DEPUTY COMMISSIONER OF INCOME TAX, MUMBAI vs. SHREE KASHI MATH SAMSTHAN VARANASI, MUMBAI

The present appeal preferred by the Revenue is directed against the Order, dated 30/09/2025, passed under Section 250 of the Income Tax Act, 1961 (in short ‘Act’) by the Commissioner of Income Tax Act, Appeals – ADDL/JCIT(A)-1, Delhi [in short ‘CIT(A)’] whereby the Learned CIT(A) had allowed the appeal against the Assessment Order, dated 28/09/2016, passed under Section 143(3) of the Act for Assessment Year 2014-15. 2. The Revenue has raised following grounds:

"On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that section 11(6) of the Act disallowing depreciation where the cost of the asset has already been claimed as application applies prospectively from AY 2015-16, without considering that the principle against double deduction existed even prior to insertion of express provision in the statute prohibiting claim of depreciation".

The appellant craves leave to add, amend, alter vary and/or withdraw any of the grounds of appeal.”

We have heard the Learned Departmental Representative and have perused the material on record.

It emerged that the Assessee is a registered charitable trust eligible to claim exemption under Section 11 of the Act. The Assessee filed return of income for the Assessment Year 2013-2014 declaring deficit of INR.6,67,34,757/-. The case of the Assessee was selected for regular scrutiny. The Assessing Officer completed the assessment under Section 143(3) of the Act vide Assessment Order, dated 28/09/2016. The Assessing Officer disallowed the depreciation of INR.3,16,98,232/- claimed by Assessee on the ground that the Assessee had already claimed deduction for the same as application of income. Taking the above disallowance of depreciation into account, the Assessing Officer recomputed the capital expenditure incurred by the Assessee at INR.4,24,70,931/- which was less than the actual capital expenditure of INR.7,75,07,456/- by INR.3,50,36,525/-.

Against the Assessment Order, dated 28/09/2016, the Assessee

Being aggrieved the Revenue has preferred the present appeal before the Tribunal.

Ground No. 1 and 3 relate to Assessee’s claim for depreciation while Ground No. 2 is the consequential ground related to computation of capital expenditure incurred during the relevant previous year.

We would first take up Ground No. 1 & 3 raised by the Revenue. In this regard we note that the Learned CIT(A) had accepted Assessee’s claim for depreciation holding as under: “Ground No. 1, 2 and 3 That with respect to the first aspect, it is submitted by the Appellant that the AO erred in disallowing depreciation of Rs. 3,16,98,232/- and further disallowing Rs. 3,50,36,525/- from the deduction claimed towards application of capital expenditure on the premise that the Appellant had claimed double deduction, once towards application of income under Section 11(1) and again by way of depreciation. The Appellant submitted that the capital expenditure incurred was claimed as application of income in terms of Section 11(1) and not as revenue write-off in the books, so therefore, depreciation on such assets represents a distinct charge to account for the wear and tear of those assets and cannot be equated with a double deduction. That the submissions made by the Appellant were duly considered and reference was made to Section 11(6) of the Act which was inserted by the Finance (No. 2) Act, 2014, with effect from Assessment Year 2015- 16, to specifically provide that where the cost of an asset has been claimed as an application of income, no depreciation shall be allowed in respect of such asset for the same or any other year. That, further, in the case of CIT v. Rajasthan and Gujarati Charitable Foundation Poona wherein the courts have upheld the view that depreciation is a legitimate deduction and allowable as application of income for charitable purposes, even if the acquisition of the capital asset has been treated as application of income in a previous year and disallowing depreciation in such cases would amount to double taxation of the same income, which is neither intended nor permitted under the Act as it stood prior to 01.04.2015. That applying the above in the present case, the Assessment Year under appeal is AY 2014-15, which is prospective to the effective date of insertion of Section 11(6) and therefore the claim of the Appellant for entitlement to claim depreciation on capital assets in addition to treating capital expenditure as application of income stands accepted by this office and the AO’s reasoning that depreciation amounts to a double deduction is contrary to the settled legal position for the relevant year. In view of the above, the disallowance of depreciation of Rs. 3,16,98,232/- and the consequential reduction of Rs. 3,50,36,525/- from the deduction claimed towards application of capital expenditure are directed to be deleted by the concerned AO. Accordingly, Grounds Nos. 1, 2 and 3 are allowed in favour of the Appellant.” (Emphasis)

It is clear that the Learned CIT(A) has granted relief to the Assessee by following binding judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax-III, Pune vs. Rajasthan & Gujarati Charitable Foundation Poona [2018] 89 taxmann.com 127 (SC)/[2018] 253 Taxman 165 (SC)/[2018] 402 ITR 441 (SC)/[2018] 300 CTR 1 (SC)[13-12-2017] wherein it was held that the charitable organization was entitled to claim depreciation even if the cost of acquisition of asset has been treated as application of income in the preceding years. It was categorically held that the provisions contained in Section 11(6) of the Act would apply prospectively and shall have no application for periods prior to 01/04/2015. The appeal before up pertains to Assessment Year 2014-2015 (i.e., period prior to 01.04.2015). Therefore, the issue raised by the Revenue by way of Ground No. 1 & 3 in the present appeal stands decided in favour of the Assessee against the Revenue. Accordingly, we do not find any reason to interfere with the order passed by Learn CIT(A) on this issue. Therefore, Ground No. 1 & 3 raised by the Revenue are dismissed.

As regards Ground No. 2 raised by the Revenue is concerned, on perusal of the Assessment Order we find that the Assessing Officer has only made a solitary allowance of depreciation in paragraph 3.1 of the Assessment Order. Paragraph 4 deals with carry forward of deficit. It is only in the computation that the Assessing Officer arrived at the figure of INR. INR.4,24,70,931/- as capital expenditure incurred during the relevant previous year (which was less than the actual capital expenditure of INR.7,75,07,456/- by INR.3,50,36,525/-). The Learned CIT(A) has also allowed the ground raised by the Assessee regarding incorrect computation of capital expenditure incurred during the relevant previous year as a consequential in nature. We have confirmed the order passed by the Learned CIT(A) allowing Assessee’s claim for depreciation. Therefore, given the aforesaid, we dispose of Ground No. 2 raised by the Revenue as consequential in nature.

In result, the Appeal preferred by the Revenue is dismissed.

"धान आयकर आयु"/ Pr.CIT 4. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, मुंबई/ DR, ITAT,

Mumbai गाड" फाईल / Guard file. 6. आदेशा नुसार/ BY ORDER, स"ािपत "ित //// उप/सहायक पंजीकार /(Dy./Asstt.