2021 (4) TMI 469 - HC - Income Tax

Assessment of trust - depreciation allowable as application of income on charitable objects - Double deduction - HELD THAT - Substantial questions of law, which have been framed in these appeals, have been answered against the Revenue as relying on RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA 2017 (12) TMI 1067 - SUPREME COURT . - Decided against revenue.

Summary

Issues involved:
1. Disallowance of depreciation on capital assets by the Assessing Officer.
2. Applicability of Section 32 to entities claiming exemption under Section 10 & 11 of the Act.
3. Interpretation of the decision in the case of Escorts Limited.
4. Entitlement of the assessee to claim depreciation on assets treated as application of income under Section 11.
5. Precedents set by the Hon'ble Supreme Court and the Hon'ble Division Bench of the Court.

Analysis:
The High Court of Madras dealt with the appeals filed by the Revenue against the orders of the Income Tax Appellate Tribunal disallowing depreciation claimed by the assessee on capital assets. The Assessing Officer had disallowed the depreciation, stating that the entire cost of the asset had been considered as application of income in the year of purchase, and Section 32 was not applicable to entities claiming exemption under Section 10 & 11 of the Act. The Assessing Officer relied on the decision of the Hon'ble Supreme Court in the case of Escorts Limited to support this stance. However, the CIT (Appeals) allowed the appeals in favor of the assessee, asserting the entitlement to depreciation claim on the assets. The Tribunal, following the assessee's own case for the earlier year, allowed the appeals, leading to the Revenue's appeals before the High Court.

The substantial question of law admitted for consideration was whether the assessee could claim depreciation on assets where the cost of purchase was treated as application of income under Section 11. During the hearing, the Senior Standing Counsel for the Revenue acknowledged that the issue had been decided against the Revenue by the Hon'ble Supreme Court in a specific case. Referring to the decision of the Hon'ble Supreme Court and a judgment of the Hon'ble Division Bench of the Court related to the same assessee, it was concluded that the substantial question of law was answered against the Revenue. Consequently, the appeals were dismissed, aligning with the precedents set by the higher courts. The Court emphasized that no costs were to be incurred in this matter.

In summary, the judgment addressed the disallowance of depreciation on capital assets, the application of Section 32 to entities under Sections 10 & 11, the interpretation of relevant legal precedents, and the entitlement of the assessee to claim depreciation on assets treated as application of income under Section 11. The decision was guided by the rulings of the Hon'ble Supreme Court and the Court's own previous judgments, leading to the dismissal of the appeals filed by the Revenue.