2021 (7) TMI 783 - HC - Income Tax

Assessment of trust - Exemption u/s 11 - entitled to claim depreciation while computing the income of the appellant u/s. 11 - HELD THAT - Issue decided against the Revenue and in favour of the Assessee as relying on THE ANJUMAN - E - HIMAYAT - E - ISLAM VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, EXEMPTIONS - IV, CHENNAI. 2021 (4) TMI 1176 - MADRAS HIGH COURT .

Summary

Issues:
Challenge to the order passed by the Income Tax Appellate Tribunal regarding depreciation claim under section 11 of the Income Tax Act for the Assessment Years 2008-2009 and 2009-2010.

Analysis:
For the Assessment Year 2008-2009, the appellant, a Trust running an Engineering College, filed its return of income claiming exemption under section 11 of the Act. The Assessing Officer rejected the claim of depreciation, stating that further allowance of depreciation on the same capital expenditure would amount to double deduction. The Commissioner of Income Tax (Appeals) allowed the appeal, but the Tribunal set aside the order. The appellant challenged this decision (issue 1).

Similarly, for the Assessment Year 2009-2010, the appellant filed its return claiming exemption under section 11, and the Assessing Officer rejected the claim of depreciation on similar grounds. The Commissioner of Income Tax (Appeals) allowed the appeals, but the Tribunal set aside the order. The appellant challenged this decision as well (issue 2).

The substantial questions of law raised by the appellant included the entitlement to claim depreciation under section 11, the treatment of capital expenditure as application, the retrospective effect of an amendment to section 11(6), and the consideration of divergent judicial precedents. The Tribunal's decision was influenced by a previous judgment that allowed depreciation on assets acquired by charitable institutions, emphasizing that the grant of depreciation does not constitute double benefit (issue 3).

The High Court, following the precedent cited, held in favor of the appellant, allowing the appeals and setting aside the Tribunal's order. The Court affirmed that depreciation can be claimed under section 11 and that the legislative amendment to section 11(6) is prospective. The Court emphasized the commercial principles for computing income of a Trust and upheld the allowance of depreciation. The judgment highlighted the consistent view of various High Courts on this matter, dismissing the appeals of the Revenue and affirming the entitlement of the assessee to depreciation (issue 4).

In conclusion, the High Court's judgment favored the appellant, allowing the appeals and setting aside the Tribunal's decision. The Court upheld the entitlement of the appellant-Trust to claim depreciation under section 11 of the Income Tax Act for the relevant assessment years, in line with established legal principles and previous judicial decisions.