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2016 (6) TMI 25

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..... ing price between the land and building without bringing any material to support their view. It is an undisputed fact that the assessing officer has allowed depreciation on the flats in AY 2006-07 and 2007-08. Hence, we are of the view that it may not be proper on his part to draw adverse inferences during the instant year, on the basis of certain presumptions entertained by him, that too without bringing any material on record to support his views. On the contrary, as stated earlier the recitals made in the conveyance deed actually supports the contentions of the assessee. Thus we direct the AO to allow the depreciation as computed by the assessee taking the price paid for purchase of flat as the cost of flats. - Decided in favour of assessee. - I.T.A. No. 6792/Mum/2011 - - - Dated:- 27-5-2016 - Shri B. R. Baskaran (AM) And Amit Shukla (JM) For the Assessee : Shri Hariom Tulsyan For the Department : Smt. Rajeshwari Motwani ORDER Per B. R. Baskaran, AM The appeal filed by the assessee is directed against the order dated 30.08.2011 passed by Ld CIT(A)-19, Mumbai for assessment year 2008-09, wherein the Ld CIT(A) has confirmed the disallowance of deprecia .....

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..... as allowable), which is apparently not correct. The assessee has also failed to note this mistake at the time of prosecuting appeal before Ld CIT(A) and hence it has filed an additional ground seeking rectification of this mistake. 5. In the appeal filed before Ld CIT(A), the assessee submitted that the land has not been transferred to it and it is still owned by the builder. Further it was submitted that, in any case, the land shall be transferred to the co-operative society that shall be formed in future. Accordingly it was contended that the assessee shall not become owner of the land at any point of time. The Ld CIT(A), however, expressed the view that the undivided share in the land in respect of flats constructed in high rise buildings is well defined and determinable. The Ld CIT(A) referred to the definitions given in sec.6 of Maharashtra Apartment Ownership Act 1970 to the terms viz., Common Areas and Facilities and apartment owner and held that the above said Act provides that the assessee is having undivided interest in the common areas and facilities. He further held that the undivided share in the land could be allocated to the individual flat s super built up a .....

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..... The Ld CIT(A) held that the value of undivided share of land should be ascertained on the basis of stamp duty valuation prescribed for ascertaining the value of land. Accordingly he directed the AO to work out the depreciation allowable on the value of flats. 7. The Ld A.R submitted that the tax authorities have failed to examine the conveyance deeds which clearly state that the assessee has purchased only the super structure and not the land. He further submitted that the conveyance deeds are very clear in stating that the land belongs to the vendor only. He further submitted that the co-operative society has not been formed till the end of the year under consideration and hence the land has remained with the builder only. Accordingly he submitted that the observations made by the tax authorities about the co-operative society, constructive possession etc., are not applicable to the year under consideration. Even if the land is transferred to cooperative society, the ownership shall remain with it and the assessee cannot be considered to be one of the deemed owners, since co-operative society is a separate legal entity. He further submitted that the case laws relied upon by Ld .....

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..... building owned, wholly or partly, by the assessee and used for the purposes of business or profession. In the instant case, there is no dispute with regard to the fact that the two flats, referred above, are owned by the assessee and they are used for its business also. It is also an undisputed fact that the AO has allowed depreciation on these two flats in AY 2006-07 and 2007-08 on the value declared by the assessee accepting the cost declared by the assessee. 11. The controversy is with regard to the value of flats purchased by the assessee. The tax authorities have taken the view that the sale consideration paid for purchase of flats should be bifurcated between the land and the building, since the depreciation is not admissible on the value of land. We notice that the tax authorities have arrived at this conclusion on presumptions, since we notice that the averments made in the conveyance deed supports the case of the assessee. The second schedule of the conveyance deed describes the nature of property that is being conveyed to the assessee and the same reads as under:- THE SECOND SCHEDULE ABOVE REFERRED TO (Description of the premises) ALL THAT the said pre .....

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..... property along with the said building constructed thereon, which Conveyance shall be in favour of Co-operative Society and/or Limited Company and/or any Association and/or Condominium of Apartment Owners or any other body corporate or other form of organization (hereinafter referred to as the said body corporate ) as the Vendor may decide and the Purchaser shall not dispute or challenge the right of the vendor in that behalf. It has been made clear in the agreement that the land (described as said property) shall be not be conveyed to the assessee, but it shall be conveyed in favour of co-operative society and/or limited company and/or any association of person and/or condominium of apartment owners etc. It is further made clear that the assessee shall not dispute or challenge the right of the vendor in that behalf, meaning thereby, the assessee does not any right to either dispute or to challenge the same and the decision of the vendor is binding upon the assessee. 12. A careful perusal of the clauses extracted above from the Sale deed would make it clear that the vendor has conveyed only the super structure of flats on ownership basis. With regard to the land, it is .....

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..... tax authorities are not justified in bifurcating the selling price between the land and building without bringing any material to support their view. 16. It is an undisputed fact that the assessing officer has allowed depreciation on the flats in AY 2006-07 and 2007-08. Hence, we are of the view that it may not be proper on his part to draw adverse inferences during the instant year, on the basis of certain presumptions entertained by him, that too without bringing any material on record to support his views. On the contrary, as stated earlier the recitals made in the conveyance deed actually supports the contentions of the assessee. 17. In view of the foregoing discussions, we are of the view that the Ld CIT(A) was not justified in confirming the action of the AO. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to allow the depreciation as computed by the assessee taking the price paid for purchase of flat as the cost of flats. 18. With regard to the additional ground, we have already noticed that the assessing officer has committed a mistake in adding the difference of depreciation. Since we have directed the AO to allow the depreciation claimed .....

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