TaxTMI 
TaxTMI 
2021 (8) TMI 1328
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....of Scientific and Industrial Research (DSIR). 3) The learned Commissioner (Appeals) having noted that the assessee has furnished the relevant application to Department of Scientific and Industrial Research (DSIR) before completion of assessment, should have allowed the deduction as the relevant expenditure was actually incurred during the relevant previous year. 4) The learned Commissioner (Appeals) erred in treating the amount of premium paid towards Leasehold rights of land as Non-Depreciable asset. 5) The learned Commissioner (Appeals) erred in not treating the premium paid for leasehold rights as Intangible asset and thereby denying the depreciation on leasehold rights @25% amounting to Rs. 86,06,701. 6) The learned Commissioner (Appeals) erred in not considering the case laws relied upon by the assessee". 3. Coming to the former issue of Section 35(2AB) weighted deduction of Rs.1,45,67,871/-, we notice at the outset that both the lower authorities have rejected the same for the sole reason that the then taxpayer had failed to file corresponding Form-3CL issued by the prescribed authority i.e., Department of Scientific and Industrial Resea....
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....ilize the land is in the nature of a license or commercial right to carry on its business activities which is evident from. the lease agreements, the appellant treated the right is an intangible asset u/s.32(1)(ii) and accordingly claimed depreciation @ 25% amounting Rs.1,03,80,339/- (25% of Rs. 4,15,21,357/-) being assets in the form of intangible assets. Provisions of the Income Tax Law: As per section 32(1)(ii) of Income tax act 1961 "In respect of depreciation of knowhow, patents, copyrights, trademarks, licenses, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed:- a. In the case of any block of assets, such percentage on the written down value thereof as may be prescribed b. In the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed As per Rule 5(1) of Income tax rules 1962 "Subj....
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....s. Commercial rights confer certain rights upon the appellant to carry on its business in order to earn more profit. The appellant got commercial benefits for a period of 33 years on payment of lease premium and therefore any amount incurred in acquiring such commercial right is eligible for depreciation u/s.32 of Income Tax: Act, 1961. 5.3 The Decision: 5.3.1 The appellant relies on the following case laws: i. Gobind Sugar Mills Ltd. 1998J 232 ITR 319 (SC) ii. Tirumal Music Centre (P.) Ltd. [2013] 39 taxmann.com 196 But in these cases it was not held that expenditure incurred for acquisition of leasehold rights is capital in nature and the same are eligible for depreciation u/s 32. In Gobind Sugar Mills Ltd (supra) case the Hon'ble Supreme Court only held that "expenditure incurred by assessee for acquisition of leasehold right for setting up of leasehold right for setting up of sugar factory was capital expenditure". But all capital expenditure is not entitled for depreciation. In Tirumal Music Centre the facts are entirely different. 5.3.2 The Land is a non-depreciable Asset. So Depreciation will not be allowed on any lea....
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.... "7.2 Having referred to the above legal position, we hold that by virtue of lease only an interest in land is created which does not qualify for allowance of depreciation" 5.3.4 The Apex Court (SC), in Mother Hospital (P.) Ltd [2017] 79 taxmann.com 375 (SC)/[2017] 247 Taxman 12 (SC)/[2017] 392 ITR 628 (SC) /[2017] 294 CTR 25 (SC) held that since the assessee (lessee) had not become the owner of the immovable property in question, depreciation could not be allowed to the taxpayer as per section 32 of the Income-tax Act, 1961. The title in the immovable property could not be passed from lessor when its value was more than INR 100, unless it was executed on a proper stamp paper and was duly registered with. the sub-registrar. In the absence thereof the taxpayer could not be said to be the owner, of the immovable property and depreciation could not be allowed in such circumstances. On the alternative argument of claiming depreciation under Explanation 1 to section 32, the SC held that the lessee was entitled to depreciation on the capital expenditure incurred by him by way of renovation, extension or improvement to the building and not on the construction carried out by the ....