the assessee relied on the decision of the Hon'ble Supreme Court in a similar case and the decision of the Hon'ble Rajasthan High Court in another case. The Department, however, had not accepted the decisions of the Rajasthan High Court and had preferred an SLP before the Supreme Court. The ITAT found the issue to be not res integra in light of the Supreme Court's decision in a similar case where the Court held that depreciation could be claimed even if the entire expenditure for acquiring capital assets had been treated as application of income for charitable purposes under section 11(1)(a) of the Act.

The ITAT referred to the judgment of the Bombay High Court, which supported the allowance of depreciation on assets even if the cost had been treated as application of income in previous years. The ITAT concluded that the assessee trust was eligible to claim depreciation for the impugned assessment year, following the Supreme Court's decision. The provisions of section 11(6), which were not applicable for the year in question, were also discussed. Consequently, the appeal filed by the assessee was allowed.

The judgment highlighted the legal principles regarding the allowance of depreciation on assets acquired by charitable institutions, emphasizing that the grant of depreciation would not amount to giving double benefit to the assessee. The decision of the Hon'ble Supreme Court and the Bombay High Court were crucial in determining the eligibility of the assessee trust to claim depreciation, despite the cost of the asset being treated as application of income in previous years under section 11 of the Act.