ITAT Directs readjudication of disallowance of Depreciation claimed on Acquisition of Asset [Read Order]

The Two member bench of Bangalore  Income Tax Appellate Tribunal ( ITAT ) directed readjudication of disallowance of depreciation claimed on acquisition of the assets.

The appeal was filed by the revenue by deleting the disallowance of depreciation claimed on acquisition of the assets. It was observed that during the assessment proceedings of Assessee Raghavendra Educational, the  AO has disallowed depreciation of Rs.2,98,26,716/- on the alleged ground that the cost of acquisition of the assets was allowed as capital expenditure in earlier years and the same was held as Income for the impugned Assessment year. The AO has generalized the issue without any specific mention of the allowance of the capital expenditure in the earlier years.

In the Assessment Order the AO has held that the deduction under Section 11 of the Income Tax Act was allowed as application of funds and therefore the depreciation was said to be not allowable. In this regard the Assessee submitted that since no capital expenditure was claimed in earlier years as contended by the AO on suspicion, surmise and with an element of guess work.

Aggrieved by the order the assessee filed an appeal before the CIT(A) who allowed  the appeal. Hence the revenue  filed another appeal before the tribunal.

During the adjudication the counsel for assessee  submitted that AO disallowed the depreciation on suspicion/surmise and an element guess work

 V. Parithivel, Counsel for Revenue supported the order of lower authorities and argued that  the provisions of section 11(6) of the Income Tax Act is  inserted by the Finance Act (2), 2014 w.e.f. 1.4.2015. Thus, this provision is applicable w.e.f. The assessment year 2015-16, the assessment year involved herein is 2016-17.

Further contended that the NFAC has allowed this ground without examining whether assessee has claimed the cost of purchase of fixed asset as an application of income while claiming exemption under Section  11 of the  Income Tax Act in the assessment year when it was acquired these fixed assets and if the assessee has already claimed cost of purchase of fixed assets as application of income in relevant assessment year while claiming exemption under Section 11 of the Income Tax Act, the assessee cannot be granted once again the depreciation as a part of application of income in this assessment year, which amounts to double deduction.

After reviewing the facts the ITAT bench of Soundararajan K (Judicial Member) and Chandra Poojari (Accountant Member) directs readjudication of disallowance of depreciation claimed on acquisition of the assets.

To Read the full text of the Order CLICK HERE

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