2021 (3) TMI 1019 - HC - Income Tax

Validity and scope of remand order of ITAT - Assessment of trust - depreciation claim of trust - whether the assets in question were used by the assessee or not? - Tribunal held that order of the Commissioner of Income Tax (Appeals) is correct and if no income is earned from the use of the assets during the relevant year for the regular business activity then depreciation is allowable - HELD THAT - Tribunal agreed with the contentions urged on behalf of the assessee that if no income is earned from the use of assets during the relevant year for regular business activity of the assessee then claiming of depreciation is justified. Therefore the order of the Commissioner of Income Tax to that extent is upheld by the Tribunal also. Tribunal in impugned order remitted the matter back to the Commissioner of Income Tax (Appeals) to inquire into the question of whether the assets were put to use in the relevant year before adding the block of assets or not is a relevant factor to be established by the assessee and thereafter the Commissioner of Income Tax (Appeals) is required to pass a speaking order. There is sufficient force in the arguments of the Revenue in regard to such a finding recorded especially in view of the order passed in I.C.D.S. Ltd.. 2013 (1) TMI 344 - SUPREME COURT . At this stage the learned counsel for the assessee contended that the Tribunal did not specify the years for which the inquiry should be carried out and the Revenue may take advantage of such an observation and inquire into all years. In our opinion such an apprehension is uncalled for in view of the fact that the dispute is only with regard to the assessment years 2011-12 and 2012-13. However we make it clear that the inquiry as ordered by the Tribunal shall be restricted for the years 2011-12 and 2012-13. Substantial questions of law raised in the appeal are answered against the assessee and in favour of the Revenue

Summary

Issues:
Challenge to remand order by Tribunal for fresh consideration by Commissioner of Income Tax (Appeals) regarding depreciation claim.

Analysis:
The appellant, a Trust engaged in charitable activities, filed returns for assessment years 2011-12 and 2012-13 declaring nil income. The Assessing Officer disallowed depreciation claim as no income was earned from asset use. The Commissioner of Income Tax (Appeals) remanded the matter back for fresh consideration, allowing the appeal. The Revenue appealed to the Tribunal, which set aside the Commissioner's order, directing a fresh decision on asset use for business activity. The Tribunal upheld that if no income was earned from asset use, depreciation could be claimed. However, it remitted the matter back to ascertain if assets were used for business activity. The appellant challenged this remand order, citing a Delhi High Court judgment to argue against the need for proof of asset use once included in the block assets.

The substantial questions of law raised in the appeal questioned the necessity of asset use for claiming depreciation under the Income Tax Act and the validity of setting aside the Commissioner's order without disputing asset use. The Revenue contended that asset use must be established before inclusion in block assets, citing a Supreme Court judgment. The Tribunal upheld the Commissioner's order on depreciation claim but remanded for verification of asset use, leading to the present appeal. The Court considered both parties' contentions, upholding the Tribunal's decision to remand for verifying asset use before adding to block assets. The Court clarified that the inquiry should be limited to the assessment years 2011-12 and 2012-13. Consequently, the substantial questions of law were answered against the appellant, resulting in the dismissal of the appeal.