AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (5) TMI 230
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....2010-11 for the sake of brevity. ITA no.2734/Mum./2019 Assessment Year - 2010-11 3. In this appeal, the assessee has raised following grounds:- "1. The Commissioner of Income Tax (Appeals), Mumbal vide order dated 27th February, 2019 erred in allowing depreciation of Rs.48,17,491/- as against the claim of depreciation of Rs.65,61,664/- as per the return of income. 2. The Commissioner of Income Tax (Appeals), Mumbai failed to appreciate that the assessee company has taken the units on lease for a period of 95 years from SEEPZ Authority, Mumbai and therefore, the assessee company is the owner of the units constructed by SEEPZ and hence it has claimed depreciation @ 10% on the cost of the units paid by it for taking on lease @ 10%. 3.The Commissioner of Income Tax (Appeals), Mumbai failed to appreciate that the assessee company was the lessee of the said units for a period of 95 years and therefore, it is entitled to the claim of depreciation on cost of the said units. 4. The order of the Commissioner of Income Tax (Appeals), Mumbai erred in holding that the assessee paid proportionate cost of the land on which the building was constructed by the SEEPZ." 4. The only issue ....
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.... given to the assessee company for the period of 95 years, against which the assessee company has paid one-time consideration of Rs. 8,24,30,300 and the yearly ground rent of Re. 1/-. It was further submitted that assessee has a right of renewal of lease for a further period of 95 years, and therefore, the consideration paid by the assessee company is capital nature by which assessee company has acquired the rights in the said units for a substantial period of 95 years and, therefore, the assessee company, which is the owner of the said units, is entitled to claim depreciation under section 32 of the Act. 8. The learned CIT(A) vide impugned order dated 27/02/2019, after considering remand report of the Assessing Officer and assessee's reply thereto, inter-alia, held that assessee is entitled to claim depreciation on the cost of construction of the said 4 units taken on an extended period of lease from MIDC. The learned CIT(A) further held that the assessee is not entitled to depreciation on the component of land in the total consideration paid for the said 4 units. Accordingly, the CIT(A) came to the conclusion that the total consideration paid, inclusive of stamp duty, of Rs. 9,9....
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....hort rebuttal, learned A.R. submitted that the department's appeal against the order passed by the learned CIT(A) for the year under consideration was dismissed on the ground of low tax effect and therefore the decision of learned CIT(A) to the extent depreciation on cost of construction of building was allowed, is final. 11. We have considered the rival submissions and perused the material available on record. In the present case, lease deed dated 28/06/2005 was entered into between MIDC (lessor) and Development Commissioner Seepz SEZ (lessee). As per the lease deed, which is also forming part of the paper book from pages 36 to 47, it is evident that 16 acres of land was transferred by the Government of Maharashtra to the lessor/MIDC for the purpose of encouraging the export industries in India and earning foreign exchange on the export by various kinds of industrial units including gems and jewellery unit and information technology/hardware units, to be situated at the said land. Further, MIDC was authorised to carry out development work of carving out plots and construction of building to accommodate the industrial units, which are export oriented. As per the lease deed, land a....
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....as the said premises and more particularly described Thirdly in the First schedule hereunder written TO HOLD the said units hereunder expressly demised onto the Sub- lessee for the term of 95 years computed from the date of 28th June 2005 and renewable for further term of 95 years on payment of premium and paying therefore the yearly rent during the said term onto the Lessor/Lessee the said yearly ground rent of Rs.1/- in advance being concessional rent without any deduction whatsoever." 14. From the conjoint reading of the aforesaid clauses of sub-lease deed, it is evident that the 4 units were allotted to the assessee for a term of 95 years, which was renewable for a further term of 95 years. It is also evident that the consideration of Rs. 8,24,30,300 paid by the assessee and yearly rental of Re. 1/- was not only in respect of the said 4 units but was also for various other facilities which were built by MIDC at its cost and expenses. Further, the lease for the term of 95 years which is further renewable for another 95 years, in the present case, is a perpetual lease. Being a perpetual lease i.e. 95 years + 95 years, the assessee is nothing less than an owner of the units allot....
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....on @ 10% on the cost of the units paid by it for taking on lease @ 10%. 3. The order of the Commissioner (Appeals) is had in law and without jurisdiction as it is contrary to his own orders in the case of the assessee company for A.Ys. 2007-08 and 2010-11 (both dated 27th February, 2019) wherein the ground regarding depreciation on industrial galas is partly allowed in the identical circumstances. 4. The Commissioner (Appeals) erred in not allowing depreciation on cost of construction of industrial galas, which is part and parcel of the total consideration paid by the assessee company, as per his orders for A.Ys.2007-08 & 2010-11 dated 27th Feb., 2019. 5. The Commissioner (Appeals) erred in not following the decision of the Bombay High Court in the case of Alpana Talkies (139 TTR 1055) wherein the Court held that though the land on which the premises was constructed belong to the Lessor, however, since the new premises constructed was of the ownership of the assessee till the completion of the extended period of lease, the assessee was entitled to claim depreciation on the cost of construction of the new premises. 6. The Commissioner (Appeals) ought to have bifurcated the t....