Govind Mathur, J. - (1.) FOR the assessment year 2004 -05 the Assessing Officer disallowed assessee's claim for depreciation of Rs. 26,20,926/ -. The Commissioner of Income Tax (Appeals) affirmed the order of assessment but the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur by its order dated 18.7.2008, while accepting the appeal preferred by the assessee, directed the Income Tax Department to allow the claim of depreciation made by the assessee, hence, this appeal by revenue is before us with a substantial question of law in the terms that "whether the Tribunal was justified in allowing depreciation claimed by the assessee on capital assets for which capital expenditure has already been allowed in the year under consideration -
(2.) THE argument advanced by learned counsel that the depreciation could have not been taken into account because full capital expenditure has been allowed in the year of acquisition of the assets. The argument advanced is substantiated by placing reliance upon a Division Bench judgment of High Court of Delhi in Director of Income Tax (Exemption) v. Charanjiv Charitable Trust, reported in : [2014]43 taxmann.com 300 (Delhi). In the case aforesaid the Delhi High Court held that if the cost of asset has been allowed as deduction by way of application of income then the depreciation on the same asset cannot be allowed in computation of the income of the trust. Reliance is also placed by learned counsel for the revenue upon a judgment of High Court of Kerala in Lissie Medical Institutions v. Commissioner of Income Tax, Kochi, reported in : [2012]24 taxmann.com 9 (Ker.), holding that when acquisition of assets is treated as application of income for charitable purposes, the value of the assets stands fully written off, and over and above, if depreciation is allowed, the same will result in double deduction of capital expenditure leading to violation of provisions of Section 11(1) of the Income Tax, 1961 (hereinafter referred to as 'the Act of 1961'). Per contra, as per learned counsel for the assessee, Section 32 of the Act of 1961 nowhere makes any distinction in the charitable trust or any other body or person so far as the application of depreciation is concerned, thus, normal depreciation is required to be considered as a legitimate deduction in computing the real income of the assessee as per provisions of Section 11(1)(a) of the Act of 1961. It is asserted that deduction of depreciation in case of a charitable institution is permissible in order to preserve the corpus of the trust and, therefore, it does not amount to double benefit or double deduction. To substantiate the contention reliance is placed upon the judgment of Bombay Court in Director of Income Tax v. Framjee Cawasjee Institute, reported in : (1993) 109 CTR 463 (Bombay), concluding that the depreciation on depreciable assets had to be taken into account in computing income of a religious trust although the amount spent of acquiring such assets has been treated as application of income of the trust in the year in which assets were acquired. In CIT v. Institute of Banking Personnel, reported in : 2003 131 TAXMAN 386, the High Court of Bombay held that when the full expenditure had been allowed to a charitable institution in the year of acquisition of assessment, the amount spent on acquiring the assets are required to be treated as "application of income" of the trust in the year in which the income was spent in acquiring those assets. This did not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account.
(3.) WE have considered the arguments advanced.;