THE ITO, (EXEMPTIONS), WARD-2, AHMEDABAD vs. PLATINUM FOUNDATION, AHMEDABAD

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ITA 2885/AHD/2016Status: DisposedITAT Ahmedabad10 May 2018AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that depreciation is allowable even if the cost of assets was treated as application of income. This is because depreciation is a distinct deduction allowed by the Act for charitable trusts, and it does not amount to double deduction.

What were the facts?

The assessee, a trust running educational institutions, claimed depreciation of Rs. 1,22,90,105/-. The Assessing Officer disallowed this claim, stating it amounted to double deduction as the cost of assets was already allowed as application of funds. The CIT(A) deleted the addition, relying on a High Court judgment.

What were the issues?

Whether depreciation is allowable as a deduction for a charitable trust when the cost of assets has already been treated as application of income. Whether allowing depreciation constitutes a double deduction.

Which sections of the Income-tax Act were involved?

Section 11(1)(a),Section 12AA,Section 80G(5),Section 143(2)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, BENCH ‘C’

Before: SHRI RAJPAL YADAV & SHRI AMARJIT SINGH

For Respondent: Shri Prasoon Kabra, Sr.DR, Shri P.B. Parmar
Hearing: 24/04/2018Pronounced: 10/05/2018

आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL BENCH ‘C’ BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No.2885/Ahd/2016 �नधा�रण वष�/Asstt. Year: 2013-14

ITO (Exemptions) Vs. Platinum Foundation Ward-2, Ahmedabad. A/201-202, Iscon Park Opp: OM Tower Satellite Ahmedabad 380 015.

PAN : AABTP 1113 G.

अपीलाथ�/ (Appellant) �त् यथ�/ (Respondent)

Revenue by : Shri Prasoon Kabra, Sr.DR Assessee by : Shri P.B. Parmar

सुनवाई क� तार�ख/Date of Hearing : 24/04/2018 घोषणा क� तार�ख /Date of Pronouncement: 10/05/2018 आदेश/O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER:

Revenue is in appeal before the Tribunal against order of ld.CIT(A)-9, Ahmedabad dated 02.9.2016 for the Asstt.Year 2013-14.

2.

In the Revenue’s appeal sole issue involved is the ld.CIT(A) has erred in deleting addition of Rs.1,22,90,105/- made by the AO on account of depreciation.

3.

Brief facts of the case are that assessee is a trust running educational institutions and imparting engineering and management courses. Trust has registered under section 12AA and also granted

ITA No.2885 /Ahd/2016 2 certificate under section 80G(5) of the Act. Assessee-trust has filed return of income for the assessment year 2013-14 decalring NIL income. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. In the assessment proceedings, it was noticed by the AO that the assessee has claimed depreciation of Rs.1,22,90,105/- in the income and expenditure account. A show cause notice dated 8.7.2015 was issued to the assessee to explain as to why depreciation should not be disallowed on the ground that cost of assets was allowed as application of fund and further allowance of depreciation would be amounted to double deduction. Assessee explained that as per scheme of the Act governing computation of income of a trust, depreciation can also be claimed as deduction over and above application of fund under section 11(1) of the Act. As the statute provides these two deductions for charitable trust, which are distinct deductions, it cannot be termed as double deduction, and claim of the assessee is wholly per the law. The AO rejected this contention of the assessee and disallowed claim of the assessee. However, the ld.First Appellate Authority allowed the claim of the assessee by following the judgment of Hon’ble jurisdictional High Court in the case of Sheth Manilal Ranchhoddas Vishram Bhavan Trust, 198 ITR 598 (Guj.). Aggrieved with this order of the ld.CIT(A), Revenue is now before us.

4.

The ld.DR relied upon order of the ld.AO, while ld.counsel for the assessee supported order of the ld.CIT(A).

5.

With the assistance of ld.representatives, we have gone through the record carefully. We find that the ld.CIT(A) while allowing claim of the assessee relied upon the decision of Hon’ble Gujarat High Court in the case of CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, 198 ITR 598. The Hon’ble Gujarat High Court has formulated the following questions for its consideration:

ITA No.2885 /Ahd/2016 3 "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that, while computing income under section 11(1)(a) of the Income-tax Act, 1961, depreciation has to be allowed ?

2.

Whether the Tribunal was right in law in holding that, having regard to the Scheme of the Act, 'income' referred to in section 11(1)(a) of the Act is to be computed not in accordance with the provisions of the Act the but in accordance with the normal rules of accountancy under which the depreciation has to be allowed while computing such income under section 11(1)(a) of the Act ?"

6.

The Hon’ble High Court has answered both the questions in affirmative and against the Revenue. The Hon’ble High Court has observed that income from properties held under Trust has to be arrived at in normal commercial manner without classifying under various heads. Recently, Hon’ble Supreme Court in the case of CIT Vs. Rajasthan& Gujarati Charitable Foundation Poona, reported in 89 taxmann.com 127 (SC) decided similar issue in favour of the assessee. Hon’ble Apex Court held that in case of assessee-trust registered under section 12A, even though expenditure incurred for acquisition of capital assets was treated as application of income for charitable purposes under section 11(1)(a), yet depreciation would be allowed on assets so purchased for calculation of its income. Therefore, respectfully following the above two decisions of the Hon’ble Courts, we are of the view that the ld.CIT(A) has not committed any error while allowing the depreciation to the assessee. We do not find any merit in this appeal. It is rejected.

7.

In the result, appeal of the Revenue is dismissed. Order pronounced in the Court on 10th May, 2018 at Ahmedabad.

Sd/- Sd/- (AMARJIT SINGH) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER

Ahmedabad; Dated 10/05/2018

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