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ACIT, Central, Aurangabad Versus Shreyash Pratisthan

2016 (10) TMI 493 - ITAT PUNE

Rejection of Claim of depreciation on the ground that the cost of asset has already been allowed as application of income in past assessment years - income for charitable purposes - Held that:- We find an identical issue had come up before the Tribunal in the case of DCIT Vs. Sanjeevan Vidyalaya Trust (2011 (9) TMI 1113 - ITAT PUNE) wherein the Tribunal after considering the decision of Hon’ble Supreme Court in the case of Escorts Ltd. and Others (1992 (10) TMI 1 - SUPREME Court) and following t .....

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M This appeal filed by the Revenue is directed against the order dated 09-06-2014 of the CIT(A), Aurangabad relating to Assessment Year 2010-11. 2. Grounds raised by the Revenue are as under : 1. On the facts and in the circumstances of the case and in law, whether the Ld. CIT(A) erred in allowing depreciation on the asset, acquisition of which has already been allowed as 'application of income'. 2. On the facts and in the circumstance of the case and in law, whether the Ld. CIT(A) erred .....

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capital asset, is not allowable again. 4. The appellant craves leave to add, alter, modify, delete, and amend any of the grounds, as per the circumstances of the case. 5. The appellant prays leave to adduce such further evidence to substantiated its case, as the occasion may demand. 3. Facts of the case, in brief, are that the assessee is a Public Charitable Trust registered under Bombay Public Trust Act, 1950 and also registered u/s.12A of the I.T. Act. The predominant object of the trust is t .....

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e, therefore, its WDV was Nil and hence there was no amount left on which depreciation could be claimed. He, therefore, held that the allowance of depreciation amounts to double deduction of the same amount invested in capital asset which is not permissible under the Act. For the above proposition, the AO relied on the decision of Hon ble Supreme Court in the case of Escorts Ltd. and others reported in 199 ITR 43 wherein it has been laid down that double deduction is not permissible in the schem .....

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tion is allowable as the same will not amount to double deduction. Distinguishing the various decisions relied on before him the AO disallowed the claim of depreciation of ₹ 2,46,56,925/-. 5. Before CIT(A) the assessee relying on various decisions submitted that depreciation is allowable even if the cost of the asset is claimed as application of the income for the objects of the trust in the earlier years. 6. Based on the arguments advanced by the assessee the Ld.CIT(A) in a very detailed .....

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n this case, it has been laid down that depreciation on depreciable assets had to be taken into account in computing income of Trust although the amount spent on acquiring such assets had been treated as application of income of the trust in the year in which assets were acquired. (ii) CIT Vs. Institute of Banking Personnel Selection (IBPS) 264· ITR 110 (Bombay) In this case, it has been laid down that depreciation is allowable on the assets the cost of which has been fully allowed as app .....

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siness income falling u/s 28 is not justified. (v) CIT Vs. Sheth Manilal Ranchhoddas Vishram Bhavan Trust (1992) 198 ITR 598 (Gujarat) In this case, it has been laid down that income for the purpose of 11(1)(a) has to be computed not in accordance with the provisions of the Act but in accordance with the normal rules of accountancy under which the depreciation on house property has to be allowed. (vi) S.RM.M.CT.M. Tiruppani Trust Vs CIT 230 ITR 636 (SC) In this case, it has been laid down that a .....

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t Committee, Pipli (AY.2005-06) 330 ITR 16 (P&H) In this case, it has been laid down that the depreciation is allowable on capital assets from the income of charitable trust for determining the quantum of the funds which have to be applied for the purposes of the trust in terms of section 11 and it cannot be said that double benefit is given in allowing the depreciation. In this case, the Hon'ble Court has considered and distinguished the decision in the case of Escorts Ltd. & Ors. V .....

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ision of Escorts Ltd. & Ors, Vs. Union of India (1993) 199 ITR 43 (SC). In this case, it has been laid down that amendment of Clause (iv) to sub section (2) of section 35 made by Finance (No.2) Act, 1980 was merely clarificatory in nature; once deduction u/s 35(2)(iv) was allowed, depreciation u/s 32 was not available qua same expenditure either in the same or any other previous year even under pre-amended provisions; the allowance of depreciation will amount to double deduction. 7.2 Now I p .....

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the decision relied on by the AO. is in respect of deduction of cost of an asset u/s 35 allowed as deduction for capital expenditure incurred on scientific research and further allowance of depreciation on the same asset whereas in the case under appeal, the appellant is a trust and has claimed cost of the asset as application of income u/s 11 and depreciation has been claimed in subsequent year on commercial principles. The above issue has been considered by Hon'ble Delhi High Court in the .....

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r its income should be computed on commercial principles in order to determine the amount of income available for application to charitable purposes. It was a case where the assessee was carrying on business and the statutory computation provisions of Chapter IV-D of the Act were applicable. In the present case, we are not concerned with the applicability of these provisions. We are concerned only with the concept of commercial income as understood from the accounting point of view. Even under n .....

