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2021 (8) TMI 159 - AT - Income TaxDisallowance of expenses relating to residential premises - allowable business expenses or personal expenses - whether said premises was not utilized by the assessee for carrying out her professional activities? - CIT-A deleted the addition - HELD THAT:- The assessee is a creative artist. The assessee was engaged as Choreographer and film producer. For the said purpose, the assessee would require creative space from where she could carry out professional engagements. It could be appreciated that as a Choreographer and a film producer, the assessee would need work space to practice dance moves and also for story sessions and other meetings. In this year, except for this space, she has not claimed any other office set-up The proportionate expenses relating to office in all the earlier years were allowed to the assessee. To meet expanding professional demands and to meet the need for bigger house, the assessee moved to new duplex apartment. The said premises were stated to be similarly used by the assessee for office-cum-residence purposes. The assessee was having 6 units out of which 2 units are stated to be used for professional purposes. The assessee has claimed proportionate expenses relating to these two units. These units form part of the opening block of asset in this year. As per the scheme of the Act, under the concept of block of asset, the assets would lose individual identity and depreciation on asset is allowed on block concept notwithstanding the fact that few of the assets were not used for business / professional purposes. As long as the assets remain part of the block and are not parted with by the assessee, the same remain part of the block of asset and depreciation is allowable to the assessee. Since the depreciation on the block has been allowed to the assessee in earlier years, the same could not be denied to the assessee in this year since individual assets have lost their specific identity. The case laws as cited by Ld. CIT(A) in the impugned order support this view and are quite applicable to the facts of the case. Hence, Ld. CIT(A), in our considered opinion, has clinched the issue in correct perspective. Also as per the requirement of Sec.32, to be eligible to claim depreciation, the assessee must own the asset and the asset must be used for the purpose of business or profession. The assessee, in our opinion, has satisfied, both these conditions since building as well as furniture was owned by the assessee and the same was used for the purpose of profession. The assessee has claimed depreciation proportionately on that part only which has been used for the purpose of profession. Therefore, the deprecation claim on building and furniture would be an allowable allowance u/s 32. We order so. The grounds, thus raised by revenue, stand dismissed. Interest claim u/s 36(1)(iii) - The interest paid on capital borrowed for acquisition of an asset after the date on which the asset is first put to use is also allowed as deduction. The assessee has borrowed loan from Standard Chartered Bank for acquisition of the said property at Oberoi Sky Heights. The interest paid on such loan has been bifurcated between residential portion and office portion and interest paid relating to office portion has been claimed as deduction. It was the submissions of the assessee that office has been acquired for the purpose of her profession and therefore, loan is borrowed for the purpose of profession. Further, the unit was put to use during financial year 2011-12 relevant to Assessment Year 2012-13. Therefore, proviso to Sec.36(1)(iii) would not apply and whole of the interest would be an allowable deduction u/s 36(1)(iii). Society & electricity charges - The society charges monthly compensation for providing various services. The appellant has bifurcated and claimed society charges relating to units used as office. Similarly, electricity charges relating to units used as office are claimed as deduction. The said claim is under section 37(1) which provide that any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Assessee fulfils the prescribed conditions of Sec.37(1). More so, the rule of consistency would debar the Ld. AO to adopt different view, facts remaining the same. The usage of units for professional use was accepted in earlier years and similar expenditure claimed in that year was duly allowed to the assessee. Moreover, the assessee has already produced sufficient documentary evidences in the shape of copy of Service Tax Registration Certificate, copies of commercial contracts entered into with producers / third parties, professional fees / sales invoices raised by the assessee on third parties etc. Assessee has proved that a clearly demarcated part of the premise was used by her as the office which is duly supported by various documents on record. There is nothing on record to disprove this claim. Therefore, we are of the considered opinion that the assessee has well substantiated her claim. - Decided against revenue.
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