ACIT CENTRAL CIRCLE 1(3), CHENNAI vs. ST. JOSEPH INSTITUTE OF SCIENCE & TECHNOLOGY PVT. LTD., CHENNAI

This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 17, Chennai dated 11.09.2017 relevant to the assessment year 2010-11. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) erred in allowing the claim of depreciation, when the entire cost of acquisition of assets were claimed by the assessee and allowed by the Assessing Officer as application of income for the purpose of exemption under section 11 of the Income Tax Act, 1961 [“Act” in short].

Brief facts of the case are that the assessee trust filed it return of income for the assessment year 2010-11 on 02.06.2011 admitting “NIL” income and claiming exemption under section 11 of the Act. Further, the assessee claimed depreciation to the extent of ₹.3,05,69,669/-. The Assessing Officer disallowed the claim of the assessee on the ground that the depreciation claimed by the assessee cannot be allowed since the cost of the asset was already claimed as application of income and concluded the assessment under section 143(3) of the Act.

On appeal, after considering the submissions of the assessee and by considering various decisions, the ld. CIT(A) has held that the assessee is entitled to claim depreciation.

Aggrieved, the Revenue is in appeal before the Tribunal. The ld. DR submitted that, admittedly, the assessee claimed the cost of acquisition as application of income, therefore, the cost of asset becomes ‘nil’. The ld. DR further submitted that there is no mechanism for computing the depreciation. Moreover, the assessee is a charitable institution. Moreover, the provision of section 32 of the Act is applicable only for the asset which is used for business and in this case, according to the ld. DR, the asset was not used for business and, therefore, there is no question of granting depreciation under section 32 of the Act and pleaded for reversing the order of the ld. CIT(A).

Per contra, the ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the judgment of Hon’ble Supreme Court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation Poona in Civil Appeal No.7186 of 2014 dated 13.12.2017 and prayed for confirmation of order passed by the ld. CIT(A).

We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The Hon’ble Supreme Court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation Poona (supra) found that even though the cost of asset was allowed as application of income in the year of acquisition of asset, the charitable institution is still entitled for depreciation. In view of this judgment of the Hon’ble Supreme Court, we are unable to uphold the contention of the ld. DR. Since the issue is squarely covered in favour of the assessee by the judgment of the Hon’ble Supreme Court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation Poona (supra) and for the reasoning stated therein, the ground raised by the Revenue stands dismissed.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 24th May, 2018 at Chennai.