TaxTMI 
TaxTMI 
2019 (9) TMI 544
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....(A) Confirmed AO's contention, & Calculated Depreciation on property given on rent separately by removing from the block of asset property given on rent and confirmed addition of Rs. 9,79,042/- 2. The learned CIT(A) and AO grossly erred in ignoring the submissions made by the Appellant in this regard. 3. Without prejudice considering above logic The learned CIT(A) did not allowed depreciation on Office premises added during the Assessment year at its cost of acquisition. 4. The Appellant craves leave to add, alter, amend all or any of the grounds in appeal." 3. The assessee is engaged in the business of trading in chemicals & dyes , intermediate & commission agents. The assessee has shown income from house property in respect of office premises which were let out during the year. The assessee had also claimed depreciation on these premises which had been let out during the year. The AO asked assessee to explain as to how depreciation can be allowed on let out properties. The assessee submitted details of properties held by it on 31.03.2013 and the purpose of acquisition of all these properties were shown to be for self use for the purposes of busin....
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....(2) of the 1961 Act and observed that the assessee is not entitled to depreciation on premises let out although part relief was granted by learned CIT(A) on computational aspects , vide appellate order dated 16.10.2017, by holding as under:- "6.1 I have considered the assessment order and submissions made by the authorized representative of the appellant. The contention of the appellant that once an asset in included in a block of assets, depreciation on the asset cannot be disallowed on the asset even if it is not used for the appellant's business is not acceptable. A following example will illustrate this point. Suppose, an individual has a large number of cars which are used for its business. Suppose, the individual purchases a car on the last day of a previous year and use it for his business for a day, i.e., for the last day of the previous year. For the purpose of the I.T. Act, the individual includes value of the car is in the WDV of the block of assets and claims depreciation on the entire WDV of the block which is allowed for that assessment year (the 'First Assessment Year'). Now, if from the first day of the next P.Y., the individual use it ....
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....lowable for thePY WDV (in Rs. ) as at the end of the PY 1990-91 15,62,152 1,56,215 14,05,937 1991-92 14,05,937 1,40,594 12,65,343 1992-93 12,65,343 1,26,534 11,38,809 1993-94 11,38,809 1,13,881 10,24,928 1994-95 10,24,928 1,02,493 9,22,435 1995-96 9,22,435 92,244 8,30,192 1996-97 8,30,192 83,019 7,47,172 1997-98 7,47,172 74,717 6,72,455 1998-99 6,72,455 67,246 6,05,210 1999-00 6,05,210 60,521 5,44,689 2000-01 5,44,689 54,469 4,90,220 2001-02 4,90,220 49,022 4,41,198 2002-03 4,41,198 44,120 3,97,078 2003-04 3,97,078 39,708 3,57,370 2004-05 3,57,370 35,737 3,21,633 2005-06 3,21,633 32,163 2,89,470 20CJ6-07 2,89,470 28,947 2,60,523 2007-08 2,60,523 26,052 2,34,471 2008-09 2,34,471 23,447 2,11,024 2009-10 2,11,024 21,102 1,89,921 2010-11 1,89,921 18,992 1,70,929 2011-12 1,70,929 17,093 1,53,836 Total 14,08,316 6.4.2 Therefore, WDV as at 31.03.2012 of the building at serial No. 1 of the Tab....
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....led written submissions and prayers are made before the Bench to take the same on record. The written submissions along with enclosures and case laws relied upon learned counsel for assessee containing in all 54 pages are placed in file. It is submitted that additions were made by AO by disallowing depreciation on immovable properties which were let out during the year on account of non user of the properties for business purposes, to the tune of Rs. 11,48,658/- which additions were later sustained by learned CIT(A) to the tune of Rs. 9,79,042/-. It was submitted by learned counsel for the assessee that these immovable properties being "Building' form part of the Block of Assets. Our attention was drawn to page no. 19 of the paper book wherein details of depreciation on "Buildings' is placed. Our attention was also drawn to page no. 12 wherein details of depreciation on "Building' under the provisions of The Companies Act is placed. The w.d.v. as on 31.03.2013 is Rs. 5.30 crores for office premises and Rs. 19.25 lacs for Godown(Ankleshwar). It was submitted that these office premises form part of Block of Assets and it is not possible to bifurcate this Block of Assets and deprec....
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....s are new properties acquired during the year under consideration while two were old properties. It was submitted that in all there are seven properties, out of which four properties were let out during the year while three properties were used for business purposes. The Ld. DR relied upon the decision of Hon'ble Gujarat High Court in the case of New India Industries Limited v. CIT reported in (1993)203 ITR 933(Guj.) and also decision of Mumbai-tribunal in the case of DCIT v. Godrej Properties & Investments Limited (2005) 93 ITD 308(Mum-trib.) . The learned DR also relied upon decision of Mumbai-tribunal in the case of Rolta Holding & Finance Corporation Limited v. DCIT reported in (2014) 49 taxmann.com 23(Mum-trib.) and decision of Hon'ble Bombay High Court in the case of Dineshkumar Gulabchand Agrawal v. CIT reported in (2004) 267 ITR 768(Bom. HC) . The learned DR would also rely on decision of Mumbai-tribunal in the case of ACIT(OSD), Range 3(3), Mumbai v. Rishiroop Polymers Private Limited reported in (2006) 105 TTJ 132(Mum-trib.). It was submitted by learned DR that assessee has brought this plea of user of two new properties for business purposes for the first time before the....
