IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : SMC-I : NEW DELHI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
ITA No.1136/Del/2015
Assessment Year : 2010-11
International Goudiya Vedanta Vs. ADIT (E),
Trust, Trust Circle-II,
B-3, Block OCF Pocket, New Delhi.
Janakpuri,
New Delhi.
PAN : AAATI2455H
(Appellant) (Respondent)
Appellant by : Shri S.K. Khurana, Advocate &
Shri Kanishka Mehta, CA
Respondent by: Shri K.K. Jaiswal, Sr.DR
Date of Hearing : 24.08.2015
Date of Pronouncement: 25.08.2015
ORDER
This appeal by the assessee is directed against the order passed by the
CIT(A) on 26.12.2014 denying depreciation u/s 32(1) on the premise that
the assessee being a charitable institution has claimed exemption for the
cost of asset by means of application of its income.
ITA No.1136/Del/2015 2
2. Briefly stated, the facts of the case are that the assessee, a registered
society u/s 12A(a), engaged in providing education, medical assistance,
knowledge and research to poor, claimed depreciation in the computation of
its income. The AO did not allow such depreciation on the ground that the
purchase of asset has already been claimed as application of income and as
such deduction on account of depreciation would amount to double
deduction, which is impermissible. When the matter came up before the ld.
CIT(A), he upheld the action of the AO in the light of the judgment of the
Hon'ble Delhi High Court in the case of DIT(Exemption) vs. Charanjiv
Charitable Trust (2014) 43 taxman.com 330 (Del). The assessee is
aggrieved and is in appeal against the denial of depreciation.
3. I have heard the rival submissions and perused the relevant material
on record. It is noticed that the assessee was allowed depreciation by the
Hon'ble Delhi High Court vide its judgment dated 27.11.2013 in a bunch of
appeals led by DIT(E) vs. Indian Trade Promotion Organisation. The
assessee's name appears at Sl. no. 4 of this judgment of the Hon'ble Delhi
High Court relevant to assessment year 2009-10. In this judgment, the only
question was about the claim of depreciation. The Hon'ble High Court held
ITA No.1136/Del/2015 3
in this case that : `Application of income may include purchase of a capital
asset. The said purchase is valid and taken into consideration for the
purpose for ensuring compliance, i.e. application of money or funds and is
not a factor which determines and decides the quantum of income derived
from property held under trust. Computation of income is separate and
distinct and has to be made on commercial basis by applying the provisions
of the Act.' Thus it is manifest that the Hon'ble Delhi High Court in the
assessee's own case for the immediately preceding assessment year has
held that depreciation is allowable as separate deduction apart from
application of income. The ld. CIT(A) has relied on the judgment in the
case of Charanjiv Charitable Trust (supra) in which it has been held that
where in case of a trust, cots of asset has been allowed as deduction by way
of application of income, then depreciation on same asset cannot be
allowed in computation of income of trust. This judgment is dated
18.3.2014. Once again, similar issue came up for consideration before the
Hon'ble Delhi High Court in DIT (E) vs. Indraprastha Cancer Society
(2015) 53 taxman.com 463 (Del). Vide its judgment dated 18.3.2014, the
Hon'ble High Court has held that a charitable institution, which has
purchased capital asset and treated the amount spent as application of
ITA No.1136/Del/2015 4
income, is further entitled to claim depreciation on the same capital asset
utilized for business. In its later judgment, the Hon'ble High Court also
considered the earlier judgment in the case of Charanjiv Charitable Trust
(supra) deciding the issue against the assessee and the earlier judgment in
the case of Indian Trade Promotion Organisation (which also includes the
assessee) in favour of the assessee. On consideration of these two views,
the Hon'ble High Court in its latest judgment has decided to allow
depreciation on capital asset in the computation of income apart from
treatment of purchase of capital asset as application of income.
4. At this stage, it is relevant to note that the instant controversy has been
put to rest by the legislature by inserting sub-section (6) to section 11 by the
Finance (No. 2) Act, 2014, w.e.f. 1-4-2015, which reads as under : -
`(6) In this section where any income is required to be applied or
accumulated or set apart for application, then, for such purposes the
income shall be determined without any deduction or allowance by way of
depreciation or otherwise in respect of any asset, acquisition of which has
been claimed as an application of income under this section in the same or
any other previous year.'
5. The effect of this insertion is that from the A.Y. 23015-16, no
depreciation can be allowed in respect of any asset, whose acquisition has
been claimed as an application of income. In view of this later legislative
ITA No.1136/Del/2015 5
insertion which is not applicable to the year under consideration and
respectfully following the judgment of the Hon'ble jurisdictional High
Court in the assessee's own case for the immediately preceding assessment
year, I hold that depreciation should be allowed separately in the
computation of income.
6. In the result, the appeal is allowed.
The decision was pronounced in the open court on 25th August,
2015.
Sd/-
(R.S. SYAL)
ACCOUNTANT MEMBER
Dated: 25th August, 2015.
dk
Copy forwarded to
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Dy. Registrar, ITAT, New Delhi
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