Depreciation under section 32 when the cost had already been claimed in the preceding year by application of Income

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
Facts, in brief, as per the relevant orders are that return declaring income of `1,92,16,940/- filed on 29-09-2009 by the assessee, providing consultancy of automotive components, was selected for scrutiny with the service of notice u/s 143(2) of the Income-tax Act, 1961 (herein after referred to as the ‘Act’]) issued on 16.09.2010.During the course of assessment proceedings, the Assessing Officer[AO in short] noticed that though assessee was registered u/s 12A of the Act, it did not claim exemption u/s 11 of the Act in view of insertion of proviso to section 2(15) of the Act introduced by the Finance Act, 2009 w.e.f 01.04.2009. To a query by the AO as to why depreciation be not disallowed, the assessee having already claimed the entire money spent on acquisition of capital assets by way of application of funds, the assessee replied that merely because cost of acquisition of capital asset has been claimed as application of income for charitable purposes in the year of acquisition, deduction of depreciation in determination of income cannot be denied. Inter alia, the assessee relied upon decisions in CIT V Society of the sisters of St. Anne, 146 ITR 28 (Kar);CIT V Raipur Pallottine Society 180 ITR 579(MP);CIT V Seth Manilal Ranchhoddas Vishram Bhawan Trust 198 ITR 598 (Guj);CIT V Institute of Banking (2003) 264 ITR 110 (Bombay);CIT V Market Committee Pipli (2011) 330 ITR 16 (P&H);CIT V Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485 (Mad) and DIT(E) vs. Framjee Cowasjee Institute,109 CTR(Bombay)463.However, the AO did accept the submissions of assessee and while relying upon the decision of the Hon’ble Apex Court in Escorts Ltd. vs. Union of India, 199 ITR 43(SC) disallowed the claim for depreciation while determining the income under the head ‘Profits and Gains of the Business or Profession

Citation :
ADIT(E), Inv. Trust Circle -I, 3rd Floor, Aaykar Bhawan, District Centre Laxmi Nagar, New Delhi (Appellant) V/s. Automotive Component Manufacturers Association of India The Capital Court, Olof Palme Marg Munirka, New Delhi-110067 [PAN: AAATA1724F] (Respondent)