2011 (12) TMI 562 - AT - Income Tax

Disallowance of depreciation to assessee trust - double deduction - Held that - Claim allowed - Decided in favour of assessee.

Summary

Issues:
- Allowance of depreciation amounting to Rs. 93,70,596 on certain fixed assets leading to possible double deduction.

Detailed Analysis:

Issue 1: Allowance of Depreciation and Double Deduction
The appeal by the department challenged the order of the Ld. CIT(A) regarding the allowance of depreciation amounting to Rs. 93,70,596 on specific fixed assets for the assessment year 2007-08. The AO had initially disallowed depreciation, citing the possibility of double deduction. However, the assessee contended that depreciation should be allowed, referencing various case laws such as 198 ITR 598 (Guj.) and CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485. The Ld. CIT(A) accepted the appeal, particularly relying on the judgment of the Punjab & Haryana High Court in the case of CIT vs. M/s. Tiny Tots Education Society, distinguishing it from the case of Escorts Ltd. & Others. The High Court clarified that allowing depreciation for computing income under Section 11 did not result in double deduction.

Issue 2: Appeal by the Department
The department, aggrieved by the decision of the Ld. CIT(A), filed an appeal seeking to set aside the order and reinstate that of the AO. The department's primary contention was that allowing the assessee's claim for depreciation would lead to double deduction, which was not permissible under the law.

Issue 3: Arguments and Counter-Arguments
During the proceedings, the counsel for the assessee supported the decision of the Ld. CIT(A) and urged for its confirmation. It was highlighted that multiple High Courts had taken a similar stance on the issue, and the Ld. CIT(A) had correctly relied on the recent judgment of the Punjab & Haryana High Court in favor of the assessee. On the other hand, the department reiterated its stance on the possibility of double deduction and sought the restoration of the AO's order.

Issue 4: Tribunal Decision
After hearing both parties and examining the evidence and precedents presented, the Tribunal upheld the decision of the Ld. CIT(A). The Tribunal found the Ld. CIT(A)'s reasoning just and appropriate, noting the absence of any contradictory judgments from the jurisdictional High Court or a higher court. Consequently, the Tribunal dismissed the appeal of the revenue, affirming the allowance of depreciation and rejecting the claim of double deduction.

In conclusion, the Tribunal's judgment supported the allowance of depreciation on fixed assets, emphasizing that such allowance did not result in double deduction as feared by the department. The decision was based on a thorough analysis of relevant case laws and the specific circumstances of the case, ultimately upholding the appeal of the assessee and dismissing the revenue's appeal.