2021 (4) TMI 921 - HC - Income Tax

Depreciation to assessee trust - HELD THAT - Following the judgment of the Hon'ble Supreme Court reported in RAJASTHAN AND GUJARATI CHARITABLE FOUNDATION POONA 2017 (12) TMI 1067 - SUPREME COURT and and NATIONAL COLLEGE COUNCIL, TEPPAKULAM, TIRUCHIRAPALLI. 2021 (4) TMI 469 - MADRAS HIGH COURT and M/S. NATIONAL COLLEGE COUNCIL 2019 (8) TMI 1671 - MADRAS HIGH COURT Substantial question of law is answered against the revenue and the appeals are dismissed.

Summary

Issues:
1. Whether depreciation is allowable as application of income on charitable objects?
2. Whether the assessee is entitled to claim depreciation on assets treated as application of income under section 11 of the Income Tax Act?
3. Whether allowing the depreciation claim would result in double deduction?

Analysis:

Issue 1:
The High Court addressed the question of whether depreciation is allowable as an application of income on charitable objects. The Revenue challenged the order passed by the Income Tax Appellate Tribunal (ITAT). The Tribunal had allowed depreciation claimed by the assessee under Section 11 of the Income Tax Act. The Revenue contended that allowing depreciation would result in double deduction. However, the Senior Standing Counsel for the appellant conceded that the substantial questions of law raised in the appeal were covered against the Revenue by previous decisions. The Court referred to earlier judgments and dismissed the appeal, following the precedent set by the Supreme Court and previous Division Bench decisions.

Issue 2:
The Court examined whether the assessee could claim depreciation on assets while treating the cost of purchase of the asset as an application of income under section 11 of the Income Tax Act. The Senior Standing Counsel for the Revenue acknowledged that the questions of law framed in the appeal had been answered against the Revenue by the Supreme Court in a previous case. The Court, in line with the Supreme Court's judgment and previous decisions of the Division Bench, dismissed the appeal, holding that the substantial question of law was answered against the Revenue.

Issue 3:
Regarding the concern of double deduction, the Court considered whether allowing the depreciation claim would lead to double deduction, given that the costs of depreciable assets had already been treated as an application of income towards the trust's objects. The Senior Standing Counsel for the appellant referred to the judgment of the Supreme Court and previous Division Bench decisions, which had dismissed similar appeals and answered the substantial questions of law against the Revenue. Consequently, the Court dismissed the appeal, following the precedent established by the Supreme Court and earlier Division Bench rulings.

In conclusion, the High Court, comprising Hon'ble Mr. Justice M. Duraiswamy and Hon'ble Mrs. Justice T.V. Thamilselvi, dismissed the appeal filed by the Revenue, as the substantial questions of law raised were answered against the Revenue based on previous judicial decisions. The Court's decision was in line with the interpretation of the law provided by the Supreme Court and previous Division Bench judgments, ensuring consistency in the application of legal principles.