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TMI Blog2020 (9) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... parties for the assessment years 2005-2006, 2007-2008 and 2008-2009. 5. As already noted above, the present appeal relates to the assessment year 2006-2007. 6. The appeal has been preferred on the following two questions stated to be substantial questions of law:- "1. Whether on the facts and in the circumstances of the case and in law, Tribunal is justified in allowing depreciation of Rs. 30,67,319.00 on Floor Space Index (FSI) @ 10% of total consideration, without appreciating that grant of additional FSI is not in the nature of any kind of assets until and unless the additional flooring/building is constructed, therefore, not eligible for depreciation in this case? 2. Whether on the facts and in the circumstances of the case and in law, Tribunal is justified in allowing depreciation amounting to Rs. 4,88,08,717.00 on intangible assets as claimed by the assessee?" 7. During the hearing on February 12, 2020, there was consensus at the Bar that in so far question No.2 is concerned, the same has already been answered by this Court in the case of the assessee itself in Income Tax Appeal Nos.835 and 836 of 2016, decided on 17th December, 2018, the only difference being that at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill get converted into asset as and when additional floors or additional building is constructed. Therefore, the payment for FSI can only be included in the value of the building block as and when the same is utilized. 3.8 In view of the above discussions an amount of Rs. 63,90,248/- is added back to the total income of the assessee company." 10. Thus, Assessing Officer took the view that grant of FSI was not in the nature of any asset. It was only a payment made to the government for increasing the size of the building. FSI can be used only when the assessee chooses to construct the additional floors. FSI will get converted into asset as and when additional floors or additional building is constructed. Thus, payment for FSI can only be included in the value of the building block as and when the same is utilized. Therefore, the amount claimed as depreciation on above account was declined and the same was added back to the total income of the assessee. 11. Aggrieved by the above, assessee preferred appeal before the Commission of Income Tax (Appeals)-7, Mumbai, referred to hereinafter as "CIT(A)". On the above issue, CIT (A) noted that the reasons for disallowance was the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate order dated 7th March, 2011 followed the above decision. While the claim of depreciation on FSI as an intangible asset under section 32 (1)(ii) of the Act was not accepted, the payment was allowed to be added to the building block of asset for depreciation as per law. 14. As against such finding of CIT(A), appeals and cross-appeals were filed by the assessee and the revenue before the Tribunal. While taking up the appeal of the assessee i.e., ITA No.3190/Mum/2011 for the assessment year 2006-2007, Tribunal noted that the issue relating to disallowance of depreciation on FSI was decided by the Tribunal in the assessee's appeal for the assessment year 2005-2006. Therefore, by the common order dated 26th August, 2016, Tribunal held that the finding given in the assessee's appeal for the assessment year 2005-2006 would apply mutatis muntandis in the appeal for the assessment year under consideration. In the appeal of the assessee for the assessment year 2005-2006, Tribunal had held as under:- "16. We have considered the rival submissions and also perused the relevant finding in the impugned orders as well as entire gamut of facts as discussed above. During the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio of the total floor of the building on a certain location to the size of the land of that location. In other words, it is quotient of the ratio of the combined gross floor area of all the floors. Granting of 'additional FSI' gives the right to construct the additional floor/s on account of increase in Floor Space Index by virtue of DCR, 1991. Here in this case, it is undisputed fact as discussed above that the assessee received the additional FSI of 10022.94 sq.meters for which premium amount of Rs. 340,81,320/- was payable to the Government/ BMC under the "installment scheme". The assessee did pay the first installment of Rs. 68,16,264/-, however, the balance installment/ payment has not been paid for many years as brought on record. Once the assessee has received the FSI, it has made the accounting entries in its books by debiting the entire amount of Rs. 3,40,81,320/- on the asset side of the Balance sheet by debiting to the details of "Fixed Assets" and the corresponding liability of Rs. 2,72,65,056 which remained unpaid (i.e., Rs. 3,40,81,320 - Rs. 68,16,264 = Rs. 2,72,65,056) has been shown as premium payable for additional FSI to the Government/BMC. Once the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the building only and, therefore, depreciation allowable would be at the rates applicable to the buildings only and for not some kind of intangible right u/s 32(1)(ii). Accordingly, we uphold the observation and order of the Ld. CIT(A) to the extent that the depreciation allowable would be on rates applicable to the building only that is, @ 10% and not @ 25% for some kind of intangible right. Thus in our conclusion, the assessee would be entitled to depreciation @ 10% on the whole of the consideration towards FSI of Rs. 3,40,81,320/-. In view of our finding ground No.1 is treated as dismissed and ground No.2 is treated as allowed." 15. From the above, we find that the assessee had acquired certain rights in the form of additional FSI over and above the existing FSI subject to payment of premium. However, premium was to be paid under an installment scheme. First installment was paid by the assessee. On payment of first installment, assessee received the rights in the form of additional FSI which was capitalized in the books of account. In the books of account, assessee had debited the entire premium amount in the schedule of fixed assets as FSI and a corresponding credit entry was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion towards FSI and not @ 25%. 18. On due consideration we are of the opinion that view taken by the Tribunal is a reasonable one, having regard to the provisions contained in sections 32 (1)(ii) and 43(6)(c) of the Act. That apart, we find that revenue had not questioned the finding of CIT(A) that the amount spent by the assessee would add to the value of the existing building as additional FSI would be available to the assessee; the amount spent was for the purpose of business and was of enduring nature; since it related to the building block of the asset, the overall cost of the building block would increase by this amount; therefore CIT(A) directed the Assessing Officer to add the amount spent during the year to the building block of asset and allow depreciation as per law i.e. on the rate applicable to the building which is 10% and not 25%. 19. We find from the documents placed on record that the order of the CIT(A) was accepted by the revenue and a conscious decision was taken not to file further appeal. When the revenue sought to file cross-objection belatedly the same was dismissed on the ground of limitation. That apart, having not filed appeal against such decision of C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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