TMI Blog2021 (5) TMI 358X X X X Extracts X X X X X X X X Extracts X X X X ..... ur opinion, there is no error in the order of Ld. CIT(A) on the issue in dispute, and accordingly, we uphold the same. The ground of the appeal of the Revenue is accordingly dismissed. - ITA No. 645/Del./2017 - - - Dated:- 11-5-2021 - SHRI O. P. KANT , ACCOUNTANT MEMBER AND SHRI KULDIP SINGH , JUDICIAL MEMBER Appellant by : Ms. Pramita M. Biswas, CIT(DR) Respondent by : None ORDER PER O. P. KANT, AM This appeal by the Revenue is directed against order dated 25/11/2016 passed by the Learned CIT(Appeals)-40, New Delhi [in short the Ld. CIT(A) ] for assessment year 2012-13 raising following grounds: 1. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in law in allowing the claim of carry forward of losses disregarding the fact that set-off and carry forward of losses are dealt with by the provisions of section 70 to 74 of the Income Tax Act. 2. On the facts and circumstances of the case and in law, Ld. CIT(A) has erred in law and fact that allowing depreciation of fixed assets is tantamount double deduction as the expenditure on fixed assets is already allowed. 3. The appellant craves leave to add, to alter or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of sections 11, 12, 12A, 12AA and 13 under Chapter III of the Income-tax Act. These sections constitute a complete code governing the grant, cancellation or withdrawal of registration, providing exemption of income and also conditions subject to which a charitable trust or institution is required to function in order to be eligible for exemption. Section ll(l)(a) provides for exemption to the extent income derived from the property held under trust is applied for charitable purposes. Subject to fulfillment of conditions laid down in section 11, exemption is available in respect of income irrespective of whether the expenditure incurred is revenue or capital in nature. Hence, exemption is available even when the income is applied for acquiring a capital asset. In view of this, charitable institutions were not eligible for depreciation. 4.1.4 This view has been clarified in Para 7.5 of the Explanatory Notes to the provisions of the Finance (No. 2) Act, 2014 issued vide Circular No. 1/2015 dated 21st January, 2015. Section 11 was amended by the Finance (No. 2) Act, 2014 whereby a new subsection' has been inserted which provides that under section 11, income for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of DIT (Exemption) vs. Indraprastha Cancer Society (supra), the claim of depreciation of the appellant is allowed. Ground ofp Appeal No. 1 hence, allowed. 4.1 We find that the Ld. CIT(A) following the decision of the Hon ble Jurisdictional High Court in the case of DIT (Exemption) Vs Indraprastha Cancer Society (supra), has allowed the claim of the assessee of the depreciation, despite claiming by assessee of capital expenditure corresponding to the depreciation as application of funds for charitable purposes while calculating excess of income over expenditure in terms of section 11 of the Act. We may also like to mention that Hon ble Supreme Court in the case of Rajasthan and Gujarati Charitable Foundation Poona reported in 402 ITR 441(SC) has allowed benefit of the depreciation while claiming exemption under section 11 of the Act. The relevant finding of the Hon ble Supreme Court is reproduced as under: 1. These are the petitions and appeals filed by the Income Tax Department against the orders passed by various High Courts granting benefit of depreciation on the assets acquired by the respondents-assessees. It is a matter of record that all the assessees are char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s application of income in the year of acquisition? It was held by the Bombay High Court that section 11 of the Income Tax Act makes provision in respect of computation of income of the Trust from the property held for charitable or religious purposes and it also provides for application and accumulation of income. On the other hand, section 28 of the Income Tax Act deals with chargeability of income from profits and gains of business and section 29 provides that income from profits and gains of business shall be computed in accordance with section 30 to section 43C. That, section 32(1) of the Act provides for depreciation in respect of building, plant and machinery owned by the assessee and used for business purposes. It further provides for deduction subject to section 34. In that matter also, a similar argument, as in the present case, was advanced on behalf of the revenue, namely, that depreciation can be allowed as deduction only under section 32 of the Income Tax Act and not under general principles. The Court rejected this argument. It was held that normal depreciation can be considered as a legitimate deduction in computing the real income of the assessee on general princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above Judgment. Consequently, Question No. 2 is answered in the Affirmative i.e., in favour of the assessee and against the Department. After hearing learned counsel for the parties, we are of the opinion that the aforesaid view taken by the Bombay High Court correctly states the principles of law and there is no need to interfere with the same. It may be mentioned that most of the High Courts have taken the aforesaid view with only exception thereto by the High Court of Kerala which has taken a contrary view in 'Lissie Medical Institutions v. Commissioner of Income Tax'. It may also be mentioned at this stage that the legislature, realising that there was no specific provision in this behalf in the Income Tax Act, has made amendment in Section 11(6) of the Act vide Finance Act No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature. It also follows that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well. 4.2 In view of the above, we do not find any error in the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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