DCIT (E) 1(1), MUMBAI vs. COSMOPOLITAN EDUCATION SOCIETY, MUMBAI

4042/Mum/2017 CO No.165/Mum/2017 and 166/Mum/2017 Cosmopolitan Education Soceity 3. Rival contentions have been heard and record perused. Briefly the facts of the case are that the assessee is a trust registered with CIT (E), Mumbai u/s.12A under Registration No.INS/6863 dated 27.2.1976. The assessee filed its return of income on 27.9.2012 along with the Income & Expenditure Account, Balance Sheet and Audit Report in Form 10B declaring total income at Rs. Nil. A.O completed the assessment vide order dated 19.3.2015 u/s. 143(3) of the I.T. Act, I961, wherein assessee’s claim of depreciation was disallowed.

By the impugned order, CIT(A) after following the decision of the Jurisdictional High Court allowed assessee’s claim. “ I found that issue is covered by the order of the Tribunal in assessee’s own case dated 23/09/2015 in and 3773/Mum/2015 for the A.Y. 2010-11 and 2011-12. The precise observation of Tribunal was as under:- 7. I have heard Ld Representatives of both the parties and perused the orders of the Revenue Authorities as well as the relevant material placed on record. On perusal of the order of the CIT (A) in general and paras from 3.2 to 3.4 in particular, I find the same are relevant in this regard. Considering the importance of the said paras 3.2 and 3.4 of the impugned order, the same are extracted as under: "3.2. I have considered the above submissions of the appellant as well as the facts of the case. I have J. also gone through the documents filed by the appellant in tills regard. From the records of the case, it is evident that the AO relied on the judgment of Hon’ble Supreme Court in the case of Escorts Ltd vs. UOI, 199 TTR 43 and concluded that the same w/ff prevail, which specifically laid down the law that in no circumstances the benefit of double deduction can be claimed and allowed. It Is seen that the issue under consideration is covered in favour of the appellant and It has been held by various courts that depredation Is to be allowed even if the entire cost of the asset was treated as application / expenditure in the year of purchase. 3.3. The decision of the Hon’ble Supreme Court in the case of Escorts Ltd (supra) will not apply to a charitable organization as It pertains to claim of depredation under another section of the 4042/Mum/2017 CO No.165/Mum/2017 and 166/Mum/2017 Cosmopolitan Education Soceity Act when 100% or more depredation had already been provided u/s 35. The Hon’ble Supreme Court in that case was dealing with a case relating to two deductions both under sections 10(2)(vi) and 10(2)(xiv) of the 1922 Act or both under section 32(l)(ii) and 35(I)(iv) of the Act. The assesses therein had incurred expenditure of a capital nature on scientific research relating to the business which resulted into acquisition of an asset. The assesses had sought to claim a specific percentage of the written down value of the asset as • depredation and at the same time claimed deduction, In five consecutive years of the. expenditure incurred on the acquisition of the asset. The judgment of the Hon’ble Supreme Court in Escorts Ltd is thus distinguishable for the above reasons. Moreover, the Supreme Court decision has been distinguished inter alia by the Punjab & Haryana High Court in the case of Market Committee Pipli and Tiny Tots Education Society (both supra) as well as Mumbai and Chennai Tribunals in t/ie cases listed above," 3.4. Further, Hon’ble Bombay High Court in the case of DIT (E) vs. Framjee Cawasfee Institute '(supra), has held that even if the amount spent on acquiring depreciable asset was • treated as application of income of the trust in the year of acquisition, depredation would still be allowable In subsequent years. Tills decision of the Hon’ble Bombay High Court was followed in CIT vs. Institute of Banking Personnel Selection (supra) and CIT vs. Sanjeevan Vidyalaya Trust (supra). Hence, I direct the AO to delete the disallowance of depredation of Rs. l,14,71,022/- in AY 2010-2011 and Rs. 68f89,365/-in AY 2011-2012."

From above, it is very dear that the judgment of Apex Court in the case of Escorts Ltd (supra) relied on by the AO while making the disallowance is not applicable to a charitable organization, like the assessee in the present case which is registered u/s 12A of the Act, since it pertains to the claim of depreciation under the provisions pf section 35 of the Act. Further, as per the proposition laid down by the Hon'ble jurisdictional High Court in the case of DIT (E) vs. Framjee Cawasjee Institute (supra) expenditure on acquisition of depreciable asset was treated as application of income of tiie trust in the year of acquisition, depredation is allowable in subsequent years. The said judgment is binding on the Mumbai Benches of the Tribunal. Considering the above propositions, in my opinion, CIT (A) has rightly adjudicated the issue and deleted the disallowance made by the AO. In my considered opinion, the decision taken by the IT (A) in allowing the assessee's appeal is fair and reasonable and it does not cafl for any interference. Accordingly, grounds raised by the Revenue are dismissed.