2023 (3) TMI 775 - AT - Income Tax

Disallowance of depreciation claimed - adjustment made by the assessing authority s order u/s 143(1) - The main contention of the assessee is that the assessee has never claimed any exemption on cost of purchase of the asset - HELD THAT - The assessment order is also silent on this aspect. Considering the above said fact, remit the matter back to the file of the AO to examine whether the assessee has claimed any exemption on cost of purchase of the asset, If the assessee has not claimed any exemption, then the assessee is entitled for depreciation. AO is directed to give opportunity of being heard to the assessee.

Summary

Issues involved:
Condonation of Delay, Disallowance of Depreciation claimed by the assessee

Condonation of Delay:
The appeal was filed with a delay of 178 days, and the assessee sought condonation of delay due to medical reasons supported by medical records. The Hon'ble Judicial Member considered the extension granted by the Supreme Court during the Covid pandemic and the genuine medical reasons cited, and thus condoned the delay to admit the appeal for hearing.

Disallowance of Depreciation claimed by the assessee:
The assessee, a charitable trust, filed its return of income for A.Y. 2017-18 and was denied depreciation during processing. The CPC rejected the application for rectification under section 154 of the Income Tax Act, 1961. The assessee appealed to the CIT(A), who dismissed the appeal. The Tribunal considered the grounds raised by the assessee, primarily regarding the disallowance of depreciation. The assessee argued that as a charitable organization, depreciation claimed should be allowed, as no exemption was claimed on the cost of asset purchase. The assessing authority's adjustment under section 143(1) was deemed incorrect. On the other hand, the Departmental Representative contended that post the amendment in the Finance Act, 2014, depreciation cannot be allowed for a Trust claiming exemption under section 11 of the Act. After hearing both parties, the Tribunal remitted the matter back to the AO to ascertain if the assessee had claimed any exemption on the asset's purchase cost. If no exemption was claimed, the assessee would be entitled to depreciation. The appeal of the assessee was allowed for statistical purposes.