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International Goudiya Vedanta Trust, B-3, Block OCF Pocket, Janakpuri, New Delhi. Vs. ADIT (E), Trust Circle-II, New Delhi.
August, 26th 2015

                         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.
New Delhi.


     (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


     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) 43 330 (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) 53 463 (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,


                                                   (R.S. SYAL)
                                             ACCOUNTANT MEMBER

Dated: 25th August, 2015.


Copy forwarded to

1.   Appellant
2.   Respondent
3.   CIT
4.   CIT(A)
5.   DR
                                              Dy. Registrar, ITAT, New Delhi
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