SARDAR DASTUR SCHOOLS TRUST,PUNE vs. INCOME-TAX OFFICER, (EXEMPTIONS) HQ, PUNE

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by assessee is emanating out of the order of 1. Commissioner of Income Tax (Appeals) – 10, Pune dated 20.01.2019 for A.Y. 2009-10.

Assessee is an Educational Trust and is engaged in running schools for students from Pre-primary to SSC and Junior College affiliated to Pune University. It has also been granted registration u/s 12A of the Act vide order dated 27.11.1973. The assessee filed its return of income for A.Y. 2009-10 on 05.10.2009 declaring total income of Rs.72,50,810/-.

The case was selected for scrutiny and thereafter assessment was

completed u/s 143(3) of the Act vide order dated 05.12.2011.

Subsequently, the case was re-opened by issuing notice u/s 148 of the

Act. Thereafter, the assessment was framed u/s 143(3) r.w.s. 147 of the

Act vide order dt.30.03.2015 and the total income before accumulation

u/s 11(1)(a) was determined at Rs.1,09,80,355/- and after allowing

accumulation u/s 11(1)(a) of Rs.99,48,253/-, the total income was

determined at Rs.10,32,102/-. Aggrieved by the order of AO, assessee

carried the matter before Ld.CIT(A), who vide order dated 20.01.2019 (in

appeal No.PN/CIT(A)10/ITO Exmp/72/15-16) dismissed the appeal of the

assessee. Aggrieved by the order of Ld.CIT(A), assessee is now in appeal

and has raised the following grounds :

“1. The learned Commissioner of Income Tax (Appeals)-10 has erred in confirming the total disallowance of depreciation of the assessment year 2009-10. The same should be allowed as deduction in computation of net taxable income. 2. The learned Commissioner of Income Tax (Appeals) has erred in not appreciating the requirement of Law that value of depreciation on assets whose expenditure was treated as revenue only should be added back to taxable income in subsequent years.”

claimed depreciation on fixed assets amounting to Rs.37,25,954/-. AO

noted that while framing the assessment u/s 143(3) of the Act, the claim

of depreciation was allowed to the assessee. AO was of the view that

since the assessee had acquired the assets and the same was allowed as

application of income, claim of depreciation on such assets is not

allowable. He accordingly denied the claim of depreciation amounting to

Rs.37,25,954/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who following the decision of Hon’ble Kerala High

Court in the case of Lissie Medical Institution Vs. CIT dismissed the appeal of assessee.

Aggrieved by the order of Ld.CIT(A) assessee is now in appeal.

Ld.CIT(A) and further submitted that income of Trust is required to be

computed u/s 11(1) of the Act on commercial principles after providing

for allowance for normal depreciation and deduction thereof from gross

income of the Trust. He submitted that when the amount has been spent

on acquiring the assets and has been treated as application of income of

the Trust in the year in which the income was spent in acquiring these

assets does not mean that in computing the income from these assets in

subsequent years, depreciation in respect of those assets cannot be taken

into account. He submitted that there are various decisions to this effect.

He therefore submitted that AO was not justified in denying the claim of

depreciation. Ld. D.R. on the other hand, supported the order of AO and

Ld.CIT(A).

record. The issue in the present ground is with respect to denial of claim

of depreciation on the assets which were acquired and which were allowed

as application of income. I find that the identical issue was settled in

favour of the assessee by the Hon’ble Supreme Court in the case of CIT

Vs. Rajasthan and Gujarati Charitable Foundation Poona reported in

(2018) 402 ITR 441 (SC), wherein the Hon’ble Apex Court has held that

in case of assessee which is a charitable institution registered u/s 12A of

the Act, even though expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes u/s 11(1)(a) of the Act, yet depreciation would be allowed on assets so purchased. It had further held that amendment to Section 11(6) of the Act which was brought by the Finance Act No.2/2014 is effective from A.Y. 2015-16 and is prospective in nature. Following the ratio of the aforesaid decision of Hon’ble Apex Court, I am of the view that AO was not justified in denying the claim of depreciation. I accordingly direct the AO to allow the claim of depreciation. Thus, the grounds of the assessee are allowed.

Order pronounced on 11th day of October, 2019.

Sd/-- (ANIL CHATURVEDI) लेखा सद�य / ACCOUNTANT MEMBER पुणे Pune; �दनांक Dated : 11th October, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER // True Copy /// व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.