2024 (1) TMI 1040 - HC - Income Tax

Reopening of assessment u/s 147 - exemption u/s 11 - claim of depreciation - HELD THAT - It is not disputed that the benefit of Section 11 of the Act was not granted in the original assessment order dated 23rd December 2011 which was carried in appeal before the CIT(A). CIT(A) vide an order dated 9th July 2012 allowed the appeal and granted exemption under Section 11 of the Act, deleted disallowed expenses and allowed claim of set off/carry forward of unabsorbed depreciation and excess of expenditure over income. The CIT(A) had also relied upon a judgment of this court in the case of CIT vs. Institute of Banking Personnel 2003 (7) TMI 52 - BOMBAY HIGH COURT Therefore, as stated in the third proviso to Section 147 of the Act, the A.O. has no jurisdiction to assess or reassess any income which was the subject matter of an appeal. Since the grant of benefit of Section 11 of the Act was the subject matter of appeal and has been held in favour of assessee, the matter cannot be reopened. As regards the issue of disallowance of depreciation claim, the Hon ble Apex Court in Rajasthan and Gujarati Charitable Foundation, Poona 2017 (12) TMI 1067 - SUPREME COURT has held that a Charitable Trust is eligible for claiming depreciation.

Summary

Issues involved:
The issues involved in the judgment are the denial of exemption under Section 11 of the Income Tax Act, 1961, and the disallowance of claim of depreciation.

Exemption under Section 11:
The petitioner, a registered society engaged in charitable activities, had been granted registration under Section 12A of the Act. However, the Director of Income Tax had withdrawn this registration, leading to an appeal by the petitioner to the Tribunal, which restored the registration. The department's subsequent appeals to the Bombay High Court were dismissed due to low tax effect. The assessment order initially denied exemption under Section 11, but the CIT(A) allowed the appeal, granting the exemption and allowing other claims based on precedent.

Disallowance of claim of depreciation:
The department issued a notice under Section 148 of the Act to reopen the assessment, citing issues related to commercial activities and depreciation. The petitioner challenged this reopening, arguing that the AO's observations were incorrect and that the matter had already been considered and decided in the original assessment proceedings and subsequent appeal. The petitioner also relied on a Supreme Court judgment to support the claim that a charitable trust is eligible for claiming depreciation. The court held that since the grant of benefit under Section 11 was the subject of appeal and had been decided in favor of the assessee, the matter could not be reopened. Additionally, the court affirmed the eligibility of a charitable trust to claim depreciation, as per the Supreme Court ruling.

Separate Judgment by the Judges:
The judgment was delivered by the Bombay High Court, and the Rule issued on 27th March 2015 was made absolute, resulting in the disposal of the petition.