Dignity Lifestyle Trust Vs ITO (ITAT Mumbai)
The ITAT Mumbai considered two appeals filed by Dignity Lifestyle Trust against orders of the CIT(A), NFAC, Delhi, both dated 1 August 2025, for AY 2017-18. The first appeal concerned the quantum assessment under Section 143(3), while the second challenged penalty under Section 270A. The assessee-trust had filed its return belatedly on 6 February 2018 declaring nil income and had claimed exemption under Section 11. During scrutiny, the Assessing Officer disallowed depreciation of Rs. 37,95,579 under the amended Section 11(6) and also disallowed pre-operative expenses of Rs. 17,10,746. The CIT(A) upheld both disallowances and directed the AO to allow the deduction only if the trust could establish application of 85% of its income after excluding depreciation and pre-operative expenses.
Before the Tribunal, the assessee submitted that capital expenditure of Rs. 31,90,774 had been claimed in the return as application of income and should be allowed if depreciation was not allowable under Section 11(6). The Tribunal accepted the submission in principle and restored the issue to the AO, directing verification of the actual capital expenditure incurred during the year and its allowance as application of income in accordance with Sections 11 and 12. Ground Nos. 1 and 2 were therefore allowed for statistical purposes.
