TMI Blog2019 (9) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire year as well for earlier years. These two properties are not even available or ready to be used for business purposes as these are let out on rent for years and doctrine of supervening impossibility of business user has set in keeping in view long period of these properties being let out . We hold that no deprecation u/s 32 can be allowed on these two properties which were acquired in earlier years and were let out throughout the year under consideration income thereof being offered for tax under the head income from house properties, as doctrine of supervening impossibility has set in as neither these properties were used for business purposes, nor ready to be used for business nor available for business user for the purposes of business of the assessee , for the entire year under consideration. Deprecation u/s 32 under these circumstances can not be allowed on these two properties merely on the grounds that once these properties entered Block of Assets viz. Building many years back and continues to be part of Block of Asset viz. Building despite the fact that factual matrix surrounding these two properties had undergone substantial change over years which cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The assessee explained before AO that said properties were acquired for business of the assessee and form part of the business assets and rightly taken into Block of Assets -Building to claim depreciation under the 1961 Act. It was submitted that moment the assets enters into Block of Assets , it loses individual identification and deprecation is claimed on closing balance in the Block of Assets which should be allowed. 3.2 The AO rejected contentions of the assessee on the ground that once assets are let out more so where the income is shown as Income from House Property , the depreciation cannot be allowed. The AO observed that standard deduction of 30% is allowed towards maintenance as statutory deduction and hence depreciation cannot be allowed on these let out properties . The AO observed that assessee was required to reduce value of such let out properties from Block of Assets before claiming depreciation because as per AO , depreciation can be allowed only on assets which are used for business purposes. The AO observed that the value of such let out property works out to be ₹ 1,14,86,576/- and hence total value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;). Now, if from the first day of the next P.Y., the individual use it purely and only for his personal work, will depreciation be allowable in respect of the car for the second assessment year? The answer, in my view, is clearly 'no'. 6.2 It is not disputed that the premises which were let out were not used for the purpose of business at all. Therefore, as per the provisions of section 38(2) , the deduction under clause (ii) of sec. 32(1) should be restricted to a fair proportionate part thereof which the AO may determine, having regard to the use of such building for the purposes of business. The relevant portions of the provisions of sec. 38(2) are reproduced below: where any building........ is not exclusively used for the purposes of business or profession, the deduction under ........ clause (ii) of sub section (1) of Section 32 shall be restricted to fair proportionate part thereof which the Assessing Officer may determine having regard to the user of such building............. for the purposes of business of profession. 6.3 In view of the above, the appellant is not entitled to depreciation on the premises let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,65,343 1992-93 12,65,343 1,26,534 11,38,809 1993-94 11,38,809 1,13,881 10,24,928 1994-95 10,24,928 1,02,493 9,22,435 1995-96 9,22,435 92,244 8,30,192 1996-97 8,30,192 83,019 7,47,172 1997-98 7,47,172 74,717 6,72,455 1998-99 6,72,455 67,246 6,05,210 1999-00 6,05,210 60,521 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of depreciation allowed is given in the Table below. PY Amount (in Rs. ) on which depreciation is admissible for thePY Depreciation (in Rs. ) allowable for thePY WDV (in Rs. ) as at the end of the PY 2009-10 10,62,130 1,06,213 9,55,917 2010-11 9,55,917 95,592 8,60,325 2011-12 8,60,325 86,033 7,74,293 Total 2,87,837 6.5.2 Therefore, WDV as at 31.03.2012 of the building at serial No. 2 of in para 6.3 works out to ₹ 7,74,293/- 6.6 The two buildings at Sl. No. 3 4 of the Table in para 6.3 were purchased in the PY 2012-13. Therefore, it is clear that these two buildi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of non user of the properties for business purposes, to the tune of ₹ 11,48,658/- which additions were later sustained by learned CIT(A) to the tune of ₹ 9,79,042/-. It was submitted by learned counsel for the assessee that these immovable properties being Building form part of the Block of Assets. Our attention was drawn to page no. 19 of the paper book wherein details of depreciation on Buildings is placed. Our attention was also drawn to page no. 12 wherein details of depreciation on Building under the provisions of The Companies Act is placed. The w.d.v. as on 31.03.2013 is ₹ 5.30 crores for office premises and ₹ 19.25 lacs for Godown(Ankleshwar). It was submitted that these office premises form part of Block of Assets and it is not possible to bifurcate this Block of Assets and depreciation is to be allowed on entire Block of Assets under the 1961 Act as individual asset s had lost their identity. It was submitted that first immovable property was purchased by assessee in previous year 1990-1991(AY 1991-92) and there are four immovable properties in Block of Assets which were let out by assessee . The other properties in Block of Assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f New India Industries Limited v. CIT reported in (1993)203 ITR 933(Guj.) and also decision of Mumbai-tribunal in the case of DCIT v. Godrej Properties Investments Limited (2005) 93 ITD 308(Mum-trib.) . The learned DR also relied upon decision of Mumbai-tribunal in the case of Rolta Holding Finance Corporation Limited v. DCIT reported in (2014) 49 taxmann.com 23(Mum-trib.) and decision of Hon ble Bombay High Court in the case of Dineshkumar Gulabchand Agrawal v. CIT reported in (2004) 267 ITR 768(Bom. HC) . The learned DR would also rely on decision of Mumbai-tribunal in the case of ACIT(OSD), Range 3(3), Mumbai v. Rishiroop Polymers Private Limited reported in (2006) 105 TTJ 132(Mum-trib.). It was submitted by learned DR that assessee has brought this plea of user of two new properties for business purposes for the first time before the tribunal. 