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2025 (5) TMI 949 - AT - Income TaxDepreciation disallowance u/s 11(6) - double deduction - as argued the appellant has not claimed the purchase value of assets as application of income and hence the claim of depreciation did not amount to claim of any double benefit - HELD THAT - Deduction by way of depreciation shall be disallowed only if depreciation is claimed in respect of any assets acquisition of which has already been claimed as an application of income under this Section 11 of the Act. In the present case assessee submitted before us that on verification of the records of the assessee it would become clear that assessee has never claimed application of income towards acquisition of the above assets either in this year or any of the earlier previous years. Therefore there is no question of making any disallowance under Section 11(6) of the Act. Assessee had also furnished Chartered Accountant Certificate in support of the above claim that the assessee has never claimed application of income towards acquisition of assets. Thus in the interest of justice the matter is restored to the file of AO to verify from the case records whether the assessee has claimed cost of acquisition of such assets on which depreciation was claimed towards application of income either in this year or any of the previous assessment years. If on verification of records it is found that the assessee has not claimed the cost of acquiring the assets as application of income then relief may be given to the assessee in accordance with law. Appeal of the assessee is allowed for statistical purposes.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Consideration of Assessee's Submissions and Replies Legal Framework and Precedents: The principles of natural justice and fair hearing require that the Assessing Officer and appellate authorities consider the submissions and evidence presented by the assessee before passing an order. The appellate authority must address the arguments raised to ensure reasoned decisions. Court's Interpretation and Reasoning: The assessee contended that neither the Assessing Officer nor the NFAC considered the replies and submissions filed, leading to a dismissal without due consideration. The Tribunal noted the assessee's grievance that the NFAC did not discuss or appreciate the crucial argument that the asset acquisition cost was never claimed as application of income. Key Evidence and Findings: The assessee had submitted a Chartered Accountant certificate affirming no claim of acquisition cost as application of income. However, the appellate order of the CIT(A) did not address this point substantively. Application of Law to Facts: The Tribunal found merit in the assessee's contention that the crucial argument was overlooked. The failure to consider this submission amounted to an error in law and fact. Treatment of Competing Arguments: The Department relied on the CIT(A)'s order confirming the addition, but the Tribunal found that the CIT(A)'s reasoning was generic and did not engage with the specific factual claim of the assessee. Conclusions: The Tribunal held that the issue required verification and proper consideration of the assessee's submissions and directed restoration of the matter to the Assessing Officer for verification. Issue 2: Denial of Opportunity for Video Hearing Legal Framework and Precedents: The right to a fair hearing includes the opportunity to be heard through available modes, including video conferencing, especially in faceless assessment and appeal proceedings under the Act. Court's Interpretation and Reasoning: The assessee requested a video hearing, which was not granted by the NFAC. The Tribunal noted this procedural lapse but did not elaborate extensively on this ground, focusing primarily on the substantive issue of depreciation disallowance. Key Evidence and Findings: The request for video hearing was on record but was not granted. Application of Law to Facts: While the Tribunal acknowledged the procedural deficiency, the main relief was granted on substantive grounds, implicitly recognizing the importance of fair hearing opportunities. Treatment of Competing Arguments: The Department did not specifically counter this procedural grievance. Conclusions: Though not the primary basis for decision, the Tribunal's order to restore the matter implicitly allowed for reconsideration of procedural aspects including hearing opportunities. Issue 3: Disallowance of Depreciation under Section 11(6) of the Act Relevant Legal Framework: Section 11(6) of the Income Tax Act, inserted by Finance Act No. 2/2014 effective from Assessment Year 2015-16, provides that where any income is applied or accumulated for acquisition of an asset and such acquisition has been claimed as application of income under Section 11, then depreciation or any allowance in respect of such asset shall not be allowed for determining income of the charitable trust or institution. Precedents: The amendment was intended to prevent double benefits-claiming both application of income for asset acquisition and depreciation on the same asset. Court's Interpretation and Reasoning: The Tribunal emphasized the plain language of Section 11(6), which disallows depreciation only if the acquisition cost of the asset has been claimed as application of income under Section 11. The Tribunal noted that the assessee had not claimed the acquisition cost as application of income in the impugned year or any prior year. Key Evidence and Findings: The assessee produced a Chartered Accountant certificate confirming that the acquisition cost of the assets was not claimed as application of income. The CIT(A) dismissed the appeal relying on the general principle and the amendment but failed to verify this fact. Application of Law to Facts: Since the assessee had not claimed the purchase value of the assets as application of income, the disallowance of depreciation under Section 11(6) was not warranted. The Tribunal thus found that the Assessing Officer's addition was not justified without verifying this crucial fact. Treatment of Competing Arguments: The Department relied on the legislative intent and the CIT(A)'s order but did not produce evidence that the acquisition cost was claimed as application of income. The Tribunal found the Department's argument insufficient in the absence of such proof. Conclusions: The Tribunal restored the matter to the Assessing Officer to verify from records whether the acquisition cost was claimed as application of income in the relevant or any earlier year. If not, the depreciation disallowance should be withdrawn. 3. SIGNIFICANT HOLDINGS The Tribunal's crucial legal reasoning is encapsulated in the following verbatim excerpt: "From the plain reading of the above provision, it is seen that deduction by way of depreciation shall be disallowed only if depreciation is claimed in respect of any assets, acquisition of which has already been claimed as an application of income under this Section 11 of the Act. In the present case, the Counsel for the assessee submitted before us that on verification of the records of the assessee, it would become clear that assessee has never claimed 'application of income' towards acquisition of the above assets, either in this year or any of the earlier previous years. Therefore, there is no question of making any disallowance under Section 11(6) of the Act." Core principles established include:
Final determinations on each issue were:
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