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