C/Taxap/1091/2018 Order v. Learned Counsel For The Revenue However

C/TAXAP/1091/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1091 of 2018 ========================================================== THE COMMISSIONER OF INCOME TAX (EXCEMPTION)VersusCHARUTAR AROGYA MANDAL========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 11/09/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. This appeal is filed by the Revenue challenging the judgment of the Income Tax Appellate Tribunal raising following questions for our consideration: “(A) Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in allowing relief of undisclosed interest income of Rs.23,08,970/- as per 26AS data which was not included in total interest offered by theassesseefortaxationof Rs.2,09,09,763/- and thereby has tried to evade tax? “(B) Whether, on the facts and in the circumstances of the case and in law, the Appellate Tribunal was justified in allowing depreciation on asset on which the assessee had purchased out of exempted income u/s.35AC of the Act?” 2.The issue pertains to the assessment year2010-11. The first question relates to the mismatch in the accounts of the assessee concerning its interest income. Commissioner of Income Tax (Appeals) however, noted that the assessee had offered larger interest income which would subsume the error component of interest income of Rs.23,08,970/-. The Tribunal confirmed this view. No question of law arises. 3.The second question relates to the assessee's claim of depreciation under section 35AC of the the Income Tax Act, 1961 ('the Act' for short) in relation to assets purchased for its cardiac center out of the grants received which were covered for exemption under section 35AC of the Act. The stand of the Assessing Officer was that on such grants, the donees would claim exemption in terms of section 35AC. The assessee therefore cannot claim depreciation on the same asset or else it will amount to double deduction. 4.The Commissioner of Income Tax (Appeals) and the Tribunal reversed such decision. Reliance was placed on a decision of this Court in case of Ahmedabad South Indian Association Charitable Trust in Tax Appeal No.933 of 2010 and allied matters, in which, in context of section 11 of the Act, it was held that even if assets purchased by the Trust are allowed deduction as applicable under income, while working out taxable income of the Trust, the depreciation has to be allowed on the value of such assets. Reliance was also placed on the decision of the Supreme Court in case of Commissioner of Income-Tax v. Rajasthan and Gujarati Charitable Foundationreported in [2018] 402 ITR 441 (SC), in which, the Supreme Court confirmed the decision of the Bombay High Court and various other High Courts granting depreciation to a Trust even though the Trust was eligible for exemption under section 11 of the Act. The income of the Trust was eligible for exemption under section 11 of the Act. 5.Learned counsel for the Revenue however submitted that in the present case, we are concerned with the deduction under section 35AC of the Act, which the donor of the funds would receive. The respondentassesseethereforecannotclaim depreciation on the assets acquired with the help of such donations. 5.Learned counsel for the Revenue however submitted that in the present case, we are concerned with the deduction under section 35AC of the Act, which the donor of the funds would receive. The respondentassesseethereforecannotclaim depreciation on the assets acquired with the help of such donations. 6.In our opinion, the logic adopted in case of Rajasthan and Gujarati Charitable Foundation (supra) would substantially apply. In terms of section 35AC of the Act, the assessee who incurs expenditure by way of payment directly on eligible project or a scheme, would enjoy exemption of such expenditure during the relevant year. This exemption however would not cast any shadow on the assessee claiming any depreciation under section 32 of the Act which is allowable in respect of any building, machinery, plant or furniture being tangible assets owned wholly or partly by the assessee and for the purpose of business or profession at the specified rates. The requirements thus, are of the assessee owning wholly or partly any building, machinery, plant or furniture being tangible assets and having used them for the purpose of business or profession. Indisputably, these conditions are satisfied in the present case. 7.In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J)