2018 (12) TMI 1928 - AT - Income Tax

Exemption u/s 11 - allowability of depreciation of fixed assets in the case of public charitable trust - HELD THAT - The issue of allowability of depreciation of fixed assets in the case of public charitable trust has been settled in the case of CIT Vs. Rajasthan and Gujarati Charitable Foundation Poona 2017 (12) TMI 1067 - SUPREME COURT - the Hon ble Bombay High Court in the case of CIT Vs. Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY HIGH COURT and in the case of Director of Income Tax(Exemptions) Mumbai Vs. Shri Vile Parle Kelavani Mandal 2015 (5) TMI 220 - BOMBAY HIGH COURT has held that there is nothing like double deduction and when the assessee has acquired an asset from the income of the trust and thereafter claimed the depreciation on the use of fixed assets such depreciation claim does not mean double deduction. Accordingly we do not find any reason to deviate from the findings of the Ld. CIT(A) and therefore we uphold the order of CIT(A) on this issue. Grounds raised by Revenue on this issue are dismissed. Carry forward loss and allow the set off against the subsequent year s income - HELD THAT - It is an undisputed fact that during the year assessee has deficit as his gross expenditure exceeded the gross income and claimed the same to subsequent year for being set off against the subsequent years - AO disallowed the same by holding that if the deficit is allowed to be carried forward; the same would result in double deduction to assessee. CIT(A) in the appellate proceedings after relying on the decision in the case of CIT Vs. Institute of Banking Personnel Selection 2003 (7) TMI 52 - BOMBAY HIGH COURT allowed the appeal of assessee. In the present facts and circumstances of the case and after perusing the decision of the Hon ble Jurisdictional High Court in the case of CIT Vs. Institute of Banking Personnel Selection (supra) we are of the view that the Ld. CIT(A) has correctly allowed the carry forward of deficit to the following years for claiming set off. - Decided against revenue.

Summary

Issues:
1. Allowability of depreciation on fixed assets for a public charitable trust.
2. Allowance of carry forward loss for subsequent years.

Issue 1: Allowability of Depreciation on Fixed Assets:
The Revenue challenged the order of the Commissioner of Income Tax (Appeals) directing the AO to allow depreciation on fixed assets for a public charitable trust. The AO had disallowed the depreciation claim, citing the principle that double deduction cannot be allowed. The CIT(A) allowed the claim, relying on relevant case laws and judgments. The ITAT observed that the issue of depreciation for public charitable trusts was settled by the Supreme Court and the Bombay High Court, emphasizing that claiming depreciation on fixed assets does not constitute double deduction. The ITAT upheld the CIT(A)'s order, dismissing the Revenue's grounds on this issue.

Issue 2: Allowance of Carry Forward Loss:
The Revenue contested the CIT(A)'s direction to allow the carry forward loss of a significant amount and set it off against subsequent years' income. The AO had rejected the claim, stating that the expenditure was out of corpus or loans and advances taken, hence not eligible for carry forward. The CIT(A) allowed the appeal, citing relevant case laws and judgments, including the decision of the Bombay High Court. The ITAT noted that the AO's disallowance would result in double deduction for the assessee and upheld the CIT(A)'s decision to allow the carry forward of the deficit for set off in subsequent years. The ITAT dismissed the Revenue's grounds on this issue as well.

In conclusion, the ITAT upheld the CIT(A)'s orders on both issues, emphasizing the legality of claiming depreciation on fixed assets for charitable trusts and the allowance of carry forward losses for subsequent years. The appeal of the Revenue was dismissed, and the decisions were pronounced in December 2018.