Depreciation allowable u/s 11(6) when assessee has not claimed cost of fixed assets as application of income in any previous year.
ABCAUS Case Law Citation:
ABCAUS 3245 (2020) (02) ITAT
In this appeal filed by the assessee, the issue was related to disallowance of claim of depreciation u/s 11(6) of the Income Tax Act, 1961 (the Act).
The assessee was a charitable institution running educational institutions. The Assessing Officer (AO) noticed that the assessee had claimed depreciation on fixed assets. The AO further noticed that a new section 11(6) has been inserted with effect from 01-04-2015 which disentitles the assessee from claiming depreciation on the fixed assets which had been claimed as an application of income in any of the years.
Accordingly, the AO disallowed the claim of depreciation as application of income.
Before the CIT(A), the assessee submitted that it had not claimed cost of fixed assets in the application of income, in any of the years. Accordingly, it was submitted that the provisions of sec.11(6) of the Act, were not applicable and depreciation claimed by the assessee should be allowed.
Hence, the CIT(A) called for a remand report from the AO. In the remand proceedings, the assessee submitted relevant details for last six assessment year. Since the assessee did not submit the details pertaining to earlier years, the AO expressed his view in the remand report that the disallowance of depreciation was justified. Hence, the CIT(A) confirmed the disallowance.
The Tribunal observed that the copies of the return of income filed by the assessee for last six assessment years showed that the assessee had not claimed cost of fixed assets as application of income. According to the assessee, it had never claimed cost of fixed assets as application of income in any of the years. Whereas, the provisions of section11(6) would apply only in respect of these assets which have been claimed as application of income.
The Tribunal noticed that the assessee had proved its submission for last six assessment years. However, the AO had taken the view that the assessee had not furnished details of earlier years and accordingly, rejected the submission made by the assessee.
However, the Tribunal observed that the AO had not brought on record any material to disprove the contention of the assessee. On the contrary, the assessee had furnished copies of returns of income for last six AYs in support of its submission.
Under the above facts, the Tribunal opined that there was no reason to suspect the submission made by the assessee in this regard.
The Tribunal held that the provisions of section 11(6) will not apply in the hands of the assessee, since the assessee had not claimed cost of fixed assets as application of income.
Accordingly, the Tribunal set aside the order passed by the CIT(A) on this issue and directed the AO to delete the disallowance.
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