AI Drafter 
TaxTMI 
TaxTMI 
2020 (4) TMI 611
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.... considering the contention of the assessee that the land is also leasehold which is also subject to amortization and effectively the total cost paid for the premises will be considered for allowance of depreciation. 4. The authorities below had erred in making/ sustaining illegal additions by applying completely distinguishable cases and ignoring the cases cited during the proceedings which were applicable in the appellant's case. Thus sustaining the illegal levy of disallowances under the stated provisions. 5. The appellant prays for further/ additional submissions and grounds to be allowed to be filed before final hearing and further prays for early out-ofturn hearing to allow the appeal with consequential relief, after hearing both sides. 6. It is prayed accordingly." (B) Assessment Order dated 31.03.2015 was passed under Section 143(3) of Income Tax Act, 1961 ("I.T. Act", for short), wherein, interalia, depreciation amounting to Rs. 40,44,605/- on office premises at India Habitat Centre was disallowed by the Assessing Officer ("AO", for short). The relevant portion of the Assessment Order dated 31.03.2015 is reproduced as under: (C) Aggrieved, the as....
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....he view taken by the ITAT in the aforesaid orders in the case of Joint Commissioner of Income-Tax vs. Rajesh Exports Ltd. (supra) and order dated 28.03.2019 of Co-ordinate Bench of ITAT, Delhi, (supra). For ease of reference, the relevant portion of the aforesaid order dated 28.03.2019 of Co-ordinate Bench of ITAT in assessee's own case is reproduced below: "25. AO as well as id. CIT (A) has disallowed an amount of Rs. 40,44,605/- claimed as depreciation on office building on the ground that the same is attributable towards cost of land. 26. Ld. AR for the assessee contented that in the absence of any segregation of value of land, depreciation has been claimed on the basis of total cost paid to India Habitat Centre because land is also leasehold being subject to amortization and effectively the total cost paid for the premises will be considered For amount of depreciation. Ld. AR relied upon the decision rendered by the coordinate Bench of the Terminal in CIT vs. Rajesh Exports Ltd. (2006) 9 SOT 28 (Bang.) which has further than relied upon by the co-ordinate Bench of the Tribunal in ease of ITO vs Millennium Spire India Management (P) Ltd. ITA No.3297/Del/2013. ....
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....emises at India Habitat centre on the basis o actual cost paid for the anid promises. In this regard the bank has made the following disclosure in its Notes to Accounts as under: "in respect of the office space acquired at India Centre(IHC) loadhi Road, New Delhi the East cost has not been apportioned by IHC among th different allots..... > 4.3 The reply of the assessee has been duly considered but it is found not to be acceptable. The assessee company has not given the bifurcation of depreciation of land and building and claimed the depreciation on entire value of premises, thus, the disallowance of Jepisolation is made accordingly as per last year assessment ordor for 2001 13 made by the AC and on the similar lines the disallowance of depreciation of 40.44.605 is made and added to assessee's total income. नीरा आवास (Addition: Rs. 40,44,605/-) Document 2 6.4. The issue came up for A.Y. 2011-12 as well during which the Ld. CIT(A) vide order dated 12.09.2004 decided as under:- "The last issue is in respect of segregation of the WDV of the property into two: land and building vis-a-vis consequ....
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....ifty percent of the claim as permitted under the provisions of the Act read with rules framed thereunder. As has been stated by the Bank in its Notes to Accounts regarding non availability of the break up, and further the property being leasehold, the total cost paid has to be considered as the basis for claim of depreciation. Therefore in any case the whole cost has to be depreciated/amortised. The disallowance by the learned assessing officer in this regard is therefore not justified and is not based on any material available with the learned assessing officer. A mere disallowance on the basis of a surmise cannot be sustained. It is therefore submitted that the disallowance made be deleted. In view of the foregoing submissions, it is once again humbly submitted that the additions/disallowances made by the learned assessing officer are not justified as they are bad in law being against the provisions of law and against the facts of the case and are therefore required to be deleted." Document 3 I have carefully considered the facts of the case, submission of the appellant and perused the record. The above mentioned issue that whether or n....
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....s". We have noticed that in sub-clauses (iv) and (v), "building" clearly means structures and does not include site. That this is the proper meaning is also borne out by rule 8 of the Indian Income-tax rules, 1922. Rule 8 has a Schedule, and as far as buildings are concerned, it reads as under: Class of asset 1.Buildings Rate Percentage 1. First class substantial buildings of 2.5 selected materials Remarks Double these numbers will be taken for factory buildings, excluding offices, godowns, officers and employees' quarters. 2.Second class buildings of Less 5 substantial construction 3.Third class buildings of 7.5 construction inferior to that of Document 4 6.5 second class buildings, but not including purely temporary erections 4.Purely temporary erections such as wooden structures. No rate is prescribed, renewals will be allowed as revenue expenditure. The rate of the depreciation is fixed on the nature of the structure. If it is a first class substantial building, the rate is Less. In other words, first class building would depreciate at a much Less rate than a second class building. It....
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.... the case of Alps Theatre (supra). In view of the ratios laid down in this decision, alps theatre; I am of the considered view that the word 'Building' does not include land beneath it. Therefore, the AQ, in principle, is held justified in segregating the purchase consideration of the above mentioned property into two: land and building vis-Ã -vis consequential working of the depreciation on the WDV of the block of asset; Building (50% of the cost of the premise is treated to belong to land.) resulting consequential disallowance of depreciation of Rs.40,44,605/-. Accordingly, the disallowance of depreciation Rs.40,44,605/- is sustained." After going through the reasoning of the A.Q., submissions of the appellant and the order of my Ld. Predecessor I uphold the addition made by the A.O. However, the addition is restricted to 50% of the depreciation claimed during the year i.e. Rs. 72,80,290/-. Therefore, the disallowance of Rs.40,44,605/- is restricted to Rs.36,40,145/-, The Ground is partly allowed. Document 5 Note on Disallowance of Part Depreciation of premises amounting to Rs. 36,40,145/- For the Said ground the appellant company has ta....