Appeal allowed: Disallowances on interest, depreciation, and land component deleted. Consistency in tax treatment emphasized.

The Tribunal allowed the assessee's appeal, directing the AO to delete disallowances on interest, depreciation, and land component. The Tribunal emphasized consistency in tax treatment over time, considering the availability of interest-free funds for investments and the rule of consistency in depreciation calculations. The business expediency of investments made to protect business interests was also taken into account, leading to the deletion of disallowances and consequential additions.

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Issues:
1. Disallowance of interest on borrowals
2. Disallowance of depreciation for an amount
3. Disallowance of depreciation on land component

Issue 1 - Disallowance of interest on borrowals:
The assessee appealed against the order disallowing a proportionate amount of interest on borrowed funds given as interest-free advances to Directors. The Assessing Officer invoked section 36(1)(iii) of the Income Tax Act and disallowed a sum towards the proportionate interest. The CIT(A) partially allowed relief by directing the AO to compute interest on funds deployed for investments and restrict the disallowance. The assessee argued that they had sufficient own funds to cover the interest-free advances and the investments were made to protect business interests. The paid-up capital and reserves available exceeded the advances made. The Tribunal relied on precedents and held that if interest-free funds were sufficient, investments would be presumed to be from such funds. The business expediency was also considered, leading to the direction to delete the addition of proportionate interest.

Issue 2 - Disallowance of depreciation for an amount:
The AO disallowed depreciation claimed on an office building, considering only the value of the land for depreciation. The CIT(A) upheld the disallowance, citing the purchase deed showing a composite value of land and building. The Tribunal noted that depreciation was allowed in previous and subsequent years on the total asset value without bifurcation. Following the rule of consistency, the Tribunal directed the AO to delete the disallowance and consequential addition, as the same treatment should be applied as in previous years.

Issue 3 - Disallowance of depreciation on land component:
The AO disallowed depreciation on the land component of an asset, contrary to previous and subsequent years' treatment. The Tribunal held that consistency in treatment over time was essential, and the AO's differentiation for a single year was impermissible. Relying on the decision in Radhasoami Satsang case, the Tribunal directed the AO to delete the disallowance and consequential addition, aligning with the consistent treatment in previous assessments.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the AO to delete the disallowances made on interest, depreciation, and land component, emphasizing the importance of consistency in tax treatment over time.

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