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2017 (2) TMI 1092 - AT - Income TaxTaxability of the lease rental income - “Profits and gains of business or profession” or “Income from other sources” - Held that:- It is the claim of the assessee that the income from lease rental should have been taxed under the head “Profit and gains of business or profession”. Subsequent conduct of the assessee prompts us to dismiss this grievance of the assessee because in subsequent years, the assessee itself has shown the lease rental income under head “Income from other sources”. Therefore, without going into the merits of this claim of the assessee and considering the subsequent conduct of the assessee, this grievance of the assessee is also dismissed. Allowability of depreciation, additional depreciation and carry forward of unabsorbed depreciation - Held that:- Coming back to the allowability of depreciation from the income taxed under the head “Income from other sources” in the light of the afore-stated discussions, in our considered opinion, the A.O. ought to have allowed depreciation as per the provisions of the law. Section 32 (1) (iia) contains the provisions for the allowability of additional depreciation. As mentioned elsewhere, u/s. 57(ii) deductions are allowed as provided in Sections 30, 31 & 32 of the Act and since the legislature has not specified any provision in respect of any sub-clause in these sections, all the deductions provided in these sections have to be allowed accordingly.. We accordingly held that the assessee is entitled for additional depreciation and the A.O. is directed accordingly. Unabsorbed depreciation - The definitions of "actualcost" and "written down value" in Section 43. We accept the submissions made on behalf of the assessee that if the unabsorbed depreciation is not allowed to be deducted, the assets which remain the same whether used in business and yielding income from the business or whether they are let out and earn income from other sources, there will be an anomaly as the same assets would have different written down values and different rates of depreciation for the purpose of deductions under Section 57 than that which would be computed if the assets earn business income. Reading the relevant sections, it appears that the scheme of the Act is that the written down value and actual cost for the purpose of sections 32and 57 are meant to be one and the same.We accordingly direct the A.O. to allow the unabsorbed depreciation to be carried forward as per the provisions of the law. Deductions of interest on prorata basis - We find that in A.Y. 2006-06, the assessee has done the business for some part of the year which income has been taxed under the head “Profits and gains of business or profession”. In our considered opinion, the interest should have been allowed on pro rata basis. We accordingly direct the A.O. to deduct interest proportionately from the income taxed under the head “Profits and gains of business or profession” and “Income from other sources”. Invoking the provisions of Section 38(2) of the Act while dismissing the claim of deductions from the head “Income from other sources” - Held that:- Since the assessee has let out its entire premises lock, stock and barrel to Arvind Mills Ltd., in our considered opinion, the provisions of Section 38(2) do not apply on the facts of the case.
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