Trust Is Eligible for Depreciation Even though the Entire Expenditure Incurred for Acquisition of Capital Assets was treated as Application of Income: SC [Read Order]

The Supreme Court of India held that, there is no double benefit while allowing the depreciation of Assets when the Capital Expenditure is treated as application of Income for Charitable Purposes under Section 11(1)(a) of the Income Tax Act.

The Apex Court was hearing several petitions and appeals filed by Income Tax Department against the various orders passed by different High Courts for granting benefit of depreciation on the assets acquired by the respondents-assessees, all are charitable institution registered under Section 12A of the Income Tax Act.

The Court rejected the view of AO that once the capital expenditure treated as application of income for charitable purpose then it would get the benefit of 100 per cent write off of the cost of assets and, therefore, the grant of depreciation would amount to giving double benefit to the assessee.

Finally the apex court mentioned that no specific provision in this behalf of Income Tax Act, so the Delhi High Court has taken the view and rightly so, that the said amendment is prospective in nature.

The two judge bench comprising of Justice A.K. Sikri and Justice Ashok Bhushan dismissed the appeals and upheld the view of High Courts and declared that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as well.