New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (7) TMI 1001 - ITAT BANGALORE

2016 (7) TMI 1001 - ITAT BANGALORE - TMI - Depreciation claim on leasehold property disallowed - Held that:- Right of enjoyment to immovable property under a lease is immovable property within the meaning given in sec.103 of the Transfer of Property Act. Under sec.105 of the Transfer of Property Act, a lease creates a right or an interest in the enjoyment of the land property.Having referred to the above legal position, we hold that by virtue of lease only an interest in land is created which do .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Disallowance made under the provisions of sec.14A - Held that:- AO, taking note of the negative balance in the bank, after making investment in mutual funds, inferred that borrowed funds were utilized. However, it is settled proposition of law that where common pool of funds were utilized for making investment should be inferred that investments are out of own funds. The AO has not rendered any finding whether the claim of the assessee is incorrect. - When the assessee-company had not incu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Khincha, CA. For The Respondent : Shri Sunil Kumar Agarwal, JCIT(DR). ORDER Per INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of the CIT(A)-I, Bangalore, dated 31/08/2012 for the assessment year 2008-09. 2. The assessee raised the following grounds of appeal: 1.1 The order passed by the learned Commissioner of Income Tax (Appeals) I, Bangalore to the extent prejudicial to the appellant is bad in law and liable to be quashed. 2.1 The learned CIT(A) I, Ba .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

revenue expenditure; (ii) at least, the proportionate amount based on the numbers of years of lease as revenue expenditure. 3.1 The learned CIT(A) I, Bangalore has erred in directing the Assessing Officer to make disallowance under section 14A in accordance with rule 81)(2)(iii). 3.2 On facts and in the circumstances of the case and law applicable, disallowance under section 14A read with rule 81)(2)(iii) as confirmed by the learned CIT(A) I, Bangalore is to be deleted in entirety. 4.1 In view .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ct, 1956. It is engaged in the business of development and maintenance of infrastructure facilities for software and related sectors. Return of income for the assessment year under consideration was filed on 30/09/2008 disclosing a total income of ₹ 9,51,25,818/-. The said return of income was taken up for scrutiny assessment and the assessment was completed u/s 143(3) [hereinafter referred to as 'the Act' for short][hereinafter referred to as 'the Act' for short] vide orde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. For this purpose, it had taken land on lease for a period of 66 years from Software Technological Park of India (STPI). In consideration of granting the leasehold rights, assessee-company had developed 42,665 sq.ft. of space for use by STPI in terms of agreement entered into by it with STPI. The cost of development of this space was treated as cost of leasehold rights treating as intangible asset, depreciation was claimed on this. It is the contention of the assessee-company that leasehold ri .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

TPI may be allowed as revenue expenditure and placing reliance on the decision of the Hon ble Karnataka High Court in the case of CIT vs. HMT Ltd. (203 ITR 820) and Hon ble Supreme Court decision in CIT vs. Madras Auto Services (233 ITR 468). The above contentions of the assessee were rejected by the AO by holding that the rights acquired are in the nature of land which is of capital asset and does not qualify for allowance of depreciation and it is also capital expenditure and therefore, cannot .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

applying the formula of total expenditure multiplied by exempted income divided by total income arrived at a disallowance of ₹ 7,91,394/-. The assessee s contention that no borrowed funds were utilised was rejected by the AO. 5. Being aggrieved, appeal was filed before the CIT(A) who vide impugned order, confirmed the disallowance of depreciation in the following words: ....It is the contention of the appellant that the rights in the undivided port ion of the land in terms of the agreement .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

enses, franchises etc., it may be seen from the descriptions of the items they are all in the nature of movable assets. Whereas in the present case the rights obtained by the appellant relating to the immovable landed property, therefore, the appellant is not eligible for any depreciation. In view of this, the nature of the asset held by the appellant is akin to the nature of immovable property and does not qualify for any depreciation the detailed reasons given by the A.O in his assessment orde .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

earned AR of the assessee-company contended that leasehold right on land constitutes an intangible asset as defined under the provisions of section 32(1)(ii) of the Act. Therefore, the claim of depreciation is allowable in light of the Hon ble Supreme Court s judgment in the case of CIT vs. Smifs Securities Ltd.(348 ITR 302)(SC). As regards disallowance u/s 14A, learned AR of the assessee contended that the AO is not justified in making disallowance without recording a finding as to how the clai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vs. Asst.CIT (99 DTR 36)(Kar.) in the context of provisions of 80M of the Act. 6.2 On the other hand, learned DR contended that on the plain meaning of the word intangible, nature of asset cannot be tangible whereas in the present case leasehold rights on land are nothing but interest in land which is nothing but land therefore is not eligible for depreciation. As regards the applicability of provisions of sec.14A, he contended that no exempt income can be earned without incurring any expenditu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

round No.2 relates to disallowance of depreciation claim on leasehold rights of ₹ 28,06, 462/-. In this ground of appeal, we are required to adjudicate whether the leasehold rights fall within the term and scope of expression intangible asset as defined under the provisions of sec.32(1)(ii) of the Act. There is no dispute about the cost of acquisition. The only dispute is with regard to nature of the asset acquired. Whether leasehold rights par take character of land or intangible asset. I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on, the following deductions shall be allowed - .................................. Thus, the term intangible assets has been defined being knowhow, patents, copy rights, trade marks, license, franchises or any other business or commercial rights of similar nature. Obviously, leasehold rights on land do not fall in the category of above categories. It does not fall even in residuary category of any other business or commercial rights of similar nature. Because the term rights of similar nature qu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ached to the earth or permanently fastened to anything attached to earth Right of enjoyment to immovable property under a lease is immovable property within the meaning given in sec.103 of the Transfer of Property Act. Under sec.105 of the Transfer of Property Act, a lease creates a right or an interest in the enjoyment of the land property.[Jaswantsingh Mathurasinh & another vs. Ahmedabad Municipal Corporation & another (1 (1992)SCC 5,page.12 7.2 Having referred to the above legal posit .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version