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2023 (11) TMI 639 - AT - Income TaxAssessment of trust - gross receipts computation - Depreciation claim of assessee trust - AO denied the claim for depreciation since the corresponding expenditure for acquisition of the asset was already claimed towards application of income in the earlier years - AO’s inclusion of profit on sale of property at Thangam colony for arriving at the gross receipts and also for not considering the said amount for the purposes of arriving at application of income - HELD THAT:- As correctly decided by CIT(A) assessee simply credited the Schedule of fixed assets of Padi school - The said addition was made under the head ‘land and building’, which had an opening WDV - there is no acquisition of any new asset. As per the written submission filed on 22.01.2020, the amounts were stated to be utilized for improvement and acquisition of other fixed assets. However, there is no acquisition of any new fixed assets. The conditions as laid down in sub section (1A) of Sec.11 stood violated and hence such amount cannot be included for the purposes of arriving at "application of income". Thus, the AO’s inclusion of profit on sale of property at Thangam colony for arriving at the gross receipts and also for not considering the said amount for the purposes of arriving at application of income, both are correct. Sec.11(1A) being violated, the impugned amount cannot be considered for application and the net consideration is taxable as capital gains. Issue of allowing depreciation on the assets, whose expenditure has already been claimed towards "application of Income" is settled in favour of the assessee by the decision of the Hon'ble Apex Court in the case of CIT Vs. Rajasthan and Gujarat Charitable Foundation (2017 (12) TMI 1067 - SUPREME COURT) - The Hon'ble Apex Court further held that the decision of the Hon’ble Bombay High Court in the case of CIT Vs Institute of Banking Personnel Selection (IBPS) [2003 (7) TMI 52 - BOMBAY HIGH COURT] is correct, wherein the claim of depreciation in the case of trusts was held allowable on the assets whose expenditure was already claimed towards application of income. Thus, the AO should not have reduced the claim of depreciation while arriving at the application of income. AO is directed to consider the application of income (which means the claim of depreciation is allowed) against the income to be applied (which represents 85% of gross receipts). Accordingly ground no. 4 pertaining to the claim of depreciation is allowed and ground no. 5, 6 & 7 are dismissed.
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