2023 (11) TMI 505 - AT - Income Tax

Depreciation Claim of trust - purchase of assets taken by the assessee as application of Income - HELD THAT - As decided in Rajasthan Gujarati Foundation 2017 (12) TMI 1067 - SUPREME COURT full expenditure had been allowed in the year of acquisition of the assets, what he really meant was that the amount spent on acquiring those assets had been treated as 'application of income' of the Trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account. As 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. Based on that observation we allow ground no. 1 raised by the assessee.

Summary

Issues Involved:
The judgment involves the disallowance of depreciation claimed by the assessee for assessment years 2006-07, 2011-12, 2012-13, 2013-14, and 2014-15. The key issue is whether the assessee is eligible to claim depreciation in addition to the capital expenditure already claimed as application of income.

Assessment Year 2006-07:
The assessee claimed depreciation on assets acquired through the application of income, which the assessing officer disallowed. The AO relied on a Supreme Court decision and Choksi Committee Report to disallow the depreciation. The CIT(A) upheld the AO's decision, stating that the assessee was claiming a double benefit. The ITAT, Jaipur, considered the amendment to Section 11(6) of the Income Tax Act, effective from AY 2015-16, and allowed the depreciation for the year 2006-07. The ITAT referred to a Bombay High Court decision supporting the assessee's claim for depreciation on assets where full capital expenditure had been allowed. The ITAT affirmed the view that the amendment was prospective, allowing the assessee's appeal for the assessment year 2006-07.

Assessment Years 2011-12 to 2014-15:
The issues raised in these years were similar to the case for the assessment year 2006-07. The ITAT applied the decision made for the lead case in 2006-07 to these years as well. The bench found the facts and grounds to be comparable across all these years, leading to the allowance of the appeals for assessment years 2011-12 to 2014-15.

Conclusion:
The ITAT, Jaipur, allowed the appeals of the assessee for all the assessment years in question, based on the interpretation of the Income Tax Act and relevant judicial precedents. The judgment clarified the eligibility of the assessee to claim depreciation on assets acquired through the application of income, emphasizing the prospective nature of the relevant amendment to Section 11(6) introduced in the Finance Act No. 2/2014. The decision provided relief to the assessee by permitting the depreciation claimed for the specified assessment years.