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2021 (11) TMI 501 - AT - Income TaxRevision u/s 263 by CIT - whether depreciation is allowable on fixed assets, whose cost have been allowed as application of income ? - HELD THAT:- As in the case of CIT Vs. Rajasthan & Gujarat Charitable Foundation, Pune [2017 (12) TMI 1067 - SUPREME COURT] held that the depreciation can be treated as application of income even if the expenditure on acquisition of capital asset was treated as application of income. We notice that the Income tax Act has been amended from AY 2015-16 disentitling the assessee to claim depreciation on assets, whose cost has been allowed as application of income. Since the year under consideration is AY 2010-11, the decision rendered by Hon'ble Supreme Court is applicable to the facts of the present case. Since the view taken by Ld. CIT(A) is contrary to the binding decision rendered by Hon'ble Supreme Court, his view on this issue cannot be sustained. Accordingly, we set aside his order on this issue. Whether "repayment of loan" is application of income or not? - CIT (Exemptions) has taken the view that if the asset acquired out of loan proceeds had been allowed as application of income, then the repayment of loan cannot be considered as application of income again, as the same will result in double deduction. A.O. has not examined this issue during the course of assessment proceedings - there is merit in initiation of revision proceedings on this issue - CIT(A) has directed the AO not to consider "repayment of loan" as application of income without giving a finding whether the cost of asset acquired out of loan funds were allowed as application of income or not. Hence his direction given on this issue requires modification. We quash the order of Ld. CIT(Exemptions) with regard to issue relating to depreciation. With regard to issue relating to repayment of loan, we modify the direction of the CIT (Exemptions) and direct the A.O. to examine this claim afresh i.e. if the cost of assets acquired out of loan funds have already been allowed as application of income, then the repayment of loan should not be allowed as application. On the contrary, if the cost of assets purchased out of loan was not allowed as application of income, then the repayment of loan should be allowed as application of income. We modify the directions given by Ld. CIT(Exemptions) accordingly.
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