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Depreciation of asset of the institution under section 12A to be deducted to arrive at income available for charitable purposes

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Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
On the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing depreciation on certain fixed assets, particularly when full cost of such assets stood allowed in earlier years as application of income and further allowance by way of depreciation would now result in allowing double deduction. Reliance is placed on the decision of Cochin Bench of ITAT in the case of the DDIT(E) Vs. Lissie Medical Institutions (2010-TIOL-644-ITAT-Coachin)

Citation :
Income-tax Officer (E), Trust Ward-III, Delhi. (Appellant) Vs.Council of Scientific & Industrial Research, Anusandhan Bhawan,Rafi Marg, New Delhi. PAN: AAATC2716R(Respondent)

IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘B’: NEW DELHI

  BEFORE SHRI B.R. MITTAL, JUDICIAL MEMBER AND

 SHRI B.R. JAIN, ACCOUNTANT MEMBER

I.T.A.No.90/Del/2011

Assessment Year : 2006-07

Income-tax Officer (E),

Trust Ward-III, Delhi. (Appellant)

Vs.

Council of Scientific & Industrial Research,

Anusandhan Bhawan,

Rafi Marg,  New Delhi.

PAN: AAATC2716R

(Respondent)

                 Appellant   by  : Shri Deepak Sehgal, Sr. DR. 

                 Respondent by : S/Sh. Manoj Garg & R.R. Maurya, ARs.

O R D E R

PER B.R. MITTAL, JUDICIAL MEMBER

The department has filed this appeal for the assessment year 2006-07 against order of the learned Commissioner of Income-tax (Appeals) dated 22nd October, 2010 on the following ground:-

“On the facts and in the circumstances of the case, the Ld. CIT(A) erred in allowing depreciation on certain fixed assets, particularly when full cost of such assets stood allowed in earlier years as application of income and further allowance by way of depreciation would now result in allowing double deduction.  Reliance is placed on the decision of Cochin Bench of ITAT in the case of the DDIT(E) Vs. Lissie Medical Institutions (2010-TIOL-644-ITAT-Coachin).”

2.       We have heard the learned representatives of the parties and perused the orders of the authorities below.  During the course of hearing the learned Sr. DR relied on the order of the Assessing Officer.  However, the learned AR submitted that the assessee is a charitable institution and is registered under sec. 12A of the Income-tax Act, 1961 (the Act) with effect from 1.04.2000 and is eligible for computation of its income under sec. 11 of the Act.  The learned AR submitted that the assessee purchased fixed assets during the year at Rs.26,341.58 lakhs and has claimed as application of income.  The assessee has also claimed depreciation of rs.13,655.72 lakhs.  However, the Assessing Officer has disallowed the depreciation by holding that the cost of acquisition of the assets has been considered as application of income under sec. 11 of the Act and if the depreciation is also allowed to the assessee, it amounts to double deduction.  He submitted that the issue is covered  in favour of the assessee by the decision of Hon’ble jurisdictional High Court in the case of Director of Income-tax vs. Vishwa Jagriti Mission in ITA No.140/2012 dated 29th March, 2012 wherein it has been held by their Lordships that the amount of depreciation debited to the account of charitable institution has to be deducted to arrive at the income available for application to charitable and religious purposes.  The learned AR to substantiate his submissions filed a copy of the said order.

3.       On consideration of facts of the case we agree with the learned AR that the issue is covered in favour of the assessee by the decision of Hon’ble jurisdictional High Court in the case of  Vishwa Jagriti Mission (supra).   In the said case the question before the Hon’ble High Court was whether the income of the assessee should be computed on commercial principles and in doing so, whether the depreciation on fixed assets utilized for the charitable purposes should be allowed.  The Hon’ble jurisdictional High Court after considering the decisions of the other Hon’ble High Courts viz. the Hon’ble Andhra Pradesh High Court in the case of  CIT vs. Nizam’s Suppl. Religious Endowment Trust (1981) 127 ITR 378; Hon’ble Madras High Court in the case of CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities (1983) 135 ITR 485; Hon’ble Madhya Pradesh High Court in the case of CIT vs. Raipur Pallottine Society, 180 ITR 579 and also the decision of Hon’ble Bombay High Court in the case of DIT(E) vs. Framjee Cawasjee Institute (1993) 109 CTR 463, held that the amount of depreciation debited to the account of the charitable institution has to be deducted to arrive at the income available for the application to charitable and religious purposes.  The assessee was only claiming the depreciation to reduce from the income for determining the percentage of funds which had to be applied for the purpose of trust.  There was no deduction claimed by the assessee.  Hence, it could not be said that double benefit was given to the assessee in allowing the claim for depreciation for computing the income for purposes of sec. 11 of the Act.  In view of above, we hold that there is no infirmity in the order of the CIT(A).  Accordingly, we uphold his order and reject the ground taken by the department. 

4.       In the result, the appeal of the department is dismissed.

5.       Order pronounced in the Open Court on 31st October, 2012.

                   Sd/-                                                             Sd/-

(B.R. JAIN)                                                   (B.R. MITTAL)

   ACCOUNTANT MEMER                                 JUDICIAL MEMBER

Dated: 31st October, 2012.

Copy of the order forwarded to:-

  1. Appellant
  2. Respondent
  3. CIT
  4. CIT(A)
  5. DR                                                                  

By Order

*mg                                                                  Deputy Registrar, ITAT. 

 

CS Bijoy
on 22 November 2012
Published in Income Tax
Views : 1873
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