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....maining immovable properties which were not let out by assessee but were forming part of Block of Asset viz. Building were used by assessee for its business purposes. The dispute has arisen between rival parties as to claim of deduction of depreciation on four immovable properties which were let out by assessee on rent and income thereof was offered for taxation by assessee under the head "Income from House Property'. The assessee on its part had claimed depreciation on all seven immovable properties held by it , viz. three immovable properties which were used for business purposes as well for four properties which were let out on rent by the assessee during the year under consideration, on the ground that all these seven immovable properties entered "Block of Asset' viz. Building and once an item of asset entered into "Block of Asset' as defined u/s 2(11) read with clause (ii) to Section 32(1), then it loses its individual identity and hence depreciation is to be allowed on entire "Block of Asset' irrespective of the fact that some of these separately identifiable properties falling within Block of Assets are not put to use for business purposes during the year under consideration....
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....t the flats which never entered into the block of depreciable assets as income from the same were being offered under the head income from house property can by no stretch of imagination be said to be entitled for automatic entry into the block of depreciable asset. In this view of the matter, the reference to section 2(11), 43(6) & 50 by learned CIT(A) is germane and support the case of the Revenue. Section 2(11) defines block of asset as a group of asset falling within the class of asset........ in respect of which the same percentage of depreciation is permissible. The income from 'Namah' building and the premises in 'Lakhani Centrium' was falling under the head 'income from house property' and hence these premises cannot be said to be falling under any asset group on which any rate of depreciation is prescribed as on such asset no depreciation is permissible." It is pertinent to mention here that counsels who represents assessee's before Hon'ble Courts/Tribunal are officers of the Court/tribunal and it is expected of them that they will make responsible, true and correct statements before the Hon'ble Courts/tribunal to provide proper assistance to the....
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....roperty chargeable to tax. This chapter IV-C of the 1961 Act does not provide for depreciation on immovable properties as one of deductions from income earned by assessee from letting out of such house property. Section 32 of the 1961 Act provides for depreciation and falls under Chapter IV-D which concerns itself with computation of income from Profits or Gains from Business or Profession. Thus, there is no question of allowing any deduction as depreciation u/s 32 from rental income on letting out of these house properties for the period for which these house properties were let out and income thereof was offered for tax under the head "Income from House Properties'. Reference is drawn to decision of Mumbai-tribunal in the case of DCIT v. Godrej Properties & Investments Limited (2005) 93 ITD 308(Mumbai) to support above proposition . Coming back to two newly acquired properties, the assessee has raised fresh claim before the tribunal for the first time that these two newly acquired properties which were let out during the part of the previous year on rent were prior to they being let out were used by assessee as godown for assessee's own business after its acquisition by the asses....
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....s that since these two properties fall within Block of Asset viz. Building for which same percentage rate of depreciation is provided, the depreciation has to be allowed u/s 32 of the 1961 Act. It is not the contention of the assessee that these properties were let out temporarily during the year under consideration but were ready/available for being used for the purposes of business of the assessee. Moreover , once rental income from these house properties is brought to tax under the head "Income from other sources' and undisputedly there is no usage of these house properties by assessee for its business, then there is no scope of claiming Depreciation on these house properties by invoking provisions of Section 32 of the 1961 Act which falls under Chapter IV-D dealing with income from Profit and Gains of Business or Profession because of factual matrix of the case before us. These are altogether different and distinct properties which are separately identifiable. These two house properties were let out by assessee even in preceding year(s) and were let out throughout the year under consideration. As we have seen earlier that the 1961 Act is a self contained code in itself and inco....
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....ny possibility of these properties being ready /available to be used for the purposes of business of the assessee, merely on the grounds that these properties continued to form part of Block of Asset as defined u/s 2(11). User of the asset for the purposes of business or profession of the assessee is a pre-condition for grant of depreciation u/s 32 of 1961 Act and these two properties were infact let out on rent for lengthy period of time from earlier years as emanating from records and as submitted before us by learned counsel for the assessee, income of which was offered for taxation by assessee under the head "Income from House Properties'. It is altogether different that some of the assets which form part of the Block of Assets may not be temporarily used for business but since they form part of the Block of Asset on which same rate of depreciation is prescribed , the depreciation stood allowed on concept of passive user but where business usage is hit by doctrine of impossibility as these properties over years continued to be let out on rent , income thereof being offered to tax under the head "income from house property' , the depreciation u/s 32 cannot be allowed merely beca....
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....eir total sanctity. It cannot be the intention of the Legislature that the words 'used' when it is to be interpreted in a wider sense to mean, 'ready to use', the same is stretched to the limits of non-user for number of years." (Emphasis supplied by us) The case laws relied upon by assessee are distinguishable. In the case of Oswal Agro(supra), the tax-payer was in business and its Bhopal unit was lying closed for several years but since the asset formed part of Block of Asset, Hon'ble Delhi High Court held deprecation u/s 32 shall be allowed keeping in view new scheme of taxation wherein concept of Block of Assets as defined u/s 2(11) is introduced by Finance(No. 2) Act, 1998 w.e.f. 01.04.1999. In the case of Oswal Agro(supra), the question before the Court was not that the user of the said asset changed from being for the purposes of the business of tax-payer to that of letting out on rent , income of which is chargeable to tax under the head "Income from House Property'. The Bhopal unit albeit was lying closed for several years was infact continued to be business asset of the assessee. Similar, is the case of G.R.Shipping Limited (supra) relied upon by assess....