5.4 On the other hand , learned counsel for the assessee made statement before the Bench in rejoinder that assessee has put these two new properties to business usage during the year under consideration as godowns and that evidences will be produced as to usage of these two new properties for the purposes of godown of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and income thereof was offered for taxation by assessee under the head Income from House Property . The assessee on its part had claimed depreciation on all seven immovable properties held by it , viz. three immovable properties which were used for business purposes as well for four properties which were let out on rent by the assessee during the year under consideration, on the ground that all these seven immovable properties entered Block of Asset viz. Building and once an item of asset entered into Block of Asset as defined u/s 2(11) read with clause (ii) to Section 32(1), then it loses its individual identity and hence depreciation is to be allowed on entire Block of Asset irrespective of the fact that some of these separately identifiable properties falling within Block of Assets are not put to use for business purposes during the year under consideration . There is no dispute between rival parties with respect to three immovable properties falling within Block of Assets which were undisputedly been used by assessee for business purposes on which depreciation was claimed by the assessee . Thus, we will be confining our discussions to only four immovable properties which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 2(11), 43(6) 50 by learned CIT(A) is germane and support the case of the Revenue. Section 2(11) defines block of asset as a group of asset falling within the class of asset .. in respect of which the same percentage of depreciation is permissible. The income from 'Namah' building and the premises in 'Lakhani Centrium' was falling under the head 'income from house property' and hence these premises cannot be said to be falling under any asset group on which any rate of depreciation is prescribed as on such asset no depreciation is permissible. It is pertinent to mention here that counsels who represents assessee s before Hon ble Courts/Tribunal are officers of the Court/tribunal and it is expected of them that they will make responsible, true and correct statements before the Hon ble Courts/tribunal to provide proper assistance to the Hon ble Courts/tribunal as there statements are normally taken cognizance to arrive at decisions and any untrue , false, irresponsible and/or reckless statements made before Hon ble Courts/tribunal by these counsels have its own repercussions as to penal consequences which may follow in consequence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cerns itself with computation of income from Profits or Gains from Business or Profession. Thus, there is no question of allowing any deduction as depreciation u/s 32 from rental income on letting out of these house properties for the period for which these house properties were let out and income thereof was offered for tax under the head Income from House Properties . Reference is drawn to decision of Mumbai-tribunal in the case of DCIT v. Godrej Properties Investments Limited (2005) 93 ITD 308(Mumbai) to support above proposition . Coming back to two newly acquired properties, the assessee has raised fresh claim before the tribunal for the first time that these two newly acquired properties which were let out during the part of the previous year on rent were prior to they being let out were used by assessee as godown for assessee s own business after its acquisition by the assessee during the previous year itself , the genuineness of such assessee s claim as to its bonafide of business user of these properties for godown purposes requires verification by the AO. The assessee has also to demonstrate pith and substance of objectives of acquisition of these two new immovable pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration but were ready/available for being used for the purposes of business of the assessee. Moreover , once rental income from these house properties is brought to tax under the head Income from other sources and undisputedly there is no usage of these house properties by assessee for its business, then there is no scope of claiming Depreciation on these house properties by invoking provisions of Section 32 of the 1961 Act which falls under Chapter IV-D dealing with income from Profit and Gains of Business or Profession because of factual matrix of the case before us. These are altogether different and distinct properties which are separately identifiable. These two house properties were let out by assessee even in preceding year(s) and were let out throughout the year under consideration. As we have seen earlier that the 1961 Act is a self contained code in itself and incomes are to be brought to tax under different heads of income which are mutually exclusive . There is a residuary head of income also provided additionally in the 1961 Act in case the income does not fall under any of the four specified head of income. Once income falls under a particular head of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-condition for grant of depreciation u/s 32 of 1961 Act and these two properties were infact let out on rent for lengthy period of time from earlier years as emanating from records and as submitted before us by learned counsel for the assessee, income of which was offered for taxation by assessee under the head Income from House Properties . It is altogether different that some of the assets which form part of the Block of Assets may not be temporarily used for business but since they form part of the Block of Asset on which same rate of depreciation is prescribed , the depreciation stood allowed on concept of passive user but where business usage is hit by doctrine of impossibility as these properties over years continued to be let out on rent , income thereof being offered to tax under the head income from house property , the depreciation u/s 32 cannot be allowed merely because these properties continued to be part of block of assets despite being never used for business purposes uninterruptedly spread over several years. Merely because depreciation was allowed by Revenue in earlier years on these two properties despite been let out on rent for uninterruptedly for several ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase laws relied upon by assessee are distinguishable. In the case of Oswal Agro(supra), the tax-payer was in business and its Bhopal unit was lying closed for several years but since the asset formed part of Block of Asset, Hon ble Delhi High Court held deprecation u/s 32 shall be allowed keeping in view new scheme of taxation wherein concept of Block of Assets as defined u/s 2(11) is introduced by Finance(No. 2) Act, 1998 w.e.f. 01.04.1999. In the case of Oswal Agro(supra), the question before the Court was not that the user of the said asset changed from being for the purposes of the business of tax-payer to that of letting out on rent , income of which is chargeable to tax under the head Income from House Property . The Bhopal unit albeit was lying closed for several years was infact continued to be business asset of the assessee. Similar, is the case of G.R.Shipping Limited (supra) relied upon by assessee. In this case of G.R.Shipping Limited (supra) , one Barge named Jay-II could not be used by tax-payer for its business owing to accident nor it was sent for repairs, the tribunal allowed depreciation as it form part of Block of Asset. The said Barge was later sold by the tax- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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