INCOME-TAX OFFICER vs. MAHATMA GANDHI MISSION, AURANGABAD

Both the appeals filed by Revenue relating to the same assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. In order to adjudicate the

The Revenue in ITA No.1633/PUN/2014, relating to assessment year 2010-11 has raised the following grounds of appeal:- 1) Whether, on the facts and in the circumstances of the case, the CIT(A) is justified in deleting the depreciation on capital assets which had already been allowed as application of income u/s 11 of the Act, earlier. 2) The order of the AO be restored and that of the CIT(A) be vacated.

The only issue raised in the present appeal is the claim of depreciation on capital assets, value of which had already been allowed as application of income under section 11 of the Act.

The learned Authorized Representative for the assessee pointed out that the issue stands covered by the ratio laid down by the Hon’ble Apex Court in CIT Vs. Rajasthan and Gujarati Charitable Foundation Poona in Civil Appeal No.7186 of 2014, judgment dated 13.12.2017.

The learned Departmental Representative for the Revenue placed reliance on the order of Assessing Officer.

We have heard the rival contentions and perused the record. The assessee before us is a Trust and is registered under section 12A of the Act. The assessee was running hospitals and educational institutions for imparting education in medical and other fields. The assessee is running 11 hospitals and 63 educational institutions. The Assessing Officer during the course of assessment proceedings noted that the assessee had made claim of deduction on account of depreciation on capital assets at ₹ 15,42,83,198/- in assessment year 2010-11. The Assessing Officer also noted that the cost of assets had already been allowed as application of income under section 11 of the Act and

The CIT(A) noted that the Hon'ble Supreme Court in Escorts Ltd. Vs. Union of India (supra) had decided the issue in respect of deduction of cost of an asset under section 35 of the Act and allowed as deduction for capital expenditure incurred on scientific research and further allowance of depreciation on the same asset. Whereas, the assessee was a Trust and had claimed cost of asset as application of income under section 11 of the Act and depreciation had been claimed in subsequent year on commercial principle. The CIT(A) noted that the said decision of the Hon'ble Supreme Court in Escorts Ltd. Vs. Union of India (supra) was taken note of by the Hon’ble High Court of Delhi in CIT Vs. Vishwa Jagriti Mission reported in 73 DTR 195 (Del) and the Hon’ble High Court of Punjab & Haryana High Court in CIT Vs. Market Committee, Pipli reported in 330 ITR 16 (P&H) and it was held that in the case of a Trust, depreciation claimed on the assets is to be allowed as deduction

The issue of claim of depreciation on assets cost of which has been allowed as application of income in the preceding year, has been decided by the Hon’ble Apex Court in CIT Vs. Rajasthan and Gujarati Charitable Foundation Poona (supra). The Hon’ble Apex Court held that the issue has been decided by the Hon’ble Bombay High Court in CIT Vs. Institute of Banking Personnel Selection (IBPS) (2003) 131 Taxman 386 (Bom). The contention of Department of double benefit was turned down in the said decision and the relevant finding of the Hon’ble High Court has been reproduced, wherein the Hon’ble High Court held that the income of Trust was required to be computed under section 11 of the Act on commercial principles, after providing for allowance for normal depreciation and deduction thereof from gross income of the Trust. In view thereof, the said claim of depreciation on the assets, cost of which had already been allowed as deduction in the preceding years was allowed in the hands of assessee. The Hon’ble Apex Court also took note of the fact that most of the High Courts had taken the said view with only exception being the High Court of Kerala in Lissie Medical Institution Vs. CIT. The Hon'ble Supreme Court further took note of the amendment by the Finance Act No.2/2014, which is effective from assessment year 2015-16, wherein amendment has been made to section 11(6) of the Act. It was further held that the said amendment was prospective in nature. The Hon’ble Apex Court thus, held that in case depreciation was to be allowed, then the same could be carried forward also.

The issue arising in the present appeal before us is identical to the issue before the Hon’ble Apex Court in CIT Vs. Rajasthan and Gujarati Charitable

The facts and issues in ITA No.1634/PUN/2014 are identical to the facts and issues in ITA No.1633/PUN/2014 and our decision in ITA No.1633/PUN/2014 shall apply mutatis mutandis to ITA No.1634/PUN/2014.

In the result, both the appeals of Revenue are dismissed.