2021 (10) TMI 964 - AT - Income Tax

Tribunal allows appeal, directs deletion of depreciation disallowance on office premises.

National Housing Bank Versus ACIT, Circle-26 (2), New Delhi

The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to delete the addition made on account of disallowance of depreciation ... Disallowance of depreciation on composite land and building - depreciation claimed by the assessee on account of office premises at India Habitat Centre - case of the assessee was selected for scrutiny under CASS - HELD THAT:- When the assessee bank does not have any segregation value of land and building of the said premises and it has paid composite price, the entire deprecation claim is allowable under section 32 of the Act. So, following the aforesaid decision rendered by the Co-ordinate Bench of the Tribunal in CIT vs Rajesh Exports Ltd. [2005 (11) TMI 362 - ITAT BANGALORE], and when it is categoric case of the assessee that the purchase price of land and building is composite one and it has no segregation of value of land and building separately, disallowance made by the Assessing Officer/CIT(A) is not sustainable in the eyes of law. - Decided in favour of assessee. Issues:1. Disallowance of depreciation claimed on office premises at India Habitat Centre.2. Application of section 14A of the Income Tax Act, 1961 for disallowance.Analysis:Issue 1: Disallowance of DepreciationThe appeal was filed against the order of Ld. CIT(A) affirming the disallowance of depreciation of Rs. 33,98,755 made by the Assessing Officer. The Assessing Officer disallowed the depreciation claimed by the assessee on account of office premises at India Habitat Centre as the title deeds were not executed. The Ld. CIT(A) partly allowed the appeal, deleting the disallowance under section 14A but sustaining the disallowance of depreciation. The Tribunal noted that the Assessing Officer and Ld. CIT(A) relied on earlier decisions to support the disallowance. However, the Tribunal overturned the decision, citing precedents that when there is no segregation of the value of land and building and a composite price is paid, the entire depreciation claim is allowable under section 32 of the Act. The Tribunal directed the Assessing Officer to delete the addition, ruling in favor of the assessee.Issue 2: Application of Section 14AThe Assessing Officer, under section 14A of the Act, made a disallowance of Rs. 1,90,72,214 and further added Rs. 33,98,755 on account of disallowance of depreciation. The Ld. CIT(A) deleted the disallowance under section 14A but sustained the disallowance of depreciation. The Tribunal upheld the deletion of the disallowance under section 14A, as it was not contested by the Revenue. However, the Tribunal directed the deletion of the addition made on account of disallowance of depreciation, following the decision in favor of the assessee based on the lack of segregation of land and building value.In conclusion, the Tribunal allowed the appeal of the assessee, directing the Assessing Officer to delete the addition made on account of disallowance of depreciation. The decision was pronounced on a virtual hearing on 21st October, 2021, in the presence of both parties.