Sh. Sanjeev Kumar Sama, Jalandhar V. The Income Tax Officer, Jalandhar

ITA 100/ASR/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73246 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-01-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 09-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: J S BHASIN
• Keywords: Depreciation; Cost of acquisition

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.100(ASR)/2012 ASSESSMENT YEAR:2006-07 PAN :ACMPS7335J SH. SANJEEV KUMAR SAMA, VS. INCOME TAX OFFICER, E.J.206/1, CHAHAR BAGH, 1(4), JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH.J.S.BHASIN, ADVOCATE RESPONDENT BY:SH.MAHAVIR SINGH, DR DATE OF HEARING: 20/01/2014 DATE OF PRONOUNCEMENT:14/02/2014 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDE R OF THE CIT(A), JALANDHAR, DATED 13.01.2012 FOR THE ASSESSMENT YEA R 2006-07. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN UPHOLD ING DISALLOWANCE OF DEPRECIATION AMOUNTING TO RS.50,057 /- ON ERRONEOUS AND INSUFFICIENT GROUNDS. ITA NO.100(ASR)/2012 2 2. THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRM ING THE DISALLOWANCE OF RS.13800/- OUT OF SALARY PAID TO EM PLOYEES WITHOUT PROPER APPRECIATION OF THE FACTS AND CIRCUM STANCES OF THE CASE. 3. THAT THE ORDER OF THE CIT(A) AS WELL AS THE AO I S AGAINST THE LAW AND FACTS OF THE CASE. 4. THAT THE ASSESSEE CRAVES RIGHT TO ADD OR DELETE ANY OF THE GROUNDS OF APPEAL. 2. AS REGARDS GROUND NO.1, THE BRIE FACTS ARE THAT THE ASSESSEE HAD PURCHASED AN IMMOVABLE PROPERTY FOR RS.5,30,570/- O N 17.05.2005 IN RESPECT OF WHICH HE HAD CLAIMED DEPRECIATION AMOUNTING TO R S.53,057/- IN THE RETURN OF INCOME. SINCE THE PROPERTY PURCHASED INCLUDED LA ND AND BUILDING, THE AO WAS OF THE VIEW THAT DEPRECIATION WAS TO BE ALLOWED ONLY FOR THE VALUE OF THE BUILDING AND NOT FOR THE LAND. HE ASKED THE ASSESSE E TO GIVE THE VALUE OF THE LAND IN THE PROPERTY PURCHASED. AS PER THE DETAILS OF THE CIRCLE RATES SUBMITTED BY ASSESSEE, THE VALUE OF THE LAND WORKED OUT TO RS.5,00, 570/-. THE AO, THEREFORE, HELD THAT RS.30,000/- REPRESENTE D THE VALUE OF THE BUILDING AND NOT FOR THE LAND. HE ASKED THE ASSESSE E TO GIVE THE VALE OF THE LAND IN THE PROPERTY PURCHASED. AS PER THE DETAILS OF THE CIRCLE RATES SUBMITTED BY ASSESSEE, THE VALUE OF THE LAND WORKED OUT TO RS.5,00,750/-. THE AO, THEREFORE, HELD THAT RS.30,000/- REPRESENTE D THE VALUE OF THE ITA NO.100(ASR)/2012 3 BUILDING AND HE ALLOWED DEPRECIATION OF RS.3,000/- ONLY. THE BALANCE CLAIM OF DEPRECIATION WAS DISALLOWED. 3. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 4. THE LD. COUNSEL FOR THE ASSESSEE, MR. J.S.BHASIN , ADVOCATE, ARGUED THAT THE ASSESSEE HAD PAID THE CONSOLIDATED SUM FOR THE PURCHASE OF THE LAND AND BUILDING AND NO SPECIFIC AMOUNT HAS BEEN PAID F OR PURCHASE OF LAND SEPARATELY. THEREFORE, DEPRECIATION IS ALLOWABLE O N THE SAID PRICE PAID OF LAND AND BUILDING BEING COMPOSITE DEMAND AS HELD IN THE CASE OF JCIT, SPL. RANGE-4 VS. RAJESH EXPORTS LIMITED (2006) 9 SOT 28 (BANG.) (URO), COPY OF WHICH IS PLACED ON RECORD. 