AO Disallows Depreciation over Alleged Double Deduction: ITAT directs Taxpayer to Produce Documents [Read Order]

The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) directed the assessee to produce supporting documents after the Assessing Officer (AO) disallowed depreciation over alleged double deduction.

Gear Foundation (assessee) is a trust, filed return of income declaring Nil income. The assessee claimed exemption under section 11 of the Income Tax Act. The assessee claimed depreciation on the assets. The Assessing Officer selected the case for Scrutiny and issued notice to the assessee.

The AO questioned whether the assessee had already claimed the asset purchase cost as an application of funds in prior years. The assessee stated that the assessee did not claim the acquisition of the asset as the application of income. However, The assessee failed to provide adequate evidence to substantiate the claim.

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Therefore, the AO disallowed depreciation of Rs. 1,32,43,091 stating that if the depreciation is allowed to the assessee, then it will amount to a double deduction. 

The assessee appealed before the Commissioner of Income Tax (Appeals) [CIT(A)], who dismissed the appeal. The CIT(A) upheld the AO’s decision, stating that the assessee had not substantiated that the asset cost was not previously claimed as an application of income. Aggrieved by the order, the assessee filed an appeal before ITAT.

The Counsel for the assessee submitted that the assessee was willing to produce documents to substantiate the claim of depreciation and it was not claimed in previous years which did not amount to a double deduction.

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The counsel for the revenue submitted that if the assessee provides documents for depreciation claim and it was not claimed in previous years, then the disallowance can be deleted. 

The two-member bench comprising Prashant Maharishi (Vice President) and K. Soundarajan (Judicial Member) observed the contention of the assessee to provide documents to substantiate the claim of depreciation and that it will not amount to a double deduction.

Therefore, the tribunal remanded the matter to the AO, for the claim of depreciation. The tribunal directed the assessee to produce evidence to substantiate that if depreciation is allowed, it will not amount to a double deduction.

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The tribunal also directed the AO to grant depreciation if no double deduction was found. The appeal of the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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