2013 (12) TMI 311 - HC - Income Tax

Depreciation on fixed assets - charitable trust - the entire expenditure incurred towards purchase of fixed assets has already been claimed in entirety either in the current year or in earlier years Held that - Following CIT v. Institute of Banking 2003 (7) TMI 52 - BOMBAY High Court - The concept of normal commercial accounting principles should be applied while computing the income of the trust - Depreciation is a necessary charge in computing the net income - Decided against Revenue.

Summary

Issues involved:
1. Whether the Tribunal was justified in upholding the deletion of the addition of depreciation on fixed assets, leading to a potential double deduction situation.

Detailed Analysis:
The appeals involved in this judgment concern the Revenue challenging the deletion of depreciation on fixed assets claimed by charitable societies running educational institutions. The main issue revolves around whether the assessees were entitled to claim depreciation on assets for which the cost had already been claimed as application of income, potentially leading to double deduction. The Commissioner of Income-tax (Appeals) and the Tribunal had ruled in favor of the assessees, citing various judgments supporting the deduction of depreciation on such assets. The High Court of Madhya Pradesh and Delhi had previously held that the deduction was rightly claimed and wrongly disallowed by the Assessing Officer. The Tribunal dismissed the Department's appeal based on these precedents, leading to the current challenge.

The judgment references past decisions such as CIT v. Raipur Pallottine Society and DIT v. Vishwa Jagriti Mission to support the allowance of depreciation on assets for computing income in subsequent years. The High Court emphasized the necessity of depreciation as a charge in computing net income, even under normal commercial accounting principles. The Bombay High Court's decision in CIT v. Institute of Banking further reinforced the position that depreciation on depreciable assets can be considered in subsequent years, even if full capital expenditure had been allowed in the year of acquisition. These precedents, along with the Division Bench's rulings, formed the basis for the High Court's decision in the current case.

Ultimately, the High Court found that the substantial question of law framed by the Revenue did not arise, as the issue had been conclusively settled by previous judgments. The Court dismissed the appeal, stating that it did not involve any substantial questions of law for consideration. The judgment highlights the consistent interpretation across various High Courts regarding the treatment of depreciation on assets already claimed as application of income, providing a clear legal precedent for the decision reached in this case.