5. THE LD. DR RELIED UPON THE ORDERS OF BOTH THE AU THORITIES BELOW. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT DEP RECIATION IS ALLOWED IN RESPECT OF BUILDING AND NOT ON LAND BECAUSE BUILDIN G IS A WASTING ASSET, WHEREAS LAND IS A PERMANENT ASSET. A WASTING ASSET IS CONSUMED OVER A PERIOD OF TIME, WHEREAS A PERMANENT ASSET DOES NOT UNDERGO ANY CHANGE WITH TIME. THERE DOES APPEAR TO BE SOME MERIT N THE APPE LLANTS CONTENTION THAT WHERE THE ASSESSEE PURCHASES AN IMMOVABLE PROPERTY CONSISTING OF LAND AND BUILDING TOGETHER, WITHOUT BIFURCATIONS OF THE VALU E OF EACH, DEPRECIATION SHOULD BE ALLOWED IN RESPECT OF THE ENTIRE PURCHASE CONSIDERATION AS IT WOULD ITA NO.100(ASR)/2012 4 BE DIFFICULT TO BIFURCATE THE COST OF ACQUISITION I NTO AND THAT OF LAND AND THE BUILDING. HOWEVER, I AM OF THE VIEW THAT WHERE IT I S POSSIBLE TO REASONABLY ALLOCATE THE COST OF ACQUISITION BETWEEN THAT OF BU ILDING AND OF LAND, THE DEPRECIATION SHOULD BE ALLOWED ONLY AFTER MAKING SU CH ALLOCATION, ON THE VALUE OF THE BUILDING SO DETERMINED. DEPRECIATION I S ALLOWED AS A CHARGE ON THE PROFITS OF THE BUSINESS AS IT IS CONSUMED OVER A PERIOD OF TIME AND ADDS TO THE COST OF THE BUSINESS CONDUCTED BY THE ASSESS EE, WHEREAS THE LAND DOES NOT DEPRECIATE OVER TIME AND IS ALWAYS AVAILABLE TO THE ASSESSEE. THIS IS MORE TRUE WHEN THE ASSESSEE IS THE SOLE OWNER OF THE BUI LDING OVER THE LAND ON WHICH THE BUILDING IS CONSTRUCTED, AS OPPOSED TO TH E SITUATION WHERE MULTIPLE UNITS ARE CONSTRUCTED ON A PIECE OF LAND, AND EACH UNIT IS SOLD TO DIFFERENT PERSONS. IN THE CASE OF CI VS. ALPS THEATRE 67 ITR 377 (SC) THE HONBLE SUPREME COURT HAVE HELD THAT BUILDING, FOR THE PURP OSE OF DEPRECIATION, MEANS ONLY THE SUPERSTRUCTURE CONSTRUCTED ON THE LA ND AND DOES NOT INCLUDE LAND. FOLLOWING THIS DECISION THE HONBLE BOMBAY HI GH COURT HAVE HELD IN THE CASE OF CIT VS. INDIAN OIL CORPORATION LTD. 218 ITR 511 (BOM) THAT THE PREMIUM PAID FOR ACQUIRING THE LAND WOULD NOT BE EN TITLED TO BE INCLUDED IN THE COST OF BUILDING FOR THE PURPOSE OF ALLOWING DE PRECIATION. IN THE CASE OF CIT VS. CITIBANK N.A. 261 ITR 570 (BOM) THE HONBLE HIGH COURT HAVE HELD, IN THE CASE OF SALE OF PROPERTY, THAT THE COS T OF LAND AND BUILDING SHOULD ITA NO.100(ASR)/2012 5 BE CONSIDERED SEPARATELY FOR DETERMINING THE CAPITA L GAINS ON THE SALE OF THE PROPERTY. IN LIGHT OF THESE JUDGMENTS OF THE HONBL E HIGH COURT, WHICH HAVE MORE FORCE THAN THE DECISION OF THE HONBLE BANGALO RE TRIBUNAL RELIED UPON BY THE APPELLANT, THE ACTION OF THE AO IN ALLOCATIN G THE COST OF ACQUISITION OF THE IMMOVABLE PROPERTY BETWEEN THAT OF LAND AND THE SUPERSTRUCTURE AND N ALLOWING DEPRECIATION ONLY IN RESPECT OF THE COST O F THE SUPERSTRUCTURE IS RIGHTLY UPHELD. IN SUCH FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS, GROUND NO.2 O F THE ASSESSEE IS ALLOWED. 