Trust can claim depreciation on assets even if cost of such assets has been allowed as deduction on account of it being application of income:

AO disallowed depreciation on assets claimed by the assessee-trust on the count that the entire cost of such assets had been allowed as a deduction on account of it being application of income. He was of the view that allowing the claim of depreciation on such assets shall tantamount to double deduction. Hon’ble ITAT was of the view that allowing such a claim of depreciation shall not lead to double deduction since allowing exemption u/s 11(1) in respect of cost of acquisition of asset is not akin to allowing deduction of any expenditure for the purpose of computing income. In fact, it is an incentive provision that extends benefit of exempt income to a trust to the extent of cost of such assets. Income of a trust remains the same only. Revenue’s contention that allowing claim of depreciation will result into cash surplus being available with the assessee that goes outside the books also has no legs to stand because even if claim of depreciation is allowed, it has no impact on cash availability with the assessee. Further, income of a trust has to be computed on commercial principles. Accordingly, it was held that claim of depreciation is allowable on such assets.

[ITO Vs. SARDAR PUBLIC CHARITABLE TRUST – ITA Nos.285 & 286/Ahd/2013]