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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Ms. SUCHITRA KAMBLE & SHRI WASEEM AHMED
PER SUCHITRA KAMBLE, JUDICIAL MEMBER :
This appeal is filed by the Revenue against the order dated 10.04.2017 passed by the CIT(A)-9, Ahmedabad for the Assessment Year 2009-10.
The Revenue has raised the following grounds of appeal:
“1. The Ld. CIT(A) has erred in law in allowing the claim of depreciation of Rs.55,32,155/- to the assessee which amounts to double deduction as 100% deduction was allowed to the assessee as application of income.
2. The Ld. CIT(A) has erred in directing the A.O. to allow the carry forward of deficit of Rs.4,34,17,907/- while there is no provision in Income Tax Act to carry forward the excess expenditure incurred by the trust during the year and set off it against the income of subsequent year.
3. On the facts and circumstances of the case, the Ld. Commissioner of Income Tax (Appeal) ought to have upheld the order of the Assessing Officer. 1
It is, therefore, prayed that the order of the Ld. Commissioner of Income Tax (Appeal) may be set aside and that of the Assessing Officer be restored.”
The assessee filed its return of income for the Assessment Year under consideration on 29.09.2009 declaring total income at Rs. Nil. The Assessing Officer completed the assessment under Section 143(3) of the Income Tax Act, 1961 on 13.12.2011, but later on it was observed that the assessee claimed excess depreciation of Rs.55,32,155/- and therefore, notice under Section 148 of the Act was issued on 16.02.2015 after obtaining due permission from relevant authority. The assessee was given show-cause notice dated 10.12.2015. The assessee filed objection against the reopening of the assessment proceedings vide letter dated 11.01.2016 which was rejected by the Assessing Officer. The Assessing Officer relied upon the decision of Hon’ble Supreme Court in the case of Escort Limited vs. Union of India (1993) 199 ITR 43 wherein it was held that when deduction under Section 35(2)(iv) of the Act was allowed in respect of capital expenditure on scientific research no depreciation has to be allowed under Section 32 on the same asset. Thus, the Assessing Officer disallowed depreciation of Rs.55,32,155/-and assessed the income at Rs.(-) 4,34,17,907/-.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
The Ld. DR submitted that as regards ground no.1 related to allowing the claim of depreciation of Rs.55,32,155/- to the assessee which amounts to double deduction as 100% deduction was allowed to the assessee as application of income, he relied upon the decision of the Hon’ble Kerala High Court in case of Lissie Medical Institutions vs. CIT, 348 ITR 344 wherein the Hon’ble Kerala High Court has also taken cognisance of the decision of Hon’ble Gujarat High Court in the case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust, 198 ITR 598 (Guj).
As regards ground no.2, the Ld. DR submitted that the CIT(A) has erred in directing the Assessing Officer to allow the carry forward of deficit of Rs.4,34,17,907/- while there is no provision in Income Tax Act to carry forward the Trust during the year and set off it against the income of subsequent year. The Ld. DR relied upon the Assessment Order.
The Ld. AR submitted that the CIT(A) has rightly allowed the claim of depreciation as the issue of allowability of depreciation in the case of Charitable Trust was decided by the Hon’ble Gujarat High Court in the case of CIT vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (supra).
As regards ground no.2, the Ld. AR relied upon the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. As regards ground no.1 relating to deduction on account of depreciation claimed by the trust vis-a-vis claim of capital expenditure on acquisition of assets on application of income under Section 11 of the Act the same is permissible in view of the provisions of law as per the contentions of the Ld. AR. From the perusal of various decisions including the decision of Hon’ble Kerala High Court wherein the case of Hon’ble Gujarat High Court relied by the Ld. AR was discussed, the same cannot be taken into account as in the present case when the assessee is a Charitable Trust the depreciation claimed by the Trust on account of acquisition of asset are eligible for claiming the same depreciation alongside the claim of expenditure under Section 11 of the Act. Both the aspects are totally different and cannot be termed as equal for claiming deduction on account of depreciation and will not be termed as double deduction under the Income Tax Statute. Therefore, the CIT(A) has rightly allowed the claim of the assessee. Ground no.1 of the Revenue’s appeal is dismissed.
As regards ground no.2, the Assessing Officer has not allowed to carry forward of deficit of Rs.4,34,17,907/-, the contentions of the Ld. AR that there was a deficit which is excess of expenditure over income during the year under consideration and the Assessing Officer has not allowed this deficit to be carried forward to the next year due to the fact that the income of the Trust is under Section 11 of the Act as there is no such provision for carry forward of deficit under the provisions of Section 11. The provisions of section 11(1)(a), 11(2) and 11(3) envisage that income derived from property held under the trust wholly for charitable 3
India, and where any such income is accumulated or set off for application to such purposes in India, to the extent to which the income so accumulated or set off is not in excess of 15% of the income from such property. Thus, there is no debarment of carried forward of deficit/losses and Section 72 to Section 74 of the Act will apply as it is. The Ld. DR could not point out as to why these Sections will not be applicable in the present assessee’s case merely on the ground that the assessee is Director of the Trust. Therefore, ground no.2 is dismissed.
As regards ground nos.3 & 4, the same are general in nature and hence dismissed.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open Court on this 14th day of September, 2022.