7. AS REGARDS GROUND NO RELATING TO CONFIRMATION OF DISALLOWANCE OF RS.1,38,000/-, THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS.5,64,000/- ON ACCOUNT OF SALARY I N THE PROFIT AND LOSS ACCOUNT. THE AO ASKED ASSESSEE TO SUBMIT THE PERSON WISE DETAILS OF SALARY PAID TO PRODUCE THE VOUCHERS FOR THE SAME. THE AO N OTED THAT THE VOUCHERS IN RESPECT OF DEEPAK, HITESH AND PRINCE WERE UNSIGN ED. THE AMOUNT OF SALARY DEBITED IN THEIR NAMES WAS RS.1,38,000/-. WH EN THIS FACT WAS CONFRONTED TO THE ASSESSEE, HE STATED THAT THE SALA RY HAD BEEN PAID TO THESE PERSONS BUT HE WAS NOT ABLE TO PRODUCE ANY EVIDENCE FOR THE SAME. HENCE, THE AO DISALLOWED THE EXPENDITURE ON SALARY AMOUNTI NG TO RS.1,38,000/- AND ADDED THIS AMOUNT TO THE TOTAL INCOME. ITA NO.100(ASR)/2012 6 8. THE LD. CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 9. THE LD. COUNSEL FOR THE ASSESSEE, ARGUED THAT TH E SALARY FOR ONE MONTH WAS NOT GOT SIGNED FROM THE SAID EMPLOYEES DUE TO O VERSIGHT, WHEREAS THE VOUCHERS WERE GOT SIGNED AND PRODUCED BEFORE THE AO . THEREFORE, BY ALL MEANS, THE SALARY HAS BEEN PAID TO THE SAID EMPLOYE ES AND THEREFORE, IS AN ALLOWABLE EXPENDITURE. 10. THE LD. DR, ON THE OTHER HAND, RELIED UPON TH E ORDERS OF BOTH THE AUTHORITIES BELOW. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. WE CONCUR WITH THE VIEWS OF THE LD. CIT(A) THAT NO EXPLANATION HAS BEEN FURNISHED AS TO WHY THE VOUCHERS EVEN FOR THE ONE M ONTH, AS CLAIMED BY THE LD. COUNSEL, WERE NOT SIGNED BY THE THREE EMPLOYEES . THE ASSESSEE HAD OBVIOUSLY EMPLOYED MORE PERSONS THAN THE AFORESAID THREE EMPLOYEES AND THE OTHER EMPLOYEES COULD HAVE CARRIED OUT THE WORK STATED TO BE DONE BY THESE THREE EMPLOYEES. THERE IS NOTHING ON RECORD T O SHOW THAT VOUCHERS FOR ONLY ONE MONTH WERE EXAMINED BY THE AO AND IT IS C LEAR THAT THE ASSESSEES COUNSEL WAS NOT ABLE TO PRODUCE ANY EVIDENCE TO S HOW THAT SALARY WAS PAID TO THESE THREE PERSONS. IN THE FACTS AND CIRCUMSTA NCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHO HAS RIGHTLY UPHELD THE ITA NO.100(ASR)/2012 7 DISALLOWANCE OF RS.1,38,000/-. THUS, GROUND NO.2 OF THE ASSESSEE IS DISMISSED. 12. GROUNDS NO. 3 & 4 ARE GENERAL IN NATURE, THEREF ORE, DO NOT REQUIRE ANY ADJUDICATION. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSE E IN ITA NO.100(ASR)/2012 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14TH FEBRUARY, 2014. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14 TH FEBRUARY, 2014 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:SH. SANJEEV KUMAR SAMA, JALANDHAR. 2. THE ITO WARD 1(4), JALANDHAR 3. THE CIT(A), JALANDHAR 4. THE CIT, JALANDHAR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR