2021 (9) TMI 63 - AT - Income Tax

Revision u/s 263 by CIT - assessee claiming Depreciation u/s 32 while claiming exemption u/s 11 - as per CIT-A Depreciation to assessee is a case of double deduction and has been allowed without getting into the details since the cost of the assets has been allowed as application of income in the past - HELD THAT - CIT (E) has misdirected himself while taking the view that depreciation has been allowed without getting into the details which amounts to double deduction by ignoring the fact that the identical issue has been decided in favour of the assessee by the coordinate Bench of the Tribunal in assessment year 2011-12 2018 (9) TMI 2044 - ITAT DELHI in which assessment framed u/s 143(3) of the Act was also set aside by invoking the provisions contained u/s 263 of the Act by relying upon the decision rendered by Hon ble Supreme Court in case of CIT vs. Rajasthan Gujrat Charitable Foundation 2017 (12) TMI 1067 - SUPREME COURT and as such, depreciation on assets has to be allowed as application of income. Consequently, we hereby set aside the order passed by the ld. CIT(E) u/s 263 of the Act. Resultantly, the appeal filed by the assessee is hereby allowed.

Summary

Issues:
1. Jurisdiction of the Commissioner of Income Tax (Exemptions) under section 263 of the Income-tax Act, 1961.
2. Allowability of depreciation on assets as application of income.
3. Correctness of the assessment order framed under section 143(3) of the Act.

Detailed Analysis:
1. The primary issue in this case revolves around the jurisdiction of the Commissioner of Income Tax (Exemptions) under section 263 of the Income-tax Act, 1961. The appellant, M/s. Ardee Foundation, challenged the impugned order dated 20.03.2017 passed by the Commissioner of Income-tax (Exemptions), New Delhi, seeking to set it aside on the grounds that the order was made without satisfying the statutory preconditions contained in the Act, rendering it without jurisdiction. The appellant argued that the order was erroneous and prejudicial to their interests. The Tribunal analyzed the contentions raised by the appellant and ultimately set aside the order passed by the Commissioner, holding that the order lacked jurisdiction and was unsustainable under the law.

2. Another crucial issue in the judgment pertains to the allowability of depreciation on assets as application of income. The Commissioner of Income Tax (Exemptions) set aside the assessment order framed under section 143(3) of the Act, contending that the Assessing Officer had not made necessary inquiries before allowing depreciation on assets to ascertain whether the cost of such assets had been allowed as application of income in the past. The Tribunal, after considering the arguments presented by both parties, concluded that the Commissioner had misdirected himself by not acknowledging that the issue of depreciation had already been settled in favor of the assessee in a previous judgment. The Tribunal referred to a prior decision by the Hon'ble Supreme Court and a coordinate Bench of the Tribunal, ultimately allowing the appeal filed by the assessee and setting aside the Commissioner's order under section 263 of the Act.

3. The correctness of the assessment order framed under section 143(3) of the Act was also a significant aspect of the judgment. The Tribunal noted that the assessment was initially framed treating the assessee's activities as charitable in nature under section 2(15) of the Act. However, the Commissioner of Income Tax (Exemptions) set aside this assessment order, citing lack of inquiry by the Assessing Officer regarding the allowability of depreciation on assets. The Tribunal, after a thorough review of the facts and legal precedents, concluded that the assessment order was to be reinstated, thereby allowing the appeal filed by the assessee.

In conclusion, the judgment by the Appellate Tribunal ITAT Delhi addressed multiple issues, including jurisdictional aspects, the allowability of depreciation on assets, and the correctness of the assessment order. The Tribunal ultimately set aside the Commissioner's order under section 263 of the Income-tax Act, 1961, and allowed the appeal filed by the assessee, emphasizing the importance of legal precedents and proper application of the law in tax matters.