BAHUJAN HITAY TRUST,PUNE vs. INCOME-TAX OFFICER, (EXEMPTIONS), WARD-1, PUNE

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ITA 1112/PUN/2019Status: HeardITAT Pune14 January 2020AY 2015-165 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that Section 11(6) disallows depreciation on assets acquired by applying income for charitable purposes. However, the Assessing Officer did not examine the assessee's contention that the depreciation claimed was not for such assets.

What were the facts?

The assessee, a charitable trust, claimed depreciation of Rs. 15,52,438/- in its Income and Expenditure account. The Assessing Officer disallowed this claim invoking Section 11(6) of the Income Tax Act.

What were the issues?

Whether depreciation claimed by a charitable trust is allowable when the Assessing Officer invoked Section 11(6) without verifying the nature of assets acquired from application of income.

Which sections of the Income-tax Act were involved?

Section 11(6),Section 12AA

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE

Before: SHRI R.S. SYAL

For Appellant: Shri Sarvesh Khandelwal
For Respondent: Shri S.P. Walimbe

This appeal by the assessee arises out of the order passed by the CIT(A)-10, Pune on 12-06-2019 in relation to the assessment year 2015-16.

2.

The only issue raised in this appeal is against the confirmation of disallowance of depreciation amounting to Rs.15,52,438/-.

3.

Brief facts of the case are that the assessee is a charitable trust, which was registered u/s 12AA of the Income Tax Act, 1961 (hereinafter also called as ‘the Act’) in 1987. The Assessing Officer observed during the course of assessment proceedings that a sum of Rs.15,52,438/- was claimed as depreciation in the Income and Expenditure account. Invoking the provisions of section 11(6) of the Act, the Assessing Officer made the addition of the said sum, which came to be confirmed in the first appeal.

4.

I have heard both the parties and gone through the relevant material on record. Sub-section (6) of section 11 was inserted by the Finance (No.2) Act, 2014 w.e.f. 1.4.2015. This provision reads as under :-

“Section 11 ……… (6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year.”

5.

On going through the above provision, it is clear that if income is applied or accumulated or set apart for application by way of purchase of assets, then no deduction on account of depreciation shall be allowed in respect of such assets. The ld. AR submitted that the amount of depreciation claimed by the assessee in the year under consideration does not pertain to the assets which were purchased by applying the income in terms of section 11 of the Act. A detailed working has been placed on record to buttress such a contention. In view of the fact that the Assessing Officer has proceeded on the basis of provision as applicable without examining the assessee’s contention about the non-purchase of assets from application of income u/s 11 of the Act, I am of the considered opinion that it would be in the fitness of things if the impugned order is set-aside and the matter is restored to the file of the Assessing Officer. I accordingly order and direct him to decide the issue afresh as

per sub-section (6) of section 11 of the Act after allowing a reasonable opportunity of hearing to the assessee.

6.

In the result, the appeal of the assessee is allowed for statistical purposes.

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