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TMI Blog2013 (12) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... R ORDER:- PER : George George K This appeal preferred by the assessee is directed against the order of the DIT (E)dated 21.12.2012 passed u/s 263 of the Act. 2. The assessee, though, in its memorandum of appeal has raised six grounds, the issues are confined to the jurisdiction of the DIT (E) in passing the order u/s 263 of the Act and setting aside the claim of depreciation for application of income. 3. Brief facts of the case are as follows: The assessee is a Trust, engaged in educational activities. For the assessment year 2009-10, return of income was filed on 25.09.2009 declaring nil income. The assessment was completed u/s 143(3) of the Act on 28.01.2011 determining the total income at Rs.2,13,92,226. 3.1 Subsequently, the DIT (E) on perusal of the assessment records noticed that the assessee had claimed capital expenditure of Rs.1,78,87,478 and also claimed depreciation on assets amounting to Rs.1,13,93,492 as application of funds towards the objects of the Trust. The DIT (E) was of the view that this amounts to double deduction and following the judgment of the Hon'ble Supreme Court in the case of Escorts Ltd Anr. v/s Union of India, (199 ITR 43) set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 11 is applicable or not. While seeing the applicability of section 11, one has to ascertain the expenditure, whether revenue. or capital, applied for the objects of the trust The Assessing Officer V in his order has clearly mentioned that the assessee has also claimed depreciation as well as capital expenditure as expenditure towards application of expenditure towards the objects of the trust. This definitely amounts to double deduction while seeing the applicability of section 11". c) The reliance is also placed on the Kochi ITAT decision in the case of DDIT (E), Range-2, Ernakulam Vs Lissie Medical Institutions, Kochi in ITA No.1O10/CocIr/2OO8 a co No.6/Coch/2O9 dated 26.10.2010. The Kerala High Court in the above case vide its order in ITA No.42 of 2011 dated 17-02-2012 has confirmed the order of Kochi ITAT and has dealt with the issue of depreciation in detail. The Honble Kerala High has held that the various decisions of the other high courts have not dealt with the issue of double deduction and has upheld the view of the Department. Before the Hon ble Kerala High Court, the department s Standing Counsel has also produced clarification issued by the CBDT which is as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the revenue. In the circumstances and for the: detailed reasons mentioned above, I set-aside the assessment order J/s 143 (3) of the Income Tax Act 1961 dated 28-11-2011 with a direction to the Assessing Officer to disallow depreciation after affording opportunity of being heard to the assessee". 4. The assessee, being aggrieved by the order passed u/s 263 of the Act, is in appeal before us. The learned Counsel for the assessee submitted that the issue of allowance of depreciation as application of income for the objects of the Trust is now a settled position of law in view of the decision of the Bangalore Bench of the Tribunal in the case of Karnataka Reddy Janasangha in ITA No.220/Bang/ 2011 dated 7.9.2012 and in the case of M/s Cutchi Memon Union in ITA No.878/Bang/2012 dated 14.8.2013. It was submited that the above two orders of the Tribunal after having considered the various judgments of the High Courts and has decided the matter in favour of the assessee. The learned DR, on the other hand strongly relied on the reasoning given by the DIT (E) in passing his revisionary order u/s 263 of the Act. 5. We have heard the rival submissions and perused the relevant material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court:- The assessee was a trust registered under the Bombay Public Trust Act and section 12A of the I T Act. The object of the assessee was charitable in nature. The income of the assessee was exempt u/s 11 of the I T Act. The assessee had claimed depreciation which was rejected by the Assessing Officer on the ground that capital expenditure incurred during the accounting year was allowed as a deduction from the income of the assessee. Further, the assessee had claimed depreciation on furniture and fixtures to the tune of Rs.49,453/- at 10% of the written down value which was disallowed by the Assessing Officer on the ground that the said assets had been received by the assessee on transfer from National Institute of Bank Management. That institute was a charitable trust. Its income was also exempt u/s 11 of the I T Act. The Assessing Officer did not allow depreciation on fixtures and furniture on the ground that full deduction had been allowed in respect of capital cost of furniture and fixtures and if the depreciation was allowed, as claimed by the assessee, it would result in double deduction. The assessee carried the matter in appeal and the appellate authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation and it is to be allowed as deduction in order to arrive at the income of the assessee-trust. It is ordered accordingly". 5.1 A similar view has been held in the case of Dy. Director of Income Tax (Exemption) vs. M/s Cutchi Memon Union in ITA No.878/Bang/2012 (Supra). The reasoning of the Tribunal in the above said case reads as follows: "20. We have considered the rival submissions. If depreciation is not allowed as a necessary deduction for computing income of charitable institutions, then there is no way to preserve the corpus of the trust for deriving the income as it is nothing but a decrease in the value of property through wear, deterioration, or obsolescence. Since income for the purposes of section 11(1) has to be computed in normal commercial manner, the amount of depreciation debited in the books is deductible while computing such income. It was so held by the Hon'ble Karnataka High Court in the case of CIT Vs. Society of Sisters of St. Anne 146 ITR 28 (Kar). It was held in CIT vs. Tiny Tots Education Society (2011) 330 ITR 21 (P H), following CIT vs. Market Committee, Pipli (2011) 330 ITR 16 (P H) : (2011) 238 CTR (P H) 103 that depreciation can be cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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