2015 (3) TMI 1242 - AT - Income Tax

Deduction of depreciation u/s. 32 available to a charitable Trust - Held that - CIT(A) followed the decision of Hon ble Bombay High Court in assessee s own case for A.Y. 2003-04 2011 (2) TMI 1505 - BOMBAY HIGH COURT in holding that the assessee is entitled to depreciation and does not amount to double deduction - Decided in favour of assessee.

Summary

Issues:
1. Allowance of depreciation based on High Court decision vs. Supreme Court judgments
2. Availability of depreciation for a charitable Trust
3. Treatment of asset value for depreciation purposes
4. Allowance of deficit carry forward as application of income for charitable purpose

Issue 1:
The first issue revolves around the allowance of depreciation based on a High Court decision versus Supreme Court judgments. The Revenue challenged the CIT(A)'s direction to allow depreciation, citing the Hon'ble Bombay High Court's decision in a specific case. The Revenue argued that the Supreme Court's stance on double deduction should be considered. However, the CIT(A) relied on the High Court's decision in the appellant's case for A.Y. 2003-04, emphasizing that depreciation does not amount to double deduction. The CIT(A) directed the AO to allow depreciation, aligning with the High Court's ruling. The ITAT upheld the CIT(A)'s decision, noting consistency with the High Court's and ITAT's views, dismissing the Revenue's appeal.

Issue 2:
The second issue pertains to the availability of depreciation for a charitable Trust under section 32 of the Income Tax Act, even if the Trust's income is not assessable under the 'Profit and gains from business and profession' head. The ITAT's decision did not directly address this issue as the focus was on the allowance of depreciation based on judicial precedents. However, the ITAT's decision to uphold the CIT(A)'s order indirectly supports the Trust's entitlement to depreciation, as determined by the High Court's ruling.

Issue 3:
The third issue concerns the treatment of the asset value for depreciation purposes, particularly whether the cost of an asset, already deducted on account of income application, should be considered as NIL for depreciation purposes. This issue was not explicitly discussed in the judgment, as the primary focus was on the allowance of depreciation based on legal precedents. Therefore, there is no specific resolution provided for this issue in the judgment.

Issue 4:
The fourth issue involves the allowance of deficit carry forward as an application of income for charitable purposes. The CIT(A) directed the AO to permit the carry forward of deficits from earlier years to subsequent years, considering such adjustments as an application of income for charitable purposes. The ITAT upheld the CIT(A)'s decision, citing consistency with previous judicial decisions and dismissing the Revenue's appeal. This issue was resolved in favor of the Trust, allowing the deficit carry forward as a valid application of income for charitable purposes.

In conclusion, the ITAT's judgment addressed the issues raised by the Revenue regarding depreciation allowance, aligning with the High Court's decision and previous ITAT rulings. The Trust's entitlement to depreciation was indirectly supported, and the allowance of deficit carry forward as an application of income for charitable purposes was upheld.