2012 (4) TMI 115 - HC - Income Tax

Disallowance of Depreciation - appellant is a charitable institution under Section 12A – acquired medical equipments with the surplus funds available – AO held that the assessee claims expenditure for acquisition of assets claiming depreciation in the computation of income though the appellant enjoys a 100% write off of the cost of assets – resulting in double deduction of capital expenditure leading to violation of the provisions of Section 11(1) – assessee contented that the system of allowing depreciation was followed by the assessee for several years - Held that :- if the assessee treats expenditure on acquisition of assets as application of income for charitable purposes under Section 11(1)(a) and claims depreciation then in order to reflect its true income, the assessee should write back in the accounts the depreciation amount to form part of the income -assessee cannot be taken by surprise by disallowing depreciation which was being allowed for several years and to demand tax for one year after making dis-allowance - assessee should be allowed to write back the depreciation for this year and even for previous and then allow the same to be carried forward for application for subsequent years - appeal in favour of Revenue but by granting the relief to the assessee .