The order of the Bench was delivered by
1. R. S. Syal (Accountant Member).-This appeal by the assessee is directed against the order passed by the Commissioner of Income-tax (Appeals) on December 26, 2014 denying depreciation under section 32(1) of the Income-tax Act, 1961, on the premise that the assessee being a charitable institution has claimed exemption for the cost of asset by means of application of its income.
2. Briefly stated, the facts of the case are that the assessee, a registered society under section 12A(a), engaged in providing education, medical assistance, knowledge and research to poor, claimed depreciation in the computation of its income. The Assessing Officer did not allow such depreciation on the ground that the purchase of asset has already been claimed as application of income and as such deduction on account of depreciation would amount to double deduction, which is impermissible. When the matter came up before the learned Commissioner of Income-tax (Appeals), he upheld the action of the Assessing Officer in the light of the judgment of the hon'ble Delhi High Court in the case of DIT (Exemption) v. Charanjiv Charitable Trust [2015] 4 ITR-OL 180 (Delhi). The assessee is aggrieved and is in appeal against the denial of depreciation.
3. I have heard the rival submissions and perused the relevant material on record. It is noticed that the assessee was allowed depreciation by the hon'ble Delhi High Court vide its judgment dated November 27, 2013 in a bunch of appeals led by DIT(E) v. Indian Trade Promotion Organisation. The assessee's name appears at Sl. No. 4 of this judgment of the hon'ble Delhi High Court relevant to the assessment year 2009-10. In this judgment, the only question was about the claim of depreciation. The hon'ble High Court held in this case that : "Application of income may include purchase of a capital asset. The said purchase is valid and taken into consideration for the purpose for ensuring compliance, i.e., application of money or funds and is not a factor which determines and decides the quantum of income derived from property held under trust. Computation of income is separate and distinct and has to be made on commercial basis by applying the provisions of the Act". Thus it is manifest that the hon'ble Delhi High Court in the assessee's own case for the immediately preceding assessment year has held that depreciation is allowable as separate deduction apart from application of income. The learned Commissioner of Income-tax (Appeals) has relied on the judgment in the case of DIT (Exemption) v. Charanjiv Charitable Trust [2015] 4 ITR-OL 180 (Delhi) in which it has been held that where in case of a trust, lots of asset has been allowed as deduction by way of application of income, then depreciation on same asset cannot be allowed in computation of income of trust. This judgment is dated March 18, 2014. Once again, similar issue came up for consideration before the hon'ble Delhi High Court in DIT (Exemption) v. Indraprastha Cancer Society [2015] 53 taxmann.com 463 (Delhi). Vide its judgment dated March 18, 2014, the hon'ble High Court has held that a charitable institution, which has purchased capital asset and treated the amount spent as application of income, is further entitled to claim depreciation on the same capital asset utilised for business. In its later judgment, the hon'ble High Court also considered the earlier judgment in the case of DIT (Exemption) v. Charanjiv Charitable Trust [2015] 4 ITR-OL 180 (Delhi) deciding the issue against the assessee and the earlier judgment in the case of Indian Trade Promotion Organisation (which also includes the assessee) in favour of the assessee. On consideration of these two views, the hon'ble High Court in its latest judgment has decided to allow depreciation on capital asset in the computation of income apart from treatment of purchase of capital asset as application of income.
4. At this stage, it is relevant to note that the instant controversy has been put to rest by the Legislature by inserting sub-section (6) to section 11 by the Finance (No. 2) Act, 2014, with effect from April 1, 2015, which reads as under :
"(6) In this section where any income is required to be applied or accumulated or set apart for application, then, for such purposes the income shall be determined without any deduction or allowance by way of depreciation or otherwise in respect of any asset, acquisition of which has been claimed as an application of income under this section in the same or any other previous year."
5. The effect of this insertion is that from the assessment year 2015-16, no depreciation can be allowed in respect of any asset, whose acquisition has been claimed as an application of income. In view of this later legislative insertion which is not applicable to the year under consideration and respectfully following the judgment of the hon'ble jurisdictional High Court in the assessee's own case for the immediately preceding assessment year, I hold that depreciation should be allowed separately in the computation of income.
6. In the result, the appeal is allowed.
The order pronounced in the open court on 25th August, 2015.