TMI Blog2018 (5) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O. to allow the unabsorbed depreciation from the rental income of the rice mill. The assessee’s appeal on this ground with regard to depreciation is allowed. Deduction in respect of interest paid to bank, interest paid to others, interest paid to partners, establishment charges, electricity development charges and remuneration to partners disallowed - Held that:- Section 57(iii) of the Act allows the expenditure incurred for earning the income. This issue is also considered in the case of Pujya Sujatha Agro Farms Pvt. Ltd. [2010 (11) TMI 694 - ITAT VISAKHAPATNAM] and directed the A.O. to allow the expenses incurred for earning the income. Therefore, we hold that the assessee is entitled for the allowance of expenditure, accordingly we direct the A.O. to allow the expenses incurred for earning the income as well as the interest incurred in establishing, repairing and renovating the rice mill. This ground of appeal of the assessee is allowed. However, the interest and remuneration paid to partners is not covered u/s 57(iii) and the AO has rightly disallowed the same. Thus we confirm the disallowance to the extent of interest and remuneration paid to the partners and direct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset with which trade is commonly carried on. We find nothing in the cases referred, to support the proposition that certain assets are commercial assets in their very nature. 4. Aggrieved by the order of the A.O., the assessee went on appeal before the CIT(A) and the Ld. CIT(A) confirmed action of the A.O. in assessing the income under the head income from other sources . 5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. During the appeal hearing, the Ld. A.R. submitted that the assessee owned a rice mill, shed, godowns and machinery and leased the premises to another rice mill i.e. M/s. Sri Kanyaka Parameswari Rice Mill Contractors Company, (hereinafter called as a lessee ) for annual lease rent of ₹ 4,50,000/-. Since the assessee has constructed a commercial asset and exploiting the commercial asset, the assessee has rightly offered the income under the head business income . The ld.AR further argued that the intention of the assessee is to do business by exploitation of commercial asset, thus the income of the assessee is to be assessed under the head business income but not under the head other sources. The Ld.AR argued that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carrying on the rice mill. Therefore, the case laws cited (supra) and the decision of Hon ble apex court in the case of M/s. Sultan Brothers Pvt. Ltd. (supra) relied upon by the lower authorities are squarely applicable and the lower authorities have rightly assessed the income under the head income from other sources . Accordingly, we uphold the order of the Ld. CIT(A) on this ground and dismiss the appeal of the assessee. 8. Ground No.3 is related to the disallowance of expenditure incurred by the assessee, denial of depreciation and set off of unabsorbed depreciation. In the assessment order, the assessing officer did not allow the unabsorbed depreciation claimed by the assessee. The A.O. has not given any reason for denying the set off of unabsorbed depreciation of earlier years. However, the A.O. allowed the current year depreciation u/s 57(ii) of the Act. Depreciation is an allowance and section 32 of the Act provides for depreciation on assets used for the purpose of businesses. Section 32(2) of the Act provides for carry forward and set off of unabsorbed depreciation. Section 32(2) of the Act reads as under: Depreciation. Section 32(2) where, in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from other sources from B/F depreciation. It is also found that in the case of the assessee, in assessment year 2009-10, the Assessing Officer himself allowed similar set off under section 143(3). It is also noteworthy that for not allowing this set off, in this year, the Assessing Officer has not assigned any reason whatsoever. Thus, in view of above legal position, it is held that whatever income stands assessed under the head income from other sources should be allowed to be set off against B/F depreciation and B/F losses. In result this ground of appeal is allowed. [Para 15] 10. The similar views are expressed by the Hon ble courts as under: CIT Vs. Sahu Rubber Pvt. Ltd. 179 ITR 29 (Bom) CIT Vs. Deepak Textile Industries Ltd. 210 ITR 1029 (Guj) CIT Vs. Virmani Industries Pvt. Ltd. Etc. 216 ITR 607 (SC) 11. Following the case laws cited (supra), since the unabsorbed depreciation partakes the character of current year depreciation, we hold that the A.O. cannot deny the set off of unabsorbed depreciation against the income from other sources. Accordingly, we direct the A.O. to allow the unabsorbed depreciation from the rental income of the rice mill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partners. The Ld. A.R. argued that except the interest and the remuneration paid to partners, the remaining expenditure incurred by the assessee is for earning the income and the same is allowable u/s 57(iii) of the Act. The interest paid to others is related to the funds borrowed by the assessee for establishing or renovation of the rice mill, hence, the interest expenditure is directly related to the earning income and to be allowed. Similarly, in respect of establishment charges and electricity development charges, Ld. A.R. argued that these are the expenses which are incurred for the purpose of establishing and running the rice mill, therefore, requested to allow the expenditure. 15. Section 57(iii) of the Act allows the expenditure incurred for earning the income. This issue is also considered by the Hon ble ITAT, Visakhapatnam bench in the case of Pujya Sujatha Agro Farms Pvt. Ltd. 12 Taxmann.com 457 (supra) and directed the A.O. to allow the expenses incurred for earning the income. Therefore, we hold that the assessee is entitled for the allowance of expenditure, accordingly we direct the A.O. to allow the expenses incurred for earning the income as well as the interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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