Depreciation cannot be added back when the same was allowed as application of income under the head capital expenditure

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘C’ NEW DELHI

BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER

AND

SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER

ITA NO.2920/DEL/2011

ASSTT. YEAR: 2008-09

Asstt. Director of Income Tax(E),

TC-II, New Delhi.

(Appellant)

Vs

International Goudiya Vedanta

Trust, B-3, Block OCF Pocket,

Near Musical Fountain Park,

Janakpuri, New Delhi-110058

(PAN No. AAATI2455H)

(Respondent)

Appellant by: Shri B.R.R. Kumar, Sr. DR

Respondent by: Shri S.K. Khurana

O R D E R

PER C. L. SETHI, J.M.

The only ground raised by the revenue in this appeal, directed against the order dated 11.4.2011 passed by the learned CIT(A) for Asstt. Year 2008-09, is as under:-

“On the facts and in the circumstances of the case, the ld. CIT(A) has erred in allowing depreciation which the AO had added back to the tune of Rs.31,03,118/- as the same was already allowed as application of income under the head Capital Expenditure”.

2. The assessee is a public charitable trust. It is registered u/s 12A(a) of the Income Tax Act. Its income is eligible for exemption u/s 11 of the Act subject to the conditions specified therein. In the income and expenditure account submitted by the assessee, the assessee claimed deduction on account of depreciation of Rs.31,03,118/-, which has been disallowed by the Assessing Officer by observing that the same is not allowable while determining the surplus of the income of the assessee after considering various revenue expenditure without depreciation, capital expenditure applied to the objects of the Trust and the amount set apart u/s 11 subsection( 2) of the Act.

3. On appeal, the ld. CIT(A) has taken the view that in the light of the decision of Hon’ble Punjab & Haryana High Court in the case of CIT vs M/s Tiny Tots Education Society 330 ITR 21(P&H), the assessee’s claim of depreciation on capital assets is to be allowed as a deduction from the total income of the Trust.

4. Hence, the revenue is in appeal before us.

5. We have heard both the parties and perused the material on record. The Hon’ble Punjab & Haryana High Court in the case of CIT vs Tiny Tots Education Society (supra) has held that the income of the assessee, being exempt, the assessee was only claiming that depreciation should be reduced from the income for determining percentage of funds which had to be applied for the purposes of the Trust and as such, it could not be held that double benefit was given in allowing the claim for depreciation for computing the income for purposes of Section 11 of the Act. Respectfully following the aforesaid decision of Hon’ble Punjab & Haryana High Court, we uphold the order of ld. CIT(A) and direct the AO to allow depreciation and reduce the same from the income of the trust for determining the percentage of funds which had to be applied for the purposes of the Trust. The order of the ld. CIT(A) is thus upheld.

6. In the result, the appeal filed by the revenue is dismissed.

Order was pronounced in the open court on 21st December, 2011, immediately after the hearing was over.

                        Sd/-                                                                       Sd/-

           (SHAMIM YAHYA)                                              (C.L. SETHI)

      ACCOUNTANT MEMBER                               JUDICIAL MEMBER

DT. 21st DECEMBER, 2011

‘GS’

Copy forwarded to:

1. Appellant

2. Respondent

3. CIT (A)

4. CIT 5. DR

                                                                                                                                        By Order

Dy. Registrar