Tribunal decision: Depreciation allowed on commercial property; separate valuation crucial

The Tribunal upheld the allowance of depreciation on the commercial property, emphasizing that a composite consideration without a separate valuation for land does not entitle the assessee to claim depreciation on the land component. The decision was based on legal principles and the absence of evidence supporting a different interpretation. The appeal was dismissed, upholding the order of the ld CIT(A).

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Issues:
Disallowance of depreciation on commercial property claimed by the assessee for the Assessment Year 2009-10.

Analysis:
The appeal involved the disallowance of depreciation amounting to &8377; 81,20,505/- on a commercial property used in the business by the assessee. The property was purchased in A.Y. 2008-09 and depreciation of &8377; 72,46,021/- was claimed initially. The balance depreciation of &8377; 8,74,483/- was related to plant and machinery, computer, and furniture. The Assessing Officer (AO) disallowed the depreciation claim, stating that the assessee had no ownership rights over the land where the building was situated, and there was no valuation report regarding the cost of construction. The AO sought information from the developer regarding the cost breakdown, which indicated that the cost of land and construction was combined to determine the price of the commercial space.

The ld CIT(A) deleted the disallowance of depreciation, leading to the appeal by the revenue. The revenue contended that depreciation cannot be allowed on the cost of land within the building. The assessee argued that the purchase price was composite, with no separate consideration for land. The agreement with the builder did not transfer any ownership rights over the land to the purchaser. The Delhi Apartment Ownership Act was also cited to support the assessee's claim.

The Tribunal analyzed the agreement between the developer and the original allottee, finding it to be a composite agreement without a separate consideration for land. Referring to a similar case, the Tribunal held that depreciation is allowable only on the superstructure and not on the land itself. As there was no evidence of a bifurcation of consideration between land and building, the Tribunal confirmed the ld CIT(A)'s decision to allow the depreciation claim. The appeal was dismissed, upholding the order of the ld CIT(A).

In conclusion, the Tribunal upheld the allowance of depreciation on the commercial property, emphasizing that a composite consideration without a separate valuation for land does not entitle the assessee to claim depreciation on the land component. The decision was based on legal principles and the absence of evidence supporting a different interpretation.

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