The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has held that depreciation is allowable u/s 11(6) when cost of fixed assets is not claimed application of income.
M/s. Podar Literacy & Education Trust, the assessee is a charitable institution and the assessing officer has computed the income of the assessee as per the provisions of section11 of the income tax Act. The assessee belongs to Podar group and the said group was subjected to search operations u/s 132 of the Act on 09-01-2018.
During the course of assessment proceedings, the AO noticed that the assessee has claimed depreciation of Rs.2,19,21,165/- in the profit and loss account.
It was viewed that if the cost of a relevant asset has been claimed as an application of income and the AO reduced the amount of depreciation from the aggregate amount utilised for charitable purposes, i.e., the AO did not treat the depreciation amount as the application of income. TheCIT(A) also confirmed the same.
Shri Sidharth Kothari, counsel for the assessee stated that the assessee has purchased some of the assets by utilising loans and hence it cannot be said that the entire cost of the asset was claimed as the application of income.
On the contrary, Shri Santhil Kumaran counsel for the department argued that the assessee has not furnished any material to substantiate the contentions raised. He further stated that the assessee has failed to prove that the provisions of sec.11(6) do not apply to it.
A Coram of Shri B.R. Baskaran (AM) & Shri Rahul Chaudhary (JM) noticed that the AO has disallowed the claim of depreciation as per the mandate of provisions of sec.11(6) of the Act. It was observed that the responsibility to show that the provisions of sec.11(6) do not apply to the assessee, shall lie upon the shoulders of the assessee.
The assessee failed to adduce any material to show the value of assets in respect of which the depreciation has been claimed was not claimed as an application of income in any of the years. While dismissing the appeal filed by the assessee, the Tribunal confirmed the order passed by CIT(A).
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