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2019 (12) TMI 36 - AT - Income TaxDepreciation to assessee trust - HELD THAT - CIT(A) on the simple ground that the claim made by the assessee for depreciation for the year under consideration is no longer res integra since the Hon ble Supreme Court in the decision in CIT Vs. Rajasthan Gujarati Charitable Foundation 2017 (12) TMI 1067 - SUPREME COURT has held at para 4(infra) that the amendment in section 11(6) of the Act vide Finance Act No. 2/2014 would be effective from AY 2015-16 and has approved the Hon ble Delhi High court s declaration that the said amendment is prospective in nature We note that the Hon ble Supreme Court has upheld the action of the Hon ble High court which in turn upheld the action of Tribunal in allowing the depreciation claimed by the assessee on the assets acquired/expenditure made has been allowed as application of income as well as the Hon ble Supreme Court also taken note that the amendment in section 11(6) of the Act inserted vide Finance Act No. 2/2014 is effective from AY 2015-16 and, therefore, is prospective in nature, therefore, we allow the claim of the assessee by following the decision of Hon ble Supreme court in the case of Rajasthan Gujarati Charitable Foundation 2017 (12) TMI 1067 - SUPREME COURT and note that the ratio decidendi of the Tribunal (Madras) is not a good law in the light of the Hon ble Supreme Court in Rajasthan Gujarati Charitable Foundation(supra) and the reliance made by the Ld. CIT(A) is thus erroneous and has to be set aside and we direct that depreciation claimed to be allowed. Before parting, we would like to observe that though the Ld. CIT(A) was aware that the Hon ble jurisdictional High Court , Calcutta has passed an order in a similar case CIT Vs. Siliguri Regulated Market Committee 2014 (8) TMI 686 - CALCUTTA HIGH COURT by allowing the claim of depreciation refer page 9 of the impugned order of CIT(A) and though the ratio of the case is binding on the Ld. CIT(A) he has preferred to apply the ratio of the Tribunal, ie, Chennai which is situated outside the jurisdiction of State of West Bengal, which is not in consonance with the judicial discipline and cannot be accepted and we expect the lower authorities to be clear in mind that the law laid by the Hon ble jurisdictional High Court is binding on us and CIT(A) and AO and others. We, we hope and expect them to follow the Ratio-decidendi of the Hon ble jurisdictional High Court without fail. - Appeal of the assessee is allowed.
Issues Involved:
1. Disallowance of depreciation claimed by the assessee trust. 2. Retrospective application of the amendment in Section 11(5) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Disallowance of Depreciation Claimed by the Assessee Trust: The primary issue in this appeal is the disallowance of depreciation amounting to ?15,04,010 out of the total claim of ?19,69,869 by the Ld. CIT(A). The assessee trust argued that the assets for which depreciation was claimed were acquired in earlier years, and their cost had been fully shown as application of income in those years. The assessee contended that for determining the income of a charitable trust eligible for exemption under Section 11, income should be construed in a commercial sense, which includes the deduction of depreciation on the assets of the trust. This position was confirmed by the CBDT Circular No. 5.P(LXX-6) dated 19.06.1968. The Ld. CIT(A) disallowed the claim based on the amendment in Section 11 of the Act effective from 01.04.2015, which states that depreciation is to be disallowed from the assessment year 2015-16 onwards. However, the assessee argued that this amendment is prospective and not applicable to the assessment year in question (2009-10). The Tribunal noted that the Hon’ble Supreme Court in CIT Vs. Rajasthan & Gujarati Charitable Foundation (2018) 402 ITR 441 (SC) held that the amendment in Section 11(6) of the Act is effective from AY 2015-16 and is prospective in nature. Therefore, the Tribunal allowed the claim of the assessee for depreciation, following the decision of the Hon’ble Supreme Court. 2. Retrospective Application of the Amendment in Section 11(5) of the Income-tax Act, 1961: The Ld. CIT(A) upheld the action of the AO in denying the depreciation claim on the ground that the amendment in Section 11(5) of the Act is retrospective in operation. However, the Tribunal disagreed with this view, citing the Hon’ble Supreme Court's decision that the amendment is prospective and applicable from AY 2015-16 onwards. The Tribunal emphasized that the law laid by the Hon’ble jurisdictional High Court is binding and should be followed by the lower authorities. Conclusion: The Tribunal allowed the appeal of the assessee, directing that the depreciation claimed be allowed. The Tribunal reiterated the importance of following the binding precedents set by the Hon’ble jurisdictional High Court and the Hon’ble Supreme Court, emphasizing judicial discipline. Order Pronounced: The appeal of the assessee is allowed, and the order was pronounced in the open court on 29th November 2019.
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