2017 (11) TMI 1563 - AT - Income Tax

Disallowance of depreciation to assessee trust - denial of deduction as it amounts to be double deduction as the assessee has claimed the exemption under section 11 - Held that - The assessee is entitled for deduction of depreciation even if in the year of purchase of the asset, the entire amount has been considered as application of income. See CIT v. Society of the Sisters of St. Anne 1983 (8) TMI 44 - KARNATAKA High Court - Decided against revenue

Summary

Issues:
Disallowance of depreciation claimed by the assessee based on the judgment of the Commissioner of Income-tax (Appeals) and the hon'ble Kerala High Court. Interpretation of the Finance Act, 2014 amendment regarding non-allowance of depreciation to charitable/ religious trusts. Application of income under section 11(1) and the effect on claiming depreciation. Examination of the orders of the lower authorities and the judgment of CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Karn) regarding double deduction on depreciation.

Analysis:

The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals) concerning the disallowance of depreciation. The assessee argued that depreciation should be allowed as per the normal provisions despite claiming exemption under section 11(1) of the Income-tax Act, 1961. The assessee cited the judgment of the hon'ble Kerala High Court in Lissie Medical Institutions v. CIT [2012] 348 ITR 344 (Ker) to support their claim.

During the hearing, the assessee did not appear, but submitted documents to support their position. The Appellate Tribunal decided to proceed with the hearing based on the judgments referred to in the paper books. The Revenue was heard, and it was noted that the impugned issue was covered by judgments of the jurisdictional High Court.

Upon examining the orders of the lower authorities, it was found that the Assessing Officer disallowed the depreciation, considering it as a double deduction due to the exemption claimed under section 11 of the Act. However, the Commissioner of Income-tax (Appeals) allowed the depreciation based on the judgment of CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Karn). The Commissioner held that depreciation should be allowed as a necessary deduction for computing the income of charitable institutions.

The Commissioner's decision was upheld by the Appellate Tribunal, as it followed the judgment of the jurisdictional High Court. The Tribunal found no infirmity in the Commissioner's order and confirmed it. Consequently, the appeal of the Revenue was dismissed, and the decision was pronounced in open court on 10th October 2017.