2019 (8) TMI 1115 - AT - Income Tax

Tribunal upholds disallowance of depreciation on tenancy rights and payments to legal heirs

The Tribunal dismissed both appeals, upholding the decisions of the Commissioner (Appeals) regarding the disallowance of depreciation on tenancy rights ... Disallowance of depreciation of tenancy rights - HELD THAT:- As seen from record, the dispute relating to assessee’s claim of depreciation on tenancy right is a recurring issue from the earlier assessment years. While deciding the issue in earlier assessment years, the Tribunal has consistently held that the tenancy right is not an intangible asset eligible for deprecation u/s 32. In fact, in the latest order passed for the assessment year 2011–12 the Tribunal, following its earlier view has disallowed assessee’s claim of depreciation on tenancy rights. Facts being identical, respectfully following the consistent view of the Tribunal in assessee’s own case in the preceding assessment years, we uphold the decision of learned Commissioner (Appeals) on the issue. Disallowance of payments made to the legal heirs of the deceased partners - HELD THAT:- Allowability of payment made to the legal heirs of deceased partners towards share in goodwill is a recurring issue between the parties continuing from the preceding assessment years. Though, the AO in the preceding assessment years has made similar disallowance, however, when the issue came up for consideration before the Tribunal, it was held that the payment made to the legal heirs of the deceased partners is allowable as deduction. In the latest order passed for the assessment year 2011–12 the Tribunal following its earlier orders has upheld the decision of Commissioner (Appeals) in allowing assessee’s claim of deduction. Facts being identical, respectfully following the consistent view of the Tribunal in assessee’s own case as referred to above, we uphold the decision of learned Commissioner (Appeals) on this issue. Grounds raised are dismissed. Issues:1. Disallowance of depreciation on tenancy rights.2. Disallowance of payments made to legal heirs of deceased partners.Analysis:Issue 1: Disallowance of Depreciation on Tenancy RightsThe case involved a partnership firm of Advocates, Solicitors, and Notary appealing against the disallowance of depreciation on tenancy rights amounting to Rs. 4,83,690 for the assessment year 2012-13. The Assessing Officer and the Commissioner (Appeals) both disallowed the claim based on the Tribunal's consistent view that tenancy rights are not depreciable assets. The Tribunal upheld the decision, citing previous orders where similar claims were rejected. The Tribunal reasoned that tenancy rights do not qualify as intangible assets eligible for depreciation under section 32 of the Act. The Tribunal dismissed the appeal, affirming the decision of the Commissioner (Appeals) based on the consistent view taken in previous assessments.Issue 2: Disallowance of Payments to Legal Heirs of Deceased PartnersThe Revenue's appeal focused on the disallowance of payments made to legal heirs of deceased partners amounting to Rs. 1,57,32,275. The Assessing Officer disallowed the deduction claimed by the assessee, but the Commissioner (Appeals) allowed the claim based on a favorable decision in a previous assessment year. The Tribunal considered the recurring issue of payment to legal heirs of deceased partners and noted that while the Assessing Officer had made similar disallowances in the past, the Tribunal consistently allowed such deductions. Citing previous orders, the Tribunal upheld the decision of the Commissioner (Appeals) to allow the deduction. The Tribunal dismissed the Revenue's appeal, aligning with its consistent view on similar cases in previous assessments.In conclusion, both appeals were dismissed by the Tribunal, maintaining the decisions of the Commissioner (Appeals) in both cases. The Tribunal pronounced the order on 7th August 2019, upholding the disallowances of depreciation on tenancy rights and payments to legal heirs of deceased partners based on the consistent views taken in previous assessments.