INSTITUTE OF MANAGEMENT AND ADVANCE GLOBAL EXCELLENCE (IMAGE),BHUBANESWAR vs. ACIT(EXEMPTIONS), BHUBANESWAR

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ITA 225/CTK/2016Status: DisposedITAT Cuttack10 January 2017AY 2011-122 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 allowing depreciation does not constitute a double deduction, especially when the income is exempt under Section 11. It referred to a High Court ruling supporting this view.

What were the facts?

The Assessing Officer disallowed depreciation on leased building improvements, invoking Explanation 1 to Section 32, stating the assessee was not entitled to it. The CIT(A) upheld this, citing double deduction concerns.

What were the issues?

Whether depreciation on leased asset improvements is admissible for a charitable trust claiming exemption under Section 11. Whether allowing depreciation amounts to a double deduction.

Which sections of the Income-tax Act were involved?

Section 32,Section 11

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

2 ITA No.225 /CT K/20 16 Asse ss ment Y ear :20 11- 201 2

3.

I have heard the rival submissions and perused the orders of lower

authorities and materials available on record. Brief facts of the case are that

the Assessing Officer observed that the assessee does not have a building of

its own, that it had stated to have incurred capital expenditure towards

improvement of the building taken on lease from one Shri Somnath Nayak

and Shjri R.S.Meher . Therefore, invoking the Explanation 1 to Section 32, he

held that the assessee is not entitled to claim depreciation on leased assets

and added Rs.7,68,058/- to the income of the assessee.

4.

On appeal, ld CIT(A) observed that the claim of depreciation over and

above claim of entire capital expenditure as application of income is not

available in the Statute. No further depreciation is admissible on assets

claimed as application of income, because if the charitable trust treats

expenditure on acquisition of assets as application of income for charitable

purposes u/s.11(1)(a) and if the trust claims depreciation on the value of such

assets, then in order to reflect the true income to be available for application

for charitable purposes, the trust should write back in the accounts the

deprecation amount to form part of income to be accounted for application for

charitable purposes.

5.

Before me, ld A.R. of the assessee filed assessment orders for the

assessment years 2006-07, 2007-08, 2008-09 & 2009-2010 passed

u/s.143(3)of the Act and submitted that the depreciation on building in

4 ITA No.225 /CT K/20 16 Asse ss ment Y ear :20 11- 201 2

different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.”

7.

Further, ld CIT(A) has held that by allowing depreciation to the

assessee, the assessee is allowed double deduction once on account of

application of funds and another on account of depreciation. The Hon’ble P&H

High Court in the case of Market Committee Pipili (2011) 330 ITR 16

(P&H) has held as under:

“In the present case, the assessee is not claiming double deduction on account of depreciation as has been suggested by learned counsel for the Revenue. The income of the assessee being exempt, the assessee is only claiming that depreciation should be reduced from the income for determining the percentage of funds which have to be applied for the purposes of the trust. There is no double deduction claimed by the assessee as canvassed by the Revenue. The judgment of the Hon'ble Supreme Court in Escorts Ltd. case [1993] 199 ITR 43 is distinguishable for the above reasons. It cannot be held that double benefit is given in allowing claim for depreciation for computing income for purposes of section 11. The questions proposed have, thus, to be answered against the Revenue and in favour of the assessee".

9.

Therefore, I set aside the orders of lower authorities and delete the

disallowance of depreciation of Rs.7,68,058/- on building and allow the ground

of appeal of the assessee.

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