Depreciation to be allowed on assets even if cost fully allowed as application of income under section 11

Depreciation on the capital assets was allowable even when capital expenditure on the acquisition of the corresponding assets had already been allowed as ‘application of income’for the purpose of allowing the exemption under s 11.

CIT Vs Market Committee, Tohona (Punjab and Haryana High Court)– Whether on the facts and in the circumstances of the case, the Honourable ITAT is justified in allowing depreciation on the capital assets even when capital expenditure on acquisition of the corresponding assets had already been allowed as ‘application of income’ for the purpose of allowing exemption under section 11 of the income-tax Act and as such further allowing of depreciation of these capital assets will amount to double deduction for the same expenditure?

Whether allowing of depreciation on the capital assets by Honourable ITAT is justified in the light of the Honourable Apex Court decision in Escorts India Ltd. (199 ITR 43), wherein it has been held that in the absence of clear statutory indication to the contrary, the statute should not be read as to permit an assessee two deductions on the same expenditure?

CIT Vs Market Committee, Tohona

High Court of Punjab and Haryana

I.T.A. No. 186 of 2011

Decided on: 12 July 2011

Judgment

This appeal has been preferred by the revenue under section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Delhi Bench “E”, New Delhi dated 25.6.2010 in I.T.A. No.1335/DEL/2010 for the assessment year 2007-08 proposing following questions of law:-

1. “Whether on the facts and in the circumstances of the case, the Hon’ble ITAT is justified in allowing depreciation on the capital assets even when capital expenditure on acquisition of the corresponding assets had already been allowed as ‘application of income’ for the purpose of allowing exemption under section 11 of the income-tax Act and as such further allowing of depreciation of these capital assets will amount to double deduction for the same expenditure?

2. Whether allowing of depreciation on the capital assets by Hon’ble ITAT is justified in the light of the Hon’ble Apex Court decision in Escorts India Ltd. (199 ITR 43), wherein it has been held that in the absence of clear statutory indication to the contrary, the statute should not be read as to permit an assessee two deductions on the same expenditure?”

2. Learned counsel for the appellant fairly states that the matter is covered against the revenue by judgement of this Court dated 5.7.2010 in I.T.A. No. 535 of 2009 in CIT v. Market Committee, Pipli.

3. Accordingly, this appeal is dismissed.