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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY, & SHRI G. PAVAN KUMAR
आदेश / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER:
This appeal is filed by the assessee aggrieved by the order of the Ld. Commissioner of Income Tax (Appeals) in dated 30.06.2016 passed u/s. 250(6) r.w.s. 143(3) of the Act.
The assessee has raised four grounds in its appeal; however the crux of the issue is that the Ld. CIT (A) has erred in upholding the order of the Ld. AO who had disallowed the depreciation while computing the income of the assessee for the purpose of Section 11 of the Act.
The brief facts of the case are that the assessee is a charitable trust running various educational institutions and it is registered u/s.12A(a) of the Act vide order dated 29.11.1976. The assessee had filed its return of income on 27.09.2012 declaring nil income. Subsequently, the case was taken up for scrutiny and the assessment was completed u/s.143(3) of the Act on 20.03.2015, wherein the Ld. AO disallowed the claim of depreciation of Rs.1,16,03,457/- for computing the income of the property held
On appeal, the Ld. CIT(A) following the decision of the Chennai bench of the Tribunal in the case of Anjuman-E- Himayath-E-Islam v Assistant Director of Income-Tax (Exemptions)-IV, Chennai reported in [2015] 59 taxmann.com 379 and various other decision of the Hon’ble High Courts dismissed the appeal of the assessee by observing as under:-
“I have considered the grounds, facts and circumstances and arguments of the AR. The issue of allowance of depreciation in the cases of trusts has been elaborately discussed in a number of decisions rendered by various Courts and conflicting decisions were given. The Punjab and Haryana High Court in the case of CIT . Vs Market Committee, Pipli (2011) 330 ITR 15 ( P & H) and in the case of CIT Vs Tinty tots Education society (2011) 330 ITR 21 (P&H) held that the Escorts case cited by the Department is distinguishable and not applicable in relation to the trust and there is no double deduction of depreciation and capital expenditure on fixed assets in respect of trust. Similar view was expressed by other Courts in the cases of CIT v. Society of the Sisters of St. Anne [1984] 146 ITR 28 (Kar), CIT v. Raipur Pollottine Society [1989] 180 ITR 579 (M.P), and Commissioner of Income Tax v. Seth Manilal Ranchhoddas Vishram Bhavan Trust [1992] 198 ITR 598 (Guj). On the other hand, the Delhi High Court, in the case of DIT (Exemptions) v. Charanjiv Charitable Trust [2014] 267 CTR (Delhi) 306 held that where in a case of a trust, cost of assets has been allowed as deduction by way of application of income, then deprecation on the same asset cannot be allowed in the computation of the trust's income. The decision of High Court of Kerala in the case of Lissie Medical Institutions, on which the AO placed reliance, is again a decision in which it was held that depreciation allowance is a notional cost after writing off the full value of expenditure on acquisition of assets as application of income, therefore the depreciation has to be written back as income available for application for charitable purposes. In other words, depreciation should not be considered as income applied for charitable purpose while considering whether 85% of gross income of the trust has been applied for charitable purpose and taxing the shortfall as income of the trust. It is true that the Chennai ITAT held in a plethora of decisions in trust cases that depreciation has to be allowed. However, in recent decisions delivered by ITAT Chennai, a contrary view was taken to the effect that depreciation on assets is not allowable as it amounts to double deduction. In the case of Anjuman- E- Himayath-E-Islam v. Assistant Director of Income-tax (Exemption)- IV Chennai [2015] 59 taxmann.com 379, the Chennai Tribunal reconsidered the decision of Kerala High Court in the case of Lissie Medical Institutions and held that it is only in this decision, the Court considered Circular No. 5P(LLX-6) dated 19.06.1968 of the Board whereas it has not been considered in other decisions and concluded that they are following this decision of the Kerala High Court and held the issue in favour of Revenue. The ITAT, while taking this decision, also took cue from the decision of Kolkata High Court order in the case of Girdharilal Shewnarain Tantia Trust [1993] 199 ITR 215 wherein the Court held that "income" contemplated by the provisions of section 11 is the real income and not the income assessed or assessable. In the later decisions in the cases of Tamil Nadu Cricket Association v. Deputy Director of Income-tax (Exemptions), Chennai [2015] 60 taxmann. Com 287 (Chennai - Trib.) and Deputy Director of Income-tax (Exemptions), Chennai v. Vels Institute of Science, Technology & Advanced Studies [2015] 64 taxmann. Com 46 (Chennai-Trib.) and few other cases, the ITAT held a similar view. In fact, the ITAT, Chennai had, vide order in 1.T.A.No.2097/Mds/2014 dated 26.06.2015, decided the identical issue in the appellant's own case for A.Y.2010-11 against the appellant. Respectfully following the above decisions of the jurisdictional ITAT, Chennai, I hold that depreciation is not allowable since the cost of asset was already allowed as deduction towards application of income. The grounds are dismissed.”
At the outset, we find the issue with respect to the claim of depreciation, while computing the income u/s. 11 of the Act, is squarely covered by the decision of the Chennai bench of the Tribunal cited supra, which the Ld. CIT (A) has followed. Therefore, we do not find it necessary to interfere with the orders of the Ld. CIT(A).
In the result the appeal of the assessee is dismissed.
Order pronounced on 09th March, 2017 at Chennai.