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M/s. Cyber Park Develoment & Construction Ltd. Versus Deputy Commissioner of Income-tax, Circle 11 (2) , Bangalore

2016 (7) TMI 1001 - ITAT BANGALORE

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 does not qualify for allowance e of depreciat .....

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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 incurred any expenditure, the question of disal .....

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l 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, Bangalore has erred in confirming the disallo .....

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oportionate 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 of the above and other grounds to be adduce .....

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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 order dated 30/09/2010 at a total income of  .....

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ease 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 rights is nothing but a commercial right fall .....

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nd 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 be allowed as revenue expenditure. As rega .....

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ultiplied 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 with STPI constitute intangible asset and .....

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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 order and the Remand Report are justifiable. He .....

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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 claim of the assessee that no expenditure was i .....

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ext 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 expenditure and therefore applicability of rule 14A .....

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ciation 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. Intangible asset has been defined under sect .....

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ed - .................................. 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 qualifies that even to fall under residuary c .....

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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 position, we hold that by virtue of lease only a .....

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