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2014 (1) TMI 599 - AT - Income TaxWhether depreciation on assets claimed as application of income be treated as double deduction - Held that - The assessee has filed revised depreciation workings and revised memo of total income, wherein they have claimed depreciation only on those assets, the cost of which were not claimed as deduction as application of income - The assessing officer has not examined the said submissions made by the assessees - Following M/s Lissie Medical Insitution 2010 (10) TMI 667 - ITAT, COCHIN - Depreciation is admissible on those assets, the cost of which was not claimed as deduction as application of income - The issue has been restored for fresh examination. Quantum of application of income - Held that - The AO has simply allowed the deduction of Rs.27,80,774/- and did not discuss anything about the reasons for rejecting the claim of the assessee in respect of the balance amount - The AO has not considered the revised computation filed by the assessee - The issue has been restored for fresh examination.
Issues Involved:
1. Depreciation on assets not claimed as application of income under Section 11(2) of the Income Tax Act. 2. Quantum of application of income eligible for deduction under Section 11 of the Income Tax Act. Issue-wise Detailed Analysis: 1. Depreciation on Assets Not Claimed as Application of Income under Section 11(2): The primary issue in these appeals is whether the assessees are entitled to claim depreciation on assets whose cost has already been allowed as a deduction under the application of income. The Assessing Officer (AO) disallowed the depreciation claims based on a precedent set by the Tribunal in the case of Lissie Medical Institutions, which was upheld by the Kerala High Court. The High Court noted that while the system of allowing depreciation had been followed for several years, the assessee should be allowed to write back the depreciation for the year and previous years and carry it forward for application in subsequent years. The assessees submitted revised computations for the years 2005-06 to 2009-10, which the AO did not consider. The CIT(A) directed the AO to allow depreciation on assets not claimed as application of income under Section 11(2), emphasizing that the AO should verify the revised computations. The Revenue argued that the concession given by the Kerala High Court in the Lissie Medical Institutions case was specific to that case and should not be extended to other assessees. The Tribunal agreed, stating that it is not empowered to grant such relief and that the CIT(A) should not have given similar directions. The Tribunal set aside the CIT(A)'s order to the extent it allowed accumulation under Section 11(2) for depreciation of earlier years. The Tribunal also noted that the AO had not examined the revised depreciation claims for the current year, which should be allowed only for assets whose cost was not claimed as application of income. The Tribunal directed the AO to re-examine the depreciation claims accordingly. 2. Quantum of Application of Income Eligible for Deduction under Section 11: In the case of Trichur Educational Society, the AO allowed a deduction of Rs. 27,80,774 for scholarships and charity but disallowed the cost of fixed assets, noting that the assessee had availed loans for capital expenditure. The CIT(A) directed the AO to allow the claim as per the revised computation. The Revenue contended that since the assets were acquired using loan amounts, the cost should not be claimed as application of income. The Tribunal found no discussion on this issue in the assessment order and noted that the AO had not considered the revised computation. The Tribunal directed the AO to re-examine this issue afresh, considering the revised computations and providing the assessee an opportunity to be heard. Conclusion: The Tribunal allowed the appeals filed by the Revenue for statistical purposes and dismissed the cross-objections filed by the assessees. The AO was directed to re-examine the depreciation claims and the quantum of application of income, considering the revised computations and in accordance with the law.
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