2020 (1) TMI 1037 - HC - Income Tax

Exemption u/s 11 - Depreciation of assets acquired by assessee trust - the capital expenditure is treated as application of income for charitable purposes - carry forward the depreciationHELD THAT - Issue decided in RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA 2017 (12) TMI 1067 - SUPREME COURT as in Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS) 2003 (7) TMI 52 - BOMBAY HIGH COURT correctly states the principles of law and there is no need to interfere with the same. It may be mentioned that most of the High Courts have taken the aforesaid view with only exception thereto by the High Court of Kerala which has taken a contrary view in 'Lissie Medical Institutions v. Commissioner of Income Tax' 2012 (4) TMI 115 - KERALA HIGH COURT It may also be mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. Also once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well.

Summary

Issues involved:
Seeking issuance of a Writ of Certiorari to quash impugned proceedings and notice under Section 148 of the Act.

Analysis:
The Petitioner filed a writ petition seeking a Writ of Certiorari to quash the impugned proceedings and notice issued by the First Respondent. The Petitioner's counsel argued that the issue is covered by a decision of the Hon'ble Supreme Court in a specific case. The Supreme Court judgment discussed the allowability of depreciation on assets whose cost was fully allowed as application of income in past years. The Court referred to a case involving a Charitable Trust claiming depreciation on assets and held that depreciation can be considered a legitimate deduction in computing the real income of the assessee. The Court emphasized that normal depreciation can be a legitimate deduction under general principles or under the Income Tax Act. The judgment also addressed a similar question raised in another case, where the Tribunal's view on allowing depreciation on assets was confirmed by the Bombay High Court, favoring the assessee against the Department.

The Court noted that the view taken by the Bombay High Court correctly states the principles of law and decided not to interfere with it. It highlighted that most High Courts have adopted a similar view, except the High Court of Kerala, which took a contrary stance in a specific case. The judgment also mentioned a legislative amendment in Section 11(6) of the Act, effective from a specific Assessment Year, emphasizing that the amendment is prospective in nature. The Respondents' counsel acknowledged that the issue is now squarely covered by the Supreme Court's decision, leading to the allowance of the Writ Petition without costs. Consequently, the connected writ miscellaneous petition was closed.