1 Section 11 – (i) Depreciation allowed on fixed assets cost of which was allowed as application of income; (ii) Assessee allowed the benefit of carry forward of deficit for future set-off.

Members: G. S. Pannu (A. M.) and Amarjit
Singh (J. M.)

ITA Nos.: 5962 & 5963/MUM/2016

A.Ys.: 2011-12 and 2012-13,

Date of Order: 30^th August, 2017

Counsel for Revenue / Assessee: Saurabh
Deshpande / Hiro Rai

FACTS

The assessee
being a charitable organisation registered u/s. 12A was engaged in carrying on
activities of charitable nature. The dispute involved in the appeal was on two
issues – firstly, the Revenue was aggrieved by the decision of the CIT(A) in
directing the AO to allow the benefit of depreciation and secondly, the action
of the CIT(A) in allowing the assessee the benefit of carry forward of the
deficit of Rs. 3.5 crore for future set-off.

Before the
Tribunal, the revenue justified the AO’s action pleading that the decision of
the Bombay High Court in the case of CIT vs. Institute of Banking Personnel
Selection (264 ITR 110), which was relied on by the assessee, had not been
accepted by the Department on merits and on a similar issue, SLP (Civil) no.
9891 of 2014 has been filed before the Supreme Court in the case of Maharashtra
Industrial Development Corporation. Further, it was contended that allowing of
depreciation would amount to a double deduction, which was impermissible having
regard to the judgment of the Supreme Court in the case of Escorts Ltd. (199
ITR 43).

HELD

The Tribunal
noted that the decision in the case of Escorts Ltd. being relied upon by the
Revenue had been considered by the Delhi High Court in the case of Indraprastha
Cancer Society, (112 DTR 345), wherein it opined that the allowance of
depreciation in similar situation would not amount to a double deduction.
Further, it was noted that the Delhi High Court in the case of Vishwa Jagriti
Mission, ITA No. 140/2012 dated 29.3.2012 also allowed a similar claim after
analysing the judgment of the Supreme Court in the case of Escorts Ltd. It also
noticed that the Supreme Court had dismissed the SLP filed by the Department
against the said decision of the Delhi High Court vide SLP No. 19321 of 2013.
The Tribunal further noted that the Bombay High Court, subsequent to the
decision in the case of Institute of Banking Personnel Selection, had
considered a similar argument of the Revenue in the case of Mumbai Education
Trust, ITA No. 11/2014 dated 03.05.2016 and had allowed the claim of the
assessee. Therefore, the Tribunal dismissed the appeal filed by the revenue on
this ground and allowed the depreciation as claimed by the assessee.

As regards the
issue relating to carry forward of the deficit of Rs.3.50 crore to be set-off
against the future income, the Tribunal upheld the order of the CIT(A) relying
on the judgements of the Bombay High Court in the case of Mumbai Education
Trust.