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TMI Blog2019 (9) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... Depreciation on property given on rent separately by removing from the block of asset property given on rent and confirmed addition of Rs. 9,79,042/- 2. The learned CIT(A) and AO grossly erred in ignoring the submissions made by the Appellant in this regard. 3. Without prejudice considering above logic The learned CIT(A) did not allowed depreciation on Office premises added during the Assessment year at its cost of acquisition. 4. The Appellant craves leave to add, alter, amend all or any of the grounds in appeal." 3. The assessee is engaged in the business of trading in chemicals & dyes , intermediate & commission agents. The assessee has shown income from house property in respect of office premises which were let out during the year. The assessee had also claimed depreciation on these premises which had been let out during the year. The AO asked assessee to explain as to how depreciation can be allowed on let out properties. The assessee submitted details of properties held by it on 31.03.2013 and the purpose of acquisition of all these properties were shown to be for self use for the purposes of business of the assessee. The assessee explained before AO that said pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... depreciation on premises let out although part relief was granted by learned CIT(A) on computational aspects , vide appellate order dated 16.10.2017, by holding as under:- "6.1 I have considered the assessment order and submissions made by the authorized representative of the appellant. The contention of the appellant that once an asset in included in a block of assets, depreciation on the asset cannot be disallowed on the asset even if it is not used for the appellant's business is not acceptable. A following example will illustrate this point. Suppose, an individual has a large number of cars which are used for its business. Suppose, the individual purchases a car on the last day of a previous year and use it for his business for a day, i.e., for the last day of the previous year. For the purpose of the I.T. Act, the individual includes value of the car is in the WDV of the block of assets and claims depreciation on the entire WDV of the block which is allowed for that assessment year (the 'First Assessment Year'). 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,343 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 5,44,689 2000-01 5,44,689 54,469 4,90,220 2001-02 4,90,220 49,022 4,41,198 2002-03 4,41,198 44,120 3,97,078 2003-04 3,97,078 39,708 3,57,370 2004-05 3,57,370 35,737 3,21,633 2005-06 3,21,633 32,163 2,89,470 20CJ6-07 2,89,470 28,947 2,60,523 2007-08 2,60,523 26,052 2,34,471 2008-09 2,34,471 23,447 2,11,024 2009-10 2,11,024 21,102 1,89,921 2010-11 1,89,921 18,992 1,70,929 2011-12 1,70,929 17,093 1,53,836 Total 14,08,316 6.4.2 Therefore, WDV as at 31.03.2012 of the building at serial No. 1 of the Table in para 6.3 works out to Rs. 1,53,836/- ( Rs, 15,62,152/- minus Rs. 14,08,316/-). 6.5.1 The Building at serial No. 2 of the Table in para 6.3 was purchased in the P.Y. 2009-10. In the 3 intervening previous years ( PY 2009-10, 2010-11 &, 2011-12), Rs. 2,87,837/- of the original cost has been allowed as depreciation. The working of depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,658/- which additions were later sustained by learned CIT(A) to the tune of Rs. 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 Rs. 5.30 crores for office premises and Rs. 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 were not let out and it is claimed that these properties were used for business purposes. It was subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 the assessee . Prayers were made by learned counsel for assessee to remit the issue to the file of the AO for denovo determinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ciation 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 were let out on rent during the year under consideration income thereof which was offered by assessee under the head "Income from House Proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin 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 making reckless, irresponsible , untrue and/or false statements before Hon'ble Courts/tribunal. Thus after hearing both the parties and keeping in view statement made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 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 properties , which also requires verification by AO which could also , inter-alia, be gathered by conduct of the assessee with respect to dealing with these two newly acqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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, then it is to be brought to tax under that head only and consequently income is to be computed after claiming deductions as provided under that head only. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 years merely on ground that these properties fall within Block of Assets cannot be a ground to allow the same in the year under consideration unless statute permits th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-payer. The said order of tribunal was upheld by Hon'ble Bombay high Court in the case of CIT v. G. R. Shipping Limited in ITA no. 598 of 2009 vide judgment dated 28.07.2009. The fact remains that sai ..... X X X X Extracts X X X X X X X X Extracts X X X X
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