2015 (11) TMI 645 - AT - Income Tax

Entitlement for the accumulation of income - submission of form No 10 delayed - Held that - Honourable Gujarat high court in case of CIT V Mayur Foundation Mayur Foundation 2004 (12) TMI 48 - GUJARAT High Court has held that if form no 10 is submitted at any time before the assessment is completed same should be considered as valid compliance of law. Admittedly in this case assessee has submitted the form No 10 before the completion of assessment proceedings therefore no fault can be found with the assessee. Therefore we are of the view that the form no. 10 submitted by the assessee before completion of assessment proceedings and is having the specific objects therefore trust is entitled for the accumulation of income. - Decided in favour of assessee. Allowability of depreciation - AO has disallowed the depreciation claimed by the assessee trust on the ground that once the assets are acquired assessee has claimed the deduction as application of income and further deprecation there on is also claimed - Held that - this issue is squarely covered in favour of the assessee by the decision of Honourable Jurisdictional High court in case of Director of Income tax V Vishwa Jagriti Mission 2012 (4) TMI 289 - DELHI HIGH COURT wherein held held that claim of depreciation on fixed assets utilized for the charitable purposes has to be allowed while arriving at the income available for application to charitable and religious purposes, since the income of the society should be computed on the basis of commercial principles - Decided in favour of assessee.

Summary

Issues:
1. Accumulation of income for trust purposes.
2. Disallowance of depreciation claimed by the trust.

Accumulation of Income for Trust Purposes:
The appeal was filed by the assessee against the order of CIT (A) regarding the accumulation of income for AY 2007-08. The trust was registered for promoting Fashion Design Industries. The AO denied the benefit of accumulation citing various reasons, including the late submission of resolution and form no. 10, different signatories, and failure to produce the trust's minute book. The CIT (A) also did not grant the benefit of accumulation, stating that the purpose was not definite or determinable. The ITAT Delhi, after analyzing the documents and objects of the trust, allowed the appeal. They found that the trust had specific objects related to promoting the fashion industry, and the submission of form no. 10 before the completion of assessment proceedings was valid compliance with the law. The ITAT held that the trust was entitled to accumulate income for its purposes.

Disallowance of Depreciation Claimed by the Trust:
The AO disallowed the depreciation claimed by the trust, stating it amounted to double deduction. The CIT (A) confirmed this disallowance. However, the ITAT Delhi noted a favorable decision by the Delhi High Court in a similar case and allowed the appeal. Citing various High Court judgments supporting the deduction of depreciation for charitable trusts on commercial principles, the ITAT held that the trust was entitled to claim depreciation. The ITAT directed the AO to grant the depreciation claimed by the trust. Consequently, the appeal of the assessee was allowed by the ITAT Delhi.

In conclusion, the ITAT Delhi allowed the appeal of the assessee, granting the accumulation of income for trust purposes and directing the allowance of depreciation claimed by the trust. The decision was based on the specific objects of the trust related to promoting the fashion industry and the legal precedent supporting the deduction of depreciation for charitable trusts.