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sessee again claim deduction on account of depreciation in respect of the same asset. The Supreme Court ruled that, under general principles of taxation, double deduction in regard to the. same business outgoing is not intended unless: clearly expressed. The present case is not one of this type, as rightly distinguished by the CIT(Appeals). Further, the above issue has also been considered by Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Market Committee, Pipli (A.Y.2005-06) .....

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r sections 32(1)(ii) and 35(1)(iv) of the Act. The assessee therein had incurred expenditure of a capital nature on scientific research relating to the business which resulted into acquisition of an asset. The assessee had sought to claim a specified percentage of the written down value of the asset as depreciation and at the same time claimed deduction, in five consecutive years of the expenditure incurred on the acquisition of the asset. The apex court observed (headnote) : "Where a capit .....

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ompletely overlap and there is some difference in the rationale of the two deductions .. " 9. It was further recorded that (head note) : "There is a fundamental, though unwritten, axiom that no Legislature could have at all intended a double deduction in regard to the same business outgoing; and, if it is intended, it will be clearly expressed. In other words, in the absence of clear statutory indication to the contrary, the statute should not be read so as to permit an assessee two de .....

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decisions relied on by the appellant are not acceptable and cannot be relied on as in the said decisions the ratio laid down by the decision in the case of Escorts Ltd. & Ors. Vs. Union of India (1993) 199 ITR 43 (SC) has not been considered. From the preceding paragraph it can be noted that in the above mentioned two decisions in the cases of CIT Vs. Vishwa Jagriti Mission (A.Y.2006-07) 73 DTR 195 (P&H) and CIT Vs. Market Committee, Pipli (AY.2005-06) 330 ITR 16 (Delhi), the decision i .....

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towards corpus is exempt and hence the investment out of such corpus is also not allowable as application for the purpose of the trust; in such case, the depreciation is allowable as the same will not amount to double deduction. In this regard, it has been noticed that the said section 11(1)(d) is in respect of exemption provided in respect of voluntary contribution received by the Trust with the specific direction that it shall form part of the corpus of the trust and hence not includible in t .....

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-06) 330 ITR 16 (Delhi) are AY.2006-07 & 2005-06 which are after the insertion of section 11(1)(d) w.e.f. 01/04/1989. In view of the above facts, the third contention raised by the A.O. is also rejected. It has also been noticed that recently the Hon'ble Kerala High Court in the case of Lissie Medical Institution Vs. CIT (2013) 76 DTR 372 has held that depreciation on the assets of a charitable trust is not allowable as the cost of asset is allowable as application of income. In support .....

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Court. It is settled law that where two views are possible and where different decisions of separate High Courts are available then the decision of the Court in favour of the assessee is to be followed. This proposition of law is supported by following decisions - i. CIT Vs. Vegetable Products Ltd. (1973) 85 ITR 192 (SC) ii. CIT Vs. Podar Cement (P) Ltd. Etc (1997) 141 CTR 67 (SC) iii. CIT Vs. Shaan Finance (P) Ltd. (1998) 146 CTR 110 (SC) Further, the decision of Hon'ble Jurisdictional High .....

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copy of the decision of the Tribunal in the case of DCIT Vs. Sanjeevan Vidyalaya Trust vide ITA No.692/PN/2010 order dated 27-09-2011 for A.Y. 2005-06 and submitted that the Tribunal after considering the decision of Hon ble Supreme Court in the case of Escorts Ltd. and Others (Supra) and following the decision of Hon ble Bombay High Court in the case of DIT(E) Vs.Framjee Cawasjee Institute (Supra) has allowed the claim of depreciation where the cost of acquisition of the asset has been claimed .....

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ion on the ground that the cost of asset has already been allowed as application of income in past assessment years and allowance of depreciation on the same will amount to double deduction. For the above proposition, the AO relied on the decision of Hon ble Supreme Court in the case of Escorts Ltd. and Others (Supra). We find the Ld.CIT(A) relying on various decisions allowed the claim of depreciation and his observation has already been reproduced in the preceding paragraphs. 11. We find an id .....

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observation of the Tribunal from Para 4 onwards read as under : 4. In brief, the facts are that the respondent-assessee is a trust which is running educational institutions and is registered under section 12A(a) of the Act with the Commissioner of Income-tax. While finalising the assessment, the Assessing Officer noticed that the assessee had claimed depreciation of ₹ 59,44,712/- on assets whose cost had been treated as application of income in the past years. As per the Assessing Officer .....

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63 (Bom). The Commissioner of Income-tax (Appeals) relying upon the aforesaid decision of the jurisdictional High Court allowed the claim of the assessee for depreciation. Against the aforesaid, Revenue is in appeal before us. 6. As noted earlier, the only plea agitated before us by the Revenue is based on the proposition that the allowance of depreciation would result in double deduction, since in the past years the capital expenditure on the relevant asset has already been allowed as applicati .....

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i Jain Agam Mandit Trust vide ITA No 1526/PN/07 has followed the judgment of the Hon'ble Bombay High Court in the case of Institute of Banking (supra) in upholding the stand similar to that of the assessee. 7. In this background, we have considered the rival submissions and find ourselves unable to uphold the stand canvassed by the Revenue, inasmuch as the Commissioner of Income-tax (Appeals) has decided the issue following the judgment of the Hon'ble jurisdictional High Court in the cas .....

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