2013 (6) TMI 903 - AT - Income Tax

Eligibility to claim depreciation as an application of income for the purpose of claiming exemption under Section 11 - Held that - In assessee s own case for assessment years 2005-06 and 2006-07 this Tribunal had held that an assessee could claim depreciation as application of income of funds while computing its eligible exemption under Sections 11 and 12 of the Act. The same view has been followed by this Tribunal in the case of Sri Ranganathar Trust 2013 (1) TMI 1025 - ITAT CHENNAI - Decided in favour of assessee.

Summary

Issues:
- Claim of depreciation as application of income for exemption under Section 11 of the Income-tax Act, 1961.

Analysis:
The appeal involved a dispute regarding the eligibility of an assessee to claim depreciation as an application of income for the purpose of claiming exemption under Section 11 of the Income-tax Act, 1961. The Assessing Officer had disallowed the claim of depreciation, citing a previous decision of the Hon'ble Apex Court in the case of Escorts Ltd. v. Union of India (199 ITR 43). However, the CIT(Appeals) allowed the assessee's appeal based on previous Tribunal decisions in the assessee's own case for assessment years 2005-06 and 2006-07, which held that such a claim could be allowed.

The central question before the Tribunal was whether depreciation could be considered as an application of income while computing the income eligible for exemption under Sections 11 and 12 of the Act. The Tribunal referred to its previous orders in the assessee's case for assessment years 2005-06 and 2006-07, where it was held that depreciation could indeed be claimed as an application of income for computing exemption under Sections 11 and 12 of the Act. The Tribunal also cited another case to support this view.

The Tribunal analyzed various judicial precedents and highlighted the interpretation of commercial income, emphasizing that depreciation on assets of a Trust should be deducted for calculating the income eligible for exemption under Section 11. The Tribunal also discussed decisions from different High Courts supporting the allowance of depreciation for charitable trusts. It was noted that the decision of the Hon'ble Kerala High Court, which was not considered by the Co-ordinate Bench, did not change the overall consensus among other High Courts on the issue.

Ultimately, the Tribunal upheld the decision of the CIT(Appeals) to allow the claim of depreciation by the assessee. The Tribunal concluded that until the jurisdictional High Court takes an adverse view on the issue, it can follow the view in favor of the assessee when there is a cleavage of opinion among various High Courts. Consequently, the appeal of the Revenue was dismissed, and the order was pronounced in Chennai on June 6, 2013.