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2015 (8) TMI 221 - AT - Income TaxDouble deduction of depreciation - assessee is a trust engaged in charitable activities and registered u/s.12A - assessee claim of depreciation on fixed assets during the year disallowed citing as double deduction - CIT(A) allowed claim - Held that - By way of amendment in Finance Act 2014 in Section 11(6) of the Act, depreciation will not be allowed while computing application of income w.e.f.1-4-2015. Thus, the amended provisions are applicable w.e.f.A.Y.2015-2016. However, the section does not mention anything for applicability prior to A.Y.2015-16 cases. So cases prior to A.Y.2015-2016 have to be decided as per the law applicable during that period.In view of the above amended provision, which is applicable w.e.f. Assessment Year 2015-2016, we do not find any infirmity in the order of CIT(A) for allowing assessee s claim for depreciation relying on the decision of jurisdictional High Court case of Indraprastha Cancer Society 2014 (11) TMI 733 - DELHI HIGH COURT in respect of assessment years falling prior to 2015-2016. The decision of the Hon ble jurisdictional High Court in the case of CIT Vs. Institute of Banking Personnel (2003 (7) TMI 52 - BOMBAY High Court ) is squarely applicable in this case. - Decided against revenue Carry forward of deficit on account of excess expenditure denied - CIT(A) allowed the appeal of assessee - Held that - The issue of excess application of income of earlier years to be carried forward is decided in favour of the assessee in the decision of Higher Judicial Forum in Commissioner of Income-Tax Versus Institute Of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY High Court as referred to and relied by the CIT(A). Therefore, respectfully following the decision relied upon by the CIT(A) and applicable under the facts and circumstances of the case, these grounds of the Revenue are dismissed. - Decided against revenue
Issues Involved:
1. Double deduction of depreciation. 2. Carry forward of deficit/excess expenditure. Detailed Analysis: Issue 1: Double Deduction of Depreciation The primary contention revolves around whether the assessee, a charitable trust, can claim depreciation on fixed assets when the cost of those assets has already been considered as an application of income under Section 11 of the Income Tax Act, 1961. The Assessing Officer (AO) disallowed the depreciation claim of Rs. 23,21,54,114, citing it as a double deduction, referencing the Supreme Court's decision in Escorts Ltd. v. Union of India (199 ITR 43), which prohibits double deductions. The CIT(A) allowed the appeal of the assessee, referencing the Bombay High Court's decision in CIT v. Institute of Banking Personnel Selection (264 ITR 110), which supports the allowance of depreciation even when the asset's cost is treated as an application of income. The CIT(A) also cited the case of DIT(E) vs. Najam Baug Trust, reinforcing that depreciation should be allowed to reflect the correct income computation of the trust. Upon appeal, the Tribunal upheld the CIT(A)'s decision, emphasizing that the amendment in Section 11(6) of the Act, which disallows depreciation from 1-4-2015, does not apply to the assessment years in question. The Tribunal noted that prior to the amendment, the law as interpreted by various High Courts, including the Bombay High Court, allowed for such depreciation claims. The Tribunal also distinguished the case from the Escorts Ltd. decision, noting that the latter involved business income and not charitable trusts. Issue 2: Carry Forward of Deficit/Excess Expenditure The second issue pertains to whether the assessee can carry forward the deficit of Rs. 2,78,24,26,641 to subsequent years for set-off against future income. The AO disallowed this, arguing that Sections 11, 12, and 13 of the Income Tax Act do not explicitly provide for the carry forward and set-off of such deficits. The CIT(A) allowed the appeal, referencing higher judicial authorities that support the carry forward of excess application of income. The CIT(A) directed the AO to verify the claim of the carry forward of earlier year deficits to ensure they are part of the excess expenditure of earlier years and are liable to be considered as part of the application of income. The Tribunal upheld the CIT(A)'s decision, noting that the issue of carrying forward excess application of income has been settled in favor of the assessee by various judicial pronouncements, including the Bombay High Court's decision in CIT v. Institute of Banking Personnel Selection (264 ITR 110). The Tribunal emphasized that the carry forward of excess application is to be treated as an application of income in subsequent years for charitable purposes, aligning with the decisions in CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal (211 ITR 293) and CIT v. Maharana of Mewar Charitable Foundation (164 ITR 439). Conclusion: The Tribunal dismissed the appeals of the Revenue on both grounds. It upheld the CIT(A)'s decisions allowing the depreciation claim and the carry forward of the deficit, aligning with established judicial precedents and the legal framework applicable to the assessment years in question. The judgment ensures that the principles of correct income computation and application of income for charitable purposes are adhered to, as per the prevailing legal interpretations prior to the amendment in Section 11(6) of the Income Tax Act, 1961.
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