2015 (2) TMI 357 - AT - Income Tax

Disallowance of depreciation on assets. Trust registered u/s 12A - Held that - In case of trusts registered u/s 12A, the claim of depreciation does not amount to double deduction. Following decision of M/s.Kongunadu Arts & Science College Council 2015 (1) TMI 310 - ITAT CHENNAI - No infirmity in order of CIT(A) - Decided against Revenue.

Summary

Issues involved:
Claim of depreciation by a trust for the Assessment Year 2010-11.

Analysis:
The appeal filed by the Revenue against the order of the Commissioner of Income Tax(Appeals)-I, Coimbatore for the Assessment Year 2010-11 raised the sole issue of the claim of depreciation by the assessee, which was allowed by the CIT(Appeals). The Assessing Officer disallowed the claim of depreciation amounting to Rs. 1,70,24,313/-, stating that depreciation is not a cash expenditure and remains with the trust, thus not utilized for charitable purposes. The CIT(Appeals) allowed the claim based on precedents like M/s. Kongunadu Arts & Science College Council, M/s. Ellen Charitable Trust, and M/s. Vidya Vikasini Society. The Revenue contended that depreciation cannot be considered expenditure for trusts as there is no cash outflow, citing the decision of the Supreme Court in J.K. Synthetics Ltd. vs. Union of India. The assessee argued that similar issues were decided in favor of the assessee in other cases and relied on judgments by different courts to support their claim.

The Tribunal noted that the issue had been previously adjudicated in favor of the assessee in cases like M/s. Kongunadu Arts & Science College Council, M/s. Ellen Charitable Trust, and M/s. Vidya Vikasini Society. The Tribunal upheld the order of the CIT(Appeals) based on the settled position that in the case of trusts registered u/s.12A, the claim of depreciation does not amount to double deduction. The High Court held that the income being exempt, claiming depreciation to be reduced from income for determining the percentage of funds for trust purposes does not constitute double deduction. The Tribunal also distinguished the case of J.K. Synthetics Ltd. vs. Union of India, stating that the facts were different in the present case. The Tribunal found no infirmity in the order of the CIT(Appeals) and dismissed the Revenue's appeal.

Regarding the Cross-objections of the assessee, since the appeal of the Revenue was dismissed, the Cross-objections became infructuous and were liable to be dismissed. The order was pronounced on 11.12.2014.