JUDGMENT Smt. Sujata Manohar, J.
1. This is an application under s. 256(2) of the IT Act. The Department requires the following question to be raised by the Tribunal and referred to us for determination :
"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law directing the ITO to take depreciation into account in computing the income from depreciable assets when in fact the full capital expenditure had been allowed in the year of acquisition of these assets ?"
2. The assessee is a trust. Its income is derived from depreciable assets. The assessee took into account depreciation on those assets in computing the income of the Trust. The ITO held that depreciation could not be taken into account because full capital expenditure has been allowed in the year of acquisition of the assets. The assessee went in appeal before the AAC who rejected the Appeal. The Tribunal has however, allowed the Appeal. The Tribunal has explained the position by stating that when the ITO says that full expenditure has been allowed in the year of the acquisition of the assets, what he really means is that the amount spent on acquiring these assets had been treated as application of income of the trust in the year in which the income was spent in acquiring these assets. This does not mean that in computing income from those assets in subsequent years, depreciation in respect of those assets cannot be taken into account.
3. The respondents have drawn out attention to a Circular dt. 26th November 1968 issued by the CBDT under which it has clarified that in the case of a business undertaking held under trust its income will be income as shown in the accounts of the undertaking and that where the trust derives income from house property, interest on securities, capital gains or other sources, the income should be understood in its commercial sense.
4. We are also informed that in the earlier years when a similar question arose in respect of an assessee known as Laxmi Charitable Trust, an application under s. 256(2) was rejected by this High Court. In our view, therefore, the answer to the question is obvious.
5. We may also point out that the question as framed is somewhat misleading and is based on misconception, in so far as it reproduces the language used by the ITO which we have explained earlier.
6. The rule is discharged.