THE DY. CIT (EXEMPTIONS), CIRCLE-2,, AHMEDABAD vs. THE NEW ENGLISH SCHOOL TRUST,, ANAND

In the Revenue’s appeal sole issue involved is that the ld.CIT(A) is erred in deleting addition of Rs.1,39,08,306/- made by the AO on account of depreciation.

Assessee has filed its return of income on 24.9.2013 declaring total loss income at Rs.(-)4,39,76,637/-. Assessment year involved is 2013-14. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. During the assessment proceedings, it was noticed by the AO that the assessee claimed depreciation to the extent of Rs.1,39,08,306/-. According to the AO, this claim amounts to double deduction in view of the fact that cost of assets was already allowed to the assessee in the form of application of income for charitable purpose and further deduction in name of depreciation was not permissible for computing the profit available for charitable activities. The AO issued a show cause notice dated 21.9.2015 to this effect to the assessee. The assessee replied 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 income 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, in the appeal before the ld.First Appellate Authority, claim of the assessee was allowed 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), Department is now in appeal before us.

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:

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 similar case in the matter of CIT Vs. Rajasthan& Gujarati Charitable Foundation Poona (supra) 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

So far as CO of the assessee is concerned, the same is in support of order of the ld.CIT(A), and does not require any adjudication. It is dismissed.

In the result, appeal of the Revenue and CO of the assessee, both are dismissed.