Depreciation on Fixed Assets Permissible Despite Application of Income Claimed During Purchase Year; No Double Deduction Involved: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Bangalore bench has held that claiming depreciation on fixed assets is permissible even if the application of income had been previously claimed during the year of purchase. The ITAT emphasised that such a claim does not result in a double deduction and falls within the provisions of Section 11 of the Income Tax Act, 1961.

The case revolved around the assessment year 2012-13, during which the appellant assessee, Janaseva Trust, a non-profit organisation based in Bangalore, had declared nil income and sought exemption under Section 11 of the Income Tax Act.

None appeared on behalf of the appellant while the respondent revenue was represented by Smt. Supriya Rao.

The appellant had claimed both the application of income as capital expenditure on fixed assets and depreciation on the same assets, which was subsequently disallowed by the Income Tax Officer, who asserted that this would lead to a double deduction since the trust had already claimed the application of income for purchasing the assets.

However, the ITAT overruled this argument, pointing out that the issue was covered by a precedent set by the Supreme Court prior to the amendment of the law on April 1, 2015. In the case of CIT v. Rajasthan & Gujarati Charitable Foundation, Poona, the Supreme Court had established that the amendment made to Section 11 of the Income Tax Act was prospective in nature and hence, organisations with cases before April 1, 2015, can indeed claim the application of income on the depreciation charged on fixed assets, even if the application of income on these assets was already claimed during the purchase year.

The two-member bench comprising George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) concluded that the trust was eligible to claim the application of income on the depreciation charged on fixed assets, even if it had claimed the application of income on the same assets during the year of purchase.

While the bench allowed the depreciation claim, it remitted other issues in the case including the treatment of a substantial amount of Rs.1,05,92,266 as corpus funds for building construction, a loss on the sale of assets amounting to Rs.52,413 and a claim of Rs.58,000 as application of income towards the refund of caution money to students back to the Commissioner of Income Tax (Appeals) for fresh consideration and decision on the finding that the appellant had not appeared before the Commissioner of Income Tax (Appeals) to substantiate its claims on these issues.

Therefore, the appellant trust was given an opportunity to provide the necessary evidence and details to support its case.

In conclusion, the appeal of the assessee is partly allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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