2024 (8) TMI 51 - HC - Income Tax

Depreciation claim of assessee-trust - Double deduction or not? - HELD THAT - The issue in the present proceedings as it relates to assessment year 2011-12, the law stands settled in the authoritative pronouncement of the Supreme Court in the case of Rajasthan Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT In such case the proceeding had arisen from the decision of this Court wherein the following question of law was formulated by this Court in Rajashtani Gujarati Charitable Foundation 2013 (1) TMI 820 - BOMBAY HIGH COURT wherein held the Income Tax Appellate Tribunal is justified in holding that the depreciation in respect of cost of the assets allowed to the assessee as expenditure is allowable and does nor gives rise to double deduction. This Court answered the question of law considering the prior decision of this Court in the case of CIT v. Institute of Banking 2003 (7) TMI 52 - BOMBAY HIGH COURT against the Revenue. Once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. Assessee appeal allowed.

Summary

Issues:
1. Appeal against order allowing depreciation claim.
2. Interpretation of law on depreciation for charitable institutions.
3. Application of law pre and post April 1, 2015.

Analysis:
1. The Appellant-Revenue challenged an ITAT order rejecting their appeal against the CIT's decision allowing the Respondent-Assessee's depreciation claim for the assessment year 2011-12. The Revenue raised questions regarding the allowance of depreciation, citing precedents like Escorts Ltd. vs. UOI and decisions from Delhi and Kerala High Courts. The ITAT's reliance on a co-ordinate Bench's decision was also contested by the Revenue.

2. The High Court referred to the Supreme Court's ruling in Commissioner of Income Tax-III, Pune v. Rajasthan & Gujarati Charitable Foundation Poona, which clarified the law on depreciation for charitable institutions pre-April 1, 2015. The Court highlighted the question raised in a previous case regarding the justification of allowing depreciation on assets whose cost was already treated as income application under Section 11 of the Income-tax Act, 1961. The Court also mentioned the precedent set by the Bombay High Court in CIT v. Institute of Banking Personnel Selection.

3. The Supreme Court's decision upheld the High Courts' rulings in favor of the assessees, emphasizing that depreciation can be claimed even if the capital expenditure was treated as income application for charitable purposes. The Court affirmed that the depreciation claim is legitimate under general principles or Section 11(1)(a) of the Act. The judgment also referred to a similar case decided by the Bombay High Court regarding the treatment of depreciation on depreciable assets for a Trust. The Court concluded that the depreciation claim is valid and not a double benefit to the assessee.

4. The High Court noted that most High Courts followed the principles established by the Bombay High Court, except for the High Court of Kerala. The legislative amendment in Section 11(6) of the Act, effective from the Assessment Year 2015-2016, was discussed, clarifying the prospective nature of the amendment. The decision confirmed that once depreciation is allowed, the assessee can carry forward the depreciation. Consequently, the High Court affirmed the decisions of the High Courts in similar cases and dismissed the appeals. The parties agreed that the issues raised were already addressed by the Supreme Court's decision, leading to the dismissal of the appeal.