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TMI Blog2018 (2) TMI 1904X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 10(22) of the Act or alternatively u/s 11 12. It may be true that for some of the years it would have been denied such exemption. But as far as assessee was concerned it considered itself as a person not required to compute its total income. Assessee could take advantage of the above explanation and the claim of WDV had to be reckoned by considering book depreciation for the years it claimed exemption under Section 10(22) or Sections 11 12 and not depreciation as per Section 32(1). We thus do not find any reason to interfere with the order of CIT (Appeals). A perusal of the assessment orders for the impugned assessment year we find that computation of depreciation has not been clearly done by AO. There is no clarity as to how it was computed. In the circumstances, we are of the opinion that the quantum of depreciation allowable to the assessee for the impugned assessment years requires a revisit by the AO. We therefore set aside the orders of the lower authorities on the aspect of the quantum of depreciation allowable to the assessee for the impugned assessment years and remit it back to AO for consideration afresh in accordance with law. Disallowance for paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assets is to be computed excluding the cost of acquisition of those assets which were considered as application of income for the purpose of Section 11 12 of the Act, in the earlier years. 3. Facts apropos are that assessee was a local authority as defined in Section 10(20) of the Act upto and including assessment year 2002-03 and enjoyed exemption of its income under the said section. However due to an explanation inserted in Section 10(20) by Finance Act, 2002, assessee lost its exempt status under the said section. Thereafter, assessee made an application for registration u/s.12AA of the Act which was denied twice. However, pursuant to the directions of the Tribunal, on an appeal filed by the assessee, the question whether assessee was eligible for registration u/s.12AA of the Act was reconsidered by the ld. CIT. Assessee was thereafter granted such registration through letter No.C.No.464/02/2007- 08/CIT-I, dated 30.03.2010. For assessment year 2009-10, ld. Assessing Officer denied exemption claimed by the assessee u/s.11 12 of the Act, holding that assessee was hit by first proviso to Section 2(15) of the Act. Ld. Assessing Officer also noted that r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... status' of the assessee from A.Y.2002-03. Hence depreciation was recomputed and the excess claim was disallowed due to the following reason: The assessee was first time brought under Income tax net in the A.Y 2003-04 (and not in A Y 2009-10) itself and assessed in the status of 'Trust' from A.Y 2003-04 to A Y 2008-09. Consequently the assessee availed the benefit of sections 11 12 till the A Y 2008-09 and claimed and allowed the book depreciation of application of income. Even in the status of Trust also, the assessee had to compute Total income without giving effect to the provisions of sec. 11 and 12 as envisaged in sec.139(4A). Therefore the book depreciation as on 31.03.2002 itself had to be taken as opening WDV as on 01/04/2002 (for A Y 2003-04) u/s 43(6) and the depreciation had to be computed u/s 32 from the A yrs 2003-04 onwards based on the rates prescribed by the IT Act as envisaged in Explanation 6 of section 43(6). When depreciation claim of the assessee is recomputed on the above lines, for this year there is an excess claim of depreciation to the tune of ₹ 18,84,84,714/- which needs to be disallowed. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... V has to be computed as per the main section as per which it is the actual cost less depreciation actually allowed. Further, the observation of the revenue audit that the depreciation had to be computed u/s.32 from the Asst.year 2003-04 onwards based on the rates prescribed by the IT Act / Rules is not at all specified in Explanation-6 whereas the audit says it is envisaged in Explanation-6. Accordingly, I find that the above observation of the revenue is factually incorrect in as much as Explanation-6 does not envisage that the depreciation has to be computed u/s.32 from Asst.year 2003-04 onwards based on the rates prescribed by the IT Act / Rules. Thus, the revenue audit has raised some objection which is not in accordance with Explanation- 6 of Sec.43(6). I, therefore, do not find merit in the contention of the Assessing Officer that the depreciation has to worked out on the opening WDV as if the depreciation was allowed based on the rates prescribed by the IT Act/ Rules for the assessment year 2003-04 to 2008-09. 4.3 Probably the revenue audit assumed that the depreciation under IT Act is to be allowed mandatorily as per Explanation-5 to Sec.32(1) for Asst. ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Authorised Representative submitted that Explanation 6 to Sec. 43(6) of the Act did not envisage depreciation to be computed u/s.32 of the Act, for the purpose of WDV. Ld. Authorised Representative relied on the decision of Rajkot Bench of the Tribunal in the case of Kandla Port Trust vs. ACIT, (2007) 101 ITD 0001. 11. We have considered the rival contentions and perused the orders of the authorities below. Taking up the first question which is whether depreciation could be allowed on assets, cost of which were allowed as application of income, it stands settled by the judgment of Hon ble Apex Court in the case of Rajasthan and Gujarati Charitable Foundation India (supra). Their lordship clearly held that an assessee enjoying exemption under section 11 12 of the Act was entitled to claim depreciation on assets, cost of which was claimed as application of income. Viz-a-viz second question which is on calculation of WDV, Explanation 6 to Sec.43(6) of the Act is reproduced hereunder:- Explanation 6.- Where an assessee was not required to compute his total income for the purposes of this Act for any previous year or years preceding the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation allowable to the assessee for the impugned assessment years and remit it back to the ld. Assessing Officer, for consideration afresh in accordance with law. 13. Only other issue raised by the Revenue for assessment years 2010-2011 and 2012-2013 is on deletion of disallowance made by the ld. Assessing Officer for payments made by the assessee to its retired employees. 14. Ld. Counsel for the Revenue submitted that assessee had made contribution to pension and gratuity fund which was approved as per the Act. In addition to this, as per the ld. DR, assessee had made direct payments of pension to its retired employees. As per the ld. DR, only contribution to approved pension/gratuity fund was allowable and not the actual pension payments. Contention of the ld. DR was that ld. Commissioner of Income Tax (Appeals) was not justified in deleting the disallowance of the latter by the ld. Assessing Officer. 15. Per contra, ld. Authorised Representative strongly supported the order of the ld. Commissioner of Income Tax (Appeals). 16. We have considered the rival contentions and perused the orders of the authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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