Tribunal disallows depreciation, adds payment to retired partner. Reassessment proceedings canceled, appeal allowed.

The tribunal ruled in favor of the appellant, disallowing depreciation on tenancy rights and confirming the addition of payment to the retired partner. The reassessment proceedings under section 147 were deemed void and canceled due to lack of tangible material, resulting in the appeal being allowed.

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Issues:
1. Disallowance of depreciation on tenancy rights
2. Addition of payment to retired partner
3. Reopening of assessment under section 147

Issue 1: Disallowance of depreciation on tenancy rights
The appellant contested the disallowance of depreciation on tenancy rights for Assessment Year 2005-06. The Commissioner (Appeals) confirmed the Assessing Officer's action, stating that tenancy rights did not fall within the block of Intangible Assets. The appellant argued that tenancy rights were a form of license and should be depreciable. The appellant sought modification of the order to allow depreciation on tenancy rights. The tribunal noted that the asset represented tenancy rights in a building used as office premises, which did not qualify for depreciation under section 32 of the Income Tax Act. The tribunal upheld the disallowance, stating that depreciation is allowable only on tangible assets, not on tenancy rights.

Issue 2: Addition of payment to retired partner
The Commissioner (Appeals) confirmed the addition of a payment made to a retired partner as per the partnership deed. The appellant contended that the payment was diverted by overriding title and not a gratuitous one. The tribunal considered the nature of the payment and the partnership agreement. It was held that the payment to the retired partner was a self-imposed obligation and not allowable as a deduction. The tribunal upheld the addition of the payment to the retired partner.

Issue 3: Reopening of assessment under section 147
The Assessing Officer reopened the assessment under section 147 based on the wrong claim of depreciation on tenancy rights, leading to alleged income escapement. The appellant challenged the reopening, arguing that there was no tangible material to support the reassessment. The tribunal analyzed the reasons recorded by the Assessing Officer and found no independent tangible material to justify the reassessment. Citing previous judgments, the tribunal held that the reassessment proceedings were void ab initio and canceled them. Consequently, the grounds related to the addition made and confirmed were not adjudicated. The appeal by the appellant was allowed.

In conclusion, the tribunal ruled in favor of the appellant, disallowing depreciation on tenancy rights and confirming the addition of payment to the retired partner. The reassessment proceedings under section 147 were deemed void and canceled due to lack of tangible material, resulting in the appeal being allowed.

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