2014 (8) TMI 948 - AT - Income Tax

Disallowance of depreciation - assessee had also claimed the cost of acquisition of assets towards application of money - Held that - Following decision of CIT v. Market Committee Pipli 2010 (7) TMI 374 - Punjab and Haryana High Court - Decided against Revenue.

Summary

Issues:
- Disallowance of depreciation on capital assets
- Interpretation of double deduction for the same expenditure

Analysis:
The appeal before the Appellate Tribunal ITAT Chandigarh involved the disallowance of depreciation on capital assets by the Revenue, challenging the order of the Commissioner of Income-tax (Appeals) who had deleted the addition of &8377; 53,61,543 made by the Assessing Officer. The main contention was whether allowing depreciation on assets, after already allowing the capital expenditure for acquisition of such assets as "application of income" for exemption under section 11 of the Income-tax Act, 1961, would result in double deduction for the same expenditure.

Upon hearing both parties, it was noted that the assessee had indeed claimed depreciation amounting to &8377; 53,61,543, but it was disallowed due to the initial claim of the cost of acquisition of assets as part of the application of money. The Commissioner of Income-tax (Appeals) allowed the claim, citing a decision of the Punjab and Haryana High Court in the case of CIT v. Market Committee, Pipli [2011] 330 ITR 16 (P&H) as precedent.

The Departmental representative supported the Assessing Officer's order, arguing against the allowance of depreciation. Conversely, the counsel for the assessee contended that the issue was favorably settled by the aforementioned High Court decision. The Tribunal, after considering the arguments, referred to the High Court's ruling, which stated that in cases where the income is exempt, claiming depreciation should not be considered as seeking a double deduction, as it merely reduces the income for determining the percentage of funds to be applied for trust purposes.

Ultimately, the Tribunal decided the issue against the Revenue, upholding the decision of the Commissioner of Income-tax (Appeals) and dismissing the appeal. The judgment emphasized that allowing depreciation for computing income under section 11 did not lead to a double benefit or deduction, as clarified by the High Court's interpretation. The order was pronounced on August 19, 2014.