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Normal Depreciation could be considered as a legitimate Deduction in Computing the Real Income: Madras HC grants relief to IIET [Read Order]
The Madras High Court while granting relief to M/s. Indian Institute of Engineering Technology held that Normal depreciation could be considered as a legitimate deduction in computing the real income of the assessee.
The assessee, M/s. Indian Institute of Engineering Technology is a society registered under the provisions of the Societies Registration Act. It established and is administering two educational institutions, one of which is affiliated to Anna University and the other is affiliated to University of Madras.
For the previous year relevant to the assessment year 2012-13, the assessee filed their return of income admitting NIL income after claiming exemption under Section 10(23C)(vi) of the Act and alternatively under Section 11 of the Act.
This claim was based on an application filed in Form 56D. Though the assessee made submissions before the Authority concerned on several dates, since nothing transpired out of such proceedings, the assessee placed reliance on the deeming provision under the 9th Proviso to Section 10(23C) of the Act.
Subsequently, the assessee’s case was selected for scrutiny and a notice under Section 143(2) of the Act and thereafter another notice under Section 142(1) read with Section 129 of the Act were issued. The assessment was completed under Section 143(3) of the Act by denying exemption under Sections 10(23C)(vi), 11 and 12 of the Act determining the total income of Rs.6,45,49,660.
The CIT(A) by an order dismissed the appeal on the ground that the differential excess amount of Rs.70,25,780 was loaned to the sister trust without adequate interest or without adequate security or both and therefore, it had clearly violated the provisions of Section 13(1)(c) read with Sections 11(5) and 13(2)(a) of the Act. There are other issues pertaining to depreciation, which was also disallowed.
As against the order passed by the CIT(A),the assessee filed an appeal before the Tribunal, which dismissed the same and in doing so, the Tribunal held that the assessee is carrying on the activities of profitable venture and is not undertaking any charitable activity within the scope of Section 2(15) of the Act. Aggrieved by the impugned order passed by the Tribunal, the assessee is before us by way of this appeal.
The division bench of Justice T.S Sivanganam and Justice V.Bhawani subbaroyan held that normal depreciation could be considered as a legitimate deduction in computing the real income of the assessee on general principles or under Section 11(1)(a) of the Act.