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2018 (5) TMI 235 - ITAT AMRITSAREntitled to a claim of depreciation allowance on the assets of its’ unit managing shrines (holy places) - Held that:- Without doubt, the same is admissible. The same would not be u/s. 32(1), as rightly pointed out by the ld. CIT(A), in-as-much as the assets do not represent or constitute a business undertaking. However, an annualized capital charge, based on a reasonable estimate of the life of the relevant assets, would definitely stand to be allowed, even as explained by the Board per its Circular No. 5-P (LXX-6) dated 19.06.1968. This, in fact, represents trite law and is also the premise for a claim of depreciation. The non-booking of depreciation in accounts, though essential inasmuch as it cannot be unaccounted, would not in our view be fatal. The first appellate authority ought to have issued specific directions in this regard as the assessee’s accounts, which are subject to audit, ought to bear the said charge. The same would also eschew a double claim in its respect, which is a distinct possibility where the asset value/s is not correspondingly reduced (by the amount of depreciation). Further, the assessee is equally entitled to claim capital expenditure, including on acquisition of capital assets, as a part of application of income. We state this in-as-much as exemption under section 11 is only on the basis of application of income, and not otherwise, and on which aspect we observe no finding by the AO. The matter, accordingly, shall travel to the file of the AO to compute the assessee’s income (for both the units) in accordance with law. The AO, whose powers in the matter of assessment are plenary, shall, after hearing the assessee, issue directions with regard to booking of depreciation deemed proper under the circumstances, which the assessee is entitled to claim, and which may extend to properties of both the units. We may clarify that the depreciation is to be consistently provided in accounts based on objective data. Penalty u/s. 271(1)(c) - excess of Gurdwara receipt over the related expenditure - Held that:- We have not only held of the assessee as being entitled for the claim of depreciation - which though would have to suitably quantified and also booked, but also for set off of capital expenditure as application of income, both in terms of settled law, which shall reduce the taxable income. In fact, even excluding section 11, the claim would stand, as it is only income thereafter that could be subject to application for charitable or religious purposes. In fact, merits apart, the assessment itself stands set aside. No case for the levy of penalty is under the circumstances made out. We decide accordingly.
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