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TMI Blog2018 (1) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... h higher than interest income of ₹ 1,81,76,676/- worked out by assessing officer based on TDS as per Form 26AS. In view of these facts, assessee's contention is acceptable. Therefore, no amount is required to be added to the returned income. In our considered opinion, ld. CIT(A) has rightly granted the relief to the assessee. Disallowance of depreciation on assets purchase out of grant received u/s.35AC towards depreciation in respect of Infrastructure facility developed by cardiac and cancer facility - Held that:- The appellant is eligible for depreciation on the assets purchased out of the donation received u/s.35AC of the Act. Revenue appeal dismissed. - I.T.A. No.2782/Ahd/2014 - - - Dated:- 12-1-2018 - SHRI PRAMOD KUMAR, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials on record are as under:- The appellant AOP is in the activity of Institute for education research, training, etc. for social and economic development under the name and style of Charutar Arogya Mandal. The AO made disallowance of ₹ 5,42,028/- as per para 6, ₹ 23,08,970/- as per para 7.1 and ₹ 1,85,78,132/- as per para 9 of the order. 4. The only issue is difference of income as per Income Expenditure account and form no. 26AS from which Tax is deducted. In this regard, it is seen that the appellant maintains the books of account on mercantile basis. It has accounted for entire income which is accrued during the year. It is also seen that in respect of corpus fund interest is credited directly to corpus a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the donation received u/s 35AC. Therefore, the same was made out of the exempted income. The AO was of the view that depreciation to the extent of funds invested and depreciation claimed cannot be allowed. 7. Ld.CIT(A) allowed this ground of appeal with the following observation: I have gone through the facts brought before me by the appellant and as discussed in the assessment order. Under the computations provisions applicable to the charitable trust registered u/s.12A of the Act which is the case with the appellant trust, the income has to be computed on the basis of commercial principles in accordance with provisions of section 11 to 13 of I.T. Act which is a code by itself and hence the depreciation necessary forms an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant is eligible for depreciation on the assets purchased out of the donation received u/s.35AC of the Act. Therefore, I direct the AO to allow the depreciation claimed by the appellant and delete the disallowance of depreciation of ₹ 1,85,78,132/-. This ground of appeal is allowed. 8. Ld.AR cited a judgment of Hon ble Supreme Court in the matter of CIT-III, Pune vs. Rajasthan and Gujarat Charitable Foundation Pune in Civil Appeal No.7186 of 2014. Relevant paras of the same is reproduced as under: The first question which requires consideration by this Court is: whether depreciation was allowable on the assets, the cost of which has been fully allowed as application of income under section 11 in the past years? In the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general principles or under section 11(1)(a) of the Income Tax Act The Court rejected the argument on behalf of the revenue that section 32 of the Income Tax Act was the only section granting benefit of deduction on account of depreciation. It was held that income of a Charitable Trust derived form building, plant and machinery and furniture was lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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. This view of the Tribunal has been confirmed by the Bombay High Court in the above judgment. Hence, Question No. 2 is covered by the decision of the Bombay High Court in the above Judgment. Consequently, Question No. 2 is answered in the Affirmative i.e., in favour of the assessee and against the Department. After hearing learned counsel for the par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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