In Brief
The Supreme Court held that charitable institutions registered under section 12A of the Income Tax Act are entitled to claim depreciation on capital assets, even though the acquisition cost was previously treated as an application of income under section 11(1)(a). The Court rejected the tax department's argument that allowing depreciation would constitute double benefit. Income of charitable trusts must be computed on commercial principles including depreciation allowances. Once depreciation is allowed, assessees can carry it forward in subsequent years. The Court affirmed the High Courts' decisions and dismissed the Income Tax Department's appeals.
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