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Facts
The appellant, an approved research association, claimed depreciation on assets. The Assessing Officer (AO) denied the claim, presuming the appellant was a Trust registered under Section 12A and thus not eligible for depreciation under Section 11(6). The CIT(A) confirmed the AO's action.
Held
The Tribunal held that the AO erred by presuming the appellant was a Section 12A Trust, when it was an institution approved under Section 35(1)(ii). Since the appellant had not claimed the purchase value of assets as revenue expenditure, disallowing depreciation as a double deduction was incorrect.
Key Issues
Whether depreciation can be claimed by an institution approved under Section 35(1)(ii) when it was erroneously treated as a Section 12A Trust, and whether the claim of depreciation is a double deduction if the asset's purchase value was not claimed as revenue expenditure.
Sections Cited
35(1)(ii), 11(2), 11(3), 11(6), 12A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Mumbai “B” Bench, Mumbai.
Before: Shri Narender Kumar Choudhry (JM) & Shri Omkareshwar Chidara (AM)
On facts and circumstances of the case and in law, the learned Additional/Joint CIT(A) erred in confirming the action of the learned Assessing Officer (the learned 'AO') of denying the claim of depreciation of the Appellant amounting to Rs. 3,04,850.
On facts and circumstances of the case and in law, the learned Additional/Joint CIT(A) has erred in confirming the action of the learned AO of not appreciating that claim of depreciation of the Appellant amounting to Rs. 3,04,850 has been made in respect of assets, the acquisition of which has not been claimed as an application of income in any previous year.
3. On facts and circumstances of the case and in law, the learned Additional/Joint CIT(A) has erred in confirming the action of the learned AO of not directing to carry forward the excess application of income of Rs. 5,66,396 to subsequent years.
2. The Ld. AR of the appellant has argued that both the Ld. AO and Ld. CIT(A) have wrongly proceeded on the presumption that that appellant is a Trust registered after getting approval under section 12A of the I.T.Act and 2 Breach Candy Medical Research Centre applied the provisions of section 11(2) and 11(3) of the I.T. Act. It was submitted that the appellant institution is an approved research association for the purposes of section 35(1)(ii) of the Act and the same was notified by Central Government through Notification No 38 of 2009 dated 28.4.2009. The Ld. AR of the appellant institution emphasized that it is not a Trust registered under section 12A of the Act and hence the Ld. AO went on a wrong presumption and applied the provisions of Trust to it and disallowed the depreciation of Rs.3,04,850/- under section 11(6) of the Act. Aggrieved by this disallowance of depreciation, the appellant filed this appeal.
During the hearing before the ITAT, Ld. AR of the appellant has mentioned that it is entitled to claim depreciation on the assets as a valid application of income towards the advancement of its objects. Moreover, Ld. AO went on a wrong presumption that purchase value of capital asset was treated as application of income and again claimed depreciation which is double deduction, it was argued. The Ld. AR of the appellant has argued that they did not claim purchase value of asset as deduction anywhere.
The Ld. DR relied on the assessment order and Ld. CIT(A) order.
Heard both sides. The Bench decides that the Ld. AO went on a wrong presumption that the appellant is a trust registered under 12A, whereas the fact is that it is an institution which was approved research association under section 35(1)(ii) of the Act and notified as above. Since the appellant is not registered under section 12A, and approved under 35(1)(ii), provisions of section 11& 12 of the Act are not applicable. As the appellant institution argues that it has not claimed the purchase value of asset as revenue expenditure and hence the Ld. AO cannot disallow depreciation of Rs. 3,04,850/- as double deduction. If the appellant institution has not claimed the purchase value of asset as deduction/revenue expenditure, the appellant is entitled to depreciation. The AO is directed accordingly. Hence, the appellant succeeds in this appeal and Ld. AO is directed to delete the addition relating to depreciation.
3 Breach Candy Medical Research Centre
The last ground taken by appellant is that the Ld. AO did not mention anything with respect to carry forward of deficit. The appellant has submitted that it is entitled to claim for carry forward deficit is founded on well settled legal principles enunciated by various judicial pronouncements as set out below :- a) CIT vs. Institute of Banking Personnel Selection (264 ITR 110) (Bom HC) b) CIT vs. Maharana of Mewar Charitable Foundation (164 ITR 439) (Raj HC) c) CIT vs. Shri Plot Swetambar Murti Pujak Jain Mandal (211 ITR 293) (Guj HC) d) CIT vs. Maitriseava Trust (242 ITR 20)(Mad HC) e) Govindu Naicker Estate vs. ADIT (248 ITR 368)(Mad HC)
But, this issue was not emanating from the assessment order. Anyhow, the Ld. AO is directed to take the submissions and cases-law cited above and if the institution is entitled for carry forward deficit of Rs. 8,71,246/-, the benefit should be allowed.
The appeal of appellant is allowed for statistical purposes.
Order pronounced in the open Court on 26/08/2025.