SHRI.VISHWANATH RAGHUNATH RAO DESHPANDE MEMORIAL TRUST,BANGALORE vs. INCOME TAX OFFICER, BANGALORE

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ITA 344/BANG/2017Status: DisposedITAT Bangalore31 March 2017AY 2012-1319 pages

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

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the issue is covered by the decisions of the jurisdictional High Court and a coordinate bench of the Tribunal in the case of ACIT Vs Vishwachetan Foundation IBMR. The Tribunal noted that the jurisdictional High Court in DIT(E) Vs. Al-Ameen Charitable Fund Trust held that while income used to acquire capital assets is exempted, depreciation allowed in subsequent years represents wear and tear of the asset, and disallowing it would not preserve the corpus of the trust. The Tribunal also referred to the amendment to Section 11(6) of the Act, which is effective from 01.04.2015, and thus prospective, as per the Apex Court's judgment in Vatika Township (P.) Ltd.'s case. The Tribunal found no basis for the CIT(A) restricting the depreciation claim by reducing the corpus donation amount if the depreciation claim is in respect of the cost of the assets. Therefore, following the earlier order of the Tribunal and the High Court's judgment, the claim of the assessee was allowed in full.

What were the facts?

The assessee, Shri Vishwanath Raghunath Rao Deshpande Memorial Trust, is challenging an order by the CIT(A) for the assessment year 2012-13. The Assessing Officer (AO) disallowed a depreciation claim of Rs. 24,09,073, deeming it a double deduction since the asset's cost was already considered an application of income. The CIT(A) partially allowed the claim, restricting it to Rs. 16,89,073 by reducing it by a corpus donation of Rs. 7,20,000 received during the year. The assessee argues that depreciation should be allowed in full, independent of corpus receipts. The revenue contended that the SLP filed by the revenue against a similar High Court decision was admitted by the Supreme Court.

What were the issues?

1. Whether the Tribunal had to decide if the disallowance of depreciation of Rs. 24,09,073 by the AO was justified, and if the CIT(A)'s restriction of the allowance to Rs. 16,89,073 was correct, concerning the assessment year 2012-13, under Section 11 of the Income Tax Act, 1961. Assessee's contentions: The assessee argued that the entire depreciation deserves to be allowed as a deduction, relying on the judgments in CIT V/s Society of Sisters of St. Anne (146 ITR 28 (Kar)) and Al-Ameen Charitable Fund Trust (383 ITR 517(Kar)). They asserted there is no restriction on depreciation allowance by reducing corpus funds received by the trust, and the receipt of corpus and claim of depreciation are independent. They also argued that Section 11(6), which restricts depreciation, is effective from 01.04.2015 and thus not applicable to the assessment year in question. Revenue's contentions: The revenue argued that the issue is covered by the decision of the Hon'ble jurisdictional High Court, but the SLP filed by the revenue has been admitted by the Hon'ble Supreme Court for deciding the matter on merits. They relied on the order of the CIT(A).

Which sections of the Income-tax Act were involved?

Section 11,Section 11(6),Section 12A

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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE

Before: SHRI VIJAY PAL RAO

For Appellant: Shri Pranav Krishna, Advocate
For Respondent: Shri AR.V. Sreenivasan, JCIT (DR)

Per Vijay Pal Rao, Judicial Member

1.

This appeal by the assessee is directed against the order dated 24.11.2016 of CIT(A) for the assessment year 2012-13. The assessee has raised the following grounds:

6. The Learned Commissioner of Income Tax (Appeals)-14 has relied on the judgement of ITAT in the case of Jyothy Charitable trust, however has ignored the ruling of the High Court in the case of Al-Ameen Charitable Fund Trust 383 ITR 517(Kar) where there is no restriction on allowance of depreciation.

2.

The only issue arises in this appeal of the assessee is regarding disallowance of deprecation on the ground that it would amount to double deduction. The assessee is a charitable trust registered u/s. 12A of the IT Act. The AO while completing the assessment u/s. 143(3) has inter alia disallowed the claim of depreciation of Rs. 24,09,073/- on the ground that when the said expenses was already allowed as application of income then the depreciation would amount as double deduction. The assessee challenged the action of the AO before the CIT(A). The CIT(A) though on principle accepted the claim of the assessee however it was restricted to Rs. 16,89,073/- by reducing the corpus donation amount of Rs. 7,20,000/- received during the year.

3.

Before the Tribunal, the ld. AR of the assessee has submitted that this issue is covered in favour of the assessee by the decisions of jurisdictional Page 4 of 19 High Court as well as this Tribunal. He has relied upon the decision dated 20.05.2016 of this Tribunal in case of ACIT Vs Vishwachetan Foundation IBMR in ITA No. 957/Bang/2015. On the other hand, the ld. AR has submitted that the decision of the Hon’ble jurisdictional High Court has not attained finality as the SLP filed by the revenue has been admitted by the Hon’ble Supreme Court for deciding the matter on merits. He has relied upon the order of the CIT(A).

4.

Having considered the rival submissions as well as relevant material on record, it is noted that this issue is covered by the decisions of the jurisdictional High Court and by following the said decision the coordinate bench of the Tribunal has dealt with this issue in case of ACIT Vs Vishwachetan Foundation IBMR (supra) in para 6 to 9 as under: “

5.

Even otherwise the CIT(A) has allowed the claim of the assessee in principle by following the various decisions of Hon’ble High Courts however the claim was restricted by reducing the amount of corpus Page 19 of 19 donation of Rs. 7,20,000/-. On perusal of the impugned order of the CIT(A) it is found that there is no basis of restricting the claim of depreciation by reducing the said amount of corpus donation if the claim of depreciation is in respect of the cost of the assets. Accordingly, by following the earlier order of this Tribunal the claim of the assessee is allowed.

6.

In the result the appeal of the assessee is allowed.

Pronounced in the open court on this 31st day of March, 2017

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