Trust
Querist :
Anonymous
(Querist) 11 December 2011
This query is : Resolved
The trust has acquired fixed assets out of bank borrowals. Repayment of bank loan installments has been claimed as application of income by the trust in the earlier years. For the assessment year 2009-10 the assessing officer wants to disallow depreciation in the scrutiny proceedings since the assset has already been deducted as application of income in the earlier years. The escorts case has been distinguished by the Punjab and Haryana High Court in the marketing comittee Pipli case wherein it is held that depreciation is allowable even in respect of assets claimed as application of income. Such being the case, can the AO disallow depreciation because the asset has been acquired out of borrowed funds and repayment of loans has been shown as application of incom
Raj Kumar Makkad
(Expert) 11 December 2011
No. Assessing Officer cannot do so merely on the ground that the asset as been acquired out of borrowed funds. The judgment (supra) is very clear on this aspect and there is no scope for AO as desired.
Guest
(Expert) 11 December 2011
Depreciation on any assets is based on the declining value of assets as per the set norms and has no concern whether the same were acquired by its own earnings or through borrowed funds. This aspect should have been ignored by the AO that even the borrowed funds have to be repaid out of the income of the Trust.
