Depreciation denied on land component of hotel building despite consolidated purchase price under Section 32

ITAT DELHI remanded the first issue to AO for fresh adjudication regarding carry forward of losses from belated return filed on 28/01/2013 instead of due date 30/09/2010, as it was unclear whether claimed loss was business loss or unabsorbed depreciation. The tribunal dismissed the second ground, upholding AO's decision to deny depreciation on land component of hotel building complex purchased at consolidated value, ruling that separate valuation of land and building was identifiable through stamp duty assessment based on circle rates, making depreciation claim on land impermissible under Section 32.

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Issues Involved:
1. Rejection of the claim of carry forward of unabsorbed depreciation.
2. Disallowance of depreciation on land.
3. Non-consideration of a specific ground of appeal.

Summary:

Issue 1: Rejection of the Claim of Carry Forward of Unabsorbed Depreciation
The Assessee contended that the claim of carry forward of unabsorbed depreciation should be covered under Section 32(2) and not Section 139(3) of the Income Tax Act. The Tribunal found that the Assessee did not clearly specify whether the claimed loss was business loss or unabsorbed depreciation. Consequently, the Tribunal remanded the issue back to the Assessing Officer (A.O.) for fresh adjudication, directing the Assessee to substantiate its claim of unabsorbed depreciation. This decision applied to both Assessment Years 2010-11 and 2011-12.

Issue 2: Disallowance of Depreciation on Land
The Assessee argued that the entire hotel building complex was purchased at a consolidated value without a separate cost for the land, hence depreciation should not be reduced. The Tribunal upheld the A.O.'s decision, stating that land does not qualify for depreciation as per Section 32 of the Act. The Tribunal noted that the Assessee had, during the registration of the conveyance deed, bifurcated the value of land and building and paid stamp duty accordingly. Thus, the disallowance of depreciation on land was justified. This ruling was consistent for both Assessment Years 2010-11 and 2011-12.

Issue 3: Non-consideration of a Specific Ground of Appeal
The Tribunal noted that the Assessee did not press this ground during the appeal. Consequently, this ground was dismissed as not pressed for both Assessment Years 2010-11 and 2011-12.

Conclusion:
The appeals for both Assessment Years 2010-11 and 2011-12 were partly allowed for statistical purposes, with the issue of carry forward of unabsorbed depreciation remanded for fresh adjudication and the disallowance of depreciation on land upheld.

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