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TMI Blog2022 (8) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation @ 25% on the total cost of Rs. 3.40 crore. The AO noticed that the depreciation claim on the above asset had been rejected by the Assessing Officer in the earlier years. However, Ld CIT(A) had allowed depreciation @ 10% on the actual payment of Rs.68.16 lakhs. During the year under consideration the assessee had claimed depreciation of Rs.11,37,327/-. The Assessing Officer accordingly, following the decision rendered by learned CIT(A) in the earlier years, held that in A.Y. 2012-13 depreciation @ 10% only allowable on the WDV of Rs. 36.22 lakhs. Accordingly he allowed depreciation of Rs. 3,62,244/- in A.Y. 2012-13 and disallowed balance amount of Rs. 7,75,083/-. For the identical reasoning the Assessing Officer disallowed part of depreciation claimed by the assessee in other four years also. 5. Learned CIT(A) noticed that the identical issue has been decided by the ITAT in assessee's own case in ITA No. 3189/Mum/2011 relating to A.Y. 2005- 06 dated 26.8.2016, wherein the Tribunal has held that the depreciation is allowable @ 10% and depreciation has to be allowed on the whole consideration towards FSI of Rs. 3,40,81,320/-. Accordingly, learned CIT(A) directed the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein the Tribunal had allowed claim of the assessee. Following the decision of the Tribunal. the learned CIT(A) deleted the disallowance made in all five years under consideration. 10. We have the parties and perused the record. We noticed that learned CIT(A) has extracted the order passed by the Tribunal as under :- "13.1 By the impugned order, the CIT(A) allowed the depreciation after having the following observations:- "2.3 I have considered the assessment order and written submissions and my appellate order No. CIT(A) XXX/IIT-204106-07 dated 22.10.200B for A. Y.2003-04. In my appellate order cited above, at pages 15 to 17, paras 10.4 to 10.19, I have held that depreciation on intangible assets is to be allowed in A. Y. 2003-04. Aas for AY 2004- 05, the appellant has claimed the depreciation on intangible assets at Rs.8,67,71,053/-on account of WDV as on 31.03.2003 (AY: 2003-04), and the facts are same. Hence, the depreciation on WDV is therefore, the disallowance of depreciation at Rs.8,67,71,053/- is deleted". 13.2 We have considered rival contentions and perused the record. We found that the CIT(A) in its earlier order for A.Y. 2003-04 has deleted the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filled cannot be accepted as the invaluable permits license, approvals for the purpose of operating hospitality business squarely falls within the purview of the definition of intangible assets given in explanation 3 of section 32 of the Act. 10.8 In this regard, yet another question' which the A O. has not considered and which can be raised is the 5th proviso to section 32 of the Act, which provides that aggregate depreciation allowable to the predecessor and successor in the case of succession referred to in clauses (xiii) and (xiv) of section 47 or section 170 or to the amalgamating and amalgamated company' in the case of amalgamating or to the 'demerged and resulting company in the case of demerger, as the case may be, shall not exceed, the amount of depreciation as if the succession, amalgamation etc. had not taken place. This question was posed, to the appellant's AR. who has vide a separate note replied as under: "Now, a question has arisen, whether in view of the 5th proviso to section 32 of the Income-tax Act, 1961 ("the Act') whether a part of the depreciation is to be apportioned and to the allowed to predecessor owner. In our considered opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 170 are applicable only where business is being run either by individual or Karta of HUF, because the phenomenon of death occurs only in these two types of cases., No death will occur to a company firm which could only be either liquidated or dissolved respectively. The 5th proviso to section 32 are also applicable to amalgamating company and demerger company. In our case, neither there is a amalgamation nor there is a demerger at all. Thus, our case is fully outside the purview of 51 h proviso to section 32." From the above submission, it is seen that the appellant's case neither falls in the category of succession (as provided in section 47, clauses (xiii) or (xiv) or section 170), nor amalgamation or demerger. Hence, I agree that 5th proviso to section 32 of the Act would not be attracted to the case of the appellant. 10.10 Taking into consideration, the facts that the A.O. had accepted that intangible assets were acquired by way of "slump sale" and for the reasons recorded in earlier paras, I hold that the depreciation on intangible assets' at Rs.46,27,78,949/- @ 25% claimed at Rs.11,50,94,737/- is admissible as the same were used for the purpose of appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the AO has to give a finding having regard to fair market rate. Accordingly, it was held that the AO could not have made disallowance u/s 40A(2)(a) of the Act. We notice that the Hon'ble Bombay High Court, vide its order dated 22nd November, 2021 passed in ITA No.1911 of 2017, has upheld the view expressed by the co-ordinate bench in AY 2010-11 with the following observations:- 6 In the assessment year, if one considers the assessment order, the Assessing Officer has not placed any material under identical facts and circumstances to justify that the fair market rate of interest was lower than what respondent has paid. The Assessing Officer has not recorded any finding or collected any material to show that the interest paid by respondent was in excess of the fair market rate. Section 40A (2) (a) reads as under: 40A (2) (a) Where the assessee incurs any expenditure in respect of which payment has been or is to be made to any person referred to in clause (b) of this sub-section, and the Assessing Officer is of opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities for which the payment is made or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. In the years under consideration also, the AO has not given any finding having regard to the fair market rate. The Ld A.R further submitted that the assessee has been continuously incurring losses and the said losses could not be set off by the assessee for want of profits. Accordingly, he submitted that there was no tax benefit to the assessee by paying interest at the alleged higher rate. However, we noticed that the Hon'ble Bombay High Court has upheld the order passed by the Tribunal in AY 2010-11 on an identical disallowance made in that year. Accordingly, following the decision rendered by Hon'ble Bombay High Court in the assessee's own case, we uphold the decision rendered by Ld CIT(A) on this issue. 15. The next issue relates to the disallowance of interest u/s 36(1)(iii) of the Act. The AO noticed that the assessee has given interest free advances to its sister concerns, while it was paying interest on moneys borrowed by it. Accordingly, the AO disallowed proportionate interest expenditure in all the five years under consideration. The Ld CIT(A) noticed that an identical disallowance made in AY 2010-11 has been deleted by the Tribunal on noticing that the interest free ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14-15 and 2015-16 relates to the disallowance of claim made u/s 40(a) of the Act on the ground of deduction/payment of tax deducted at source. 20. In AY 204-15, the assessee had claimed deduction of certain expenses as admissible u/s 40(a) of the Act. The AO noticed that the amount claimed by the assessee included interest expenditure of Rs.4,48,54,200/- and Rs.4,32,00,000/- being interest payments made to M/s Cox & Kings Ltd in the year relevant to AY 2013-14. The AO further noticed that he had disallowed a sum of Rs.1,25,59,308/- u/s 40A(2)(a) and another sum of Rs.2,16,59,178/- u/s 36(1)(iii) from out of interest expenses. Accordingly, he took the view that both these expenses cannot be allowed u/s 40(a) of the Act, since the disallowance had not been made u/s 40(a). Accordingly he rejected the claim for deduction u/s 40(a) to the extent of Rs.3,42,18,486/-. 21. On identical reasoning, the AO disallowed the claim made by the assessee u/s 40(a) to the tune of Rs.3,63,04,274/- in AY 2015-16, since he had disallowed the above said amount in AY 2014-15 u/s 40A(2)(a) and 36(1)(iii). 22. The Ld CIT(A) noticed that he has deleted the disallowance of interest expenses of Rs.3,42,18,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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