ITAT Bangalore confirms depreciation allowed on ‘income from other sources’ [Read Order]

The Income Tax Appellate Tribunal, Bangalore bench, in recently confirmed the decision of the Commissioner of Income Tax(Appeals) who allowed the assessee, a charitable trust, depreciation in respect of income from other sources. The ITAT, upheld the view of the CIT(A) that depreciation is allowable even if the assessee is not doing any business since it is following the generally accepted principles and practices of accountancy.

The revenue preferred an appeal before the ITAT challenging the order of the Commissioner of Income Tax(Appeals). One of the main contention raised before the ITAT was that the CIT(A) has erred in allowing depreciation to the assessee, which is a charitable Trust, deriving income from other sources and not doing any business. According to the Revenue, the same amounts to double deduction.

Earlier, the Revision order passed by the Commissioner of Income Tax denying depreciation to the assessee-trust was quashed by the CIT(Appeals) relying upon the decision of the Tribunal in an earlier case of the assessee. The CIT(A) clarified that the assessee-trust, like any other entity is entitled to work out its income. It was observed that even if the assessees’ case is not covered by section 32 of the Income Tax Act, it is entitled to deduction in respect depreciation for the reason that it follows the generally accepted principles and practices of accountancy. In is in this context, observed that “The law has prescribed specific rules for computation of income from other sources in Part ‘F’ under Chapter IV of the IT Act, 1961 running from sections 56 to 59 of the Income Tax Act. Section 57 of the Income Tax Act provides for deduction allowable in computing income under other sources. Clause (ii) of section 57 provides for depreciation u/s.32(2) of the Income Tax Act. It shows that even in computing the income from other sources, the assessee is entitled to claim depreciation u/s.32(2).”The Appellate Tribunal confirmed the above view of the CIT(A) by dismissing the appeal.

Read the full text of the order below.

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