Tribunal allows assessee to change income head and claim depreciation under section 153A

The Tribunal upheld the CIT(A)'s decision, permitting the assessee to change the head of income from "House Property" to "Profit and Gain from Business and Profession" and claim depreciation on assets in abated assessments under section 153A. The Revenue's appeals were dismissed as the return filed under section 153A replaces the original return, allowing for new claims, distinguishing it from cases under section 147/148. The Tribunal clarified that prior decisions cited by the Revenue were not relevant in this context.

---

---

Issues Involved:
1. Change of head of income from "House Property" to "Profit and Gain from Business and Profession."
2. Applicability of the decision in CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO.
3. Claim of depreciation on assets not claimed in the original return.

Detailed Analysis:

1. Change of Head of Income:
The assessee, a company engaged in real estate development and operating SEZ projects, initially declared rental income under "House Property" in its original returns for A.Y. 2015-16 and 2016-17. After a search action under section 132 of the Income Tax Act, the assessee filed returns under section 153A, changing the head of income to "Profit and Gain from Business and Profession." The Assessing Officer (AO) rejected this change, citing consistency with previous returns and assessed the income under "House Property."

The Ld. Commissioner of Income Tax (Appeals) [CIT(A)] acknowledged that the years under consideration were abated years, allowing the AO to decide any issue based on the material on record. The CIT(A) relied on the CBDT Circular No. 16/2017, which states that income from letting out premises in SEZs should be charged under "Business or Profession." Consequently, the CIT(A) directed the AO to compute the income from lease rentals under "Profit and Gain from Business and Profession."

2. Applicability of CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO:
The Revenue argued that the assessee could not change the head of income or claim new benefits in the returns filed under section 153A, citing the decisions in CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO. The CIT(A) and the Tribunal observed that these cases pertained to reassessment under section 147/148 and were not applicable to the present case involving abated assessments under section 153A. The Tribunal noted that in abated assessments, the return filed under section 153A replaces the original return, allowing for new claims.

3. Claim of Depreciation on Assets:
The Revenue contended that the assessee could not claim depreciation on assets not claimed in the original return in the subsequent proceedings under section 153A. The Tribunal held that in abated years, the assessee could make fresh claims, including depreciation, as the return filed under section 153A replaces the original return.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, allowing the assessee to change the head of income from "House Property" to "Profit and Gain from Business and Profession" and to claim depreciation on assets. The appeals filed by the Revenue were dismissed, affirming that in abated assessments, the return filed under section 153A replaces the original return, permitting new claims. The Tribunal also clarified that the decisions in CIT v. Sun Engineering Works (P) Ltd. and K. Sudhakar S. Shanbhag v. ITO were not applicable to the present case.

---