JCIT, CHENNAI V. Chennai City Center Holdings P Ltd., CHENNAI

ITA 1001/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8389 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Keywords: Business income; Depreciation
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , ! .#$#%, ' !( BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ./ ITA NOS.1000 & 1001/MDS/2016 % *% / ASSESSMENT YEARS : 2010-11 & 2011-12 THE JOINT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(2), CHENNAI - 600 034. V. M/S CHENNAI CITY CENTRE HOLDINGS PVT. LTD., NO.10-11, DR. RADHAKRISHNAN SALAI MYLAPORE, CHENNAI - 600 004. PAN : AAACG 3869 Q (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT ./,- 0 1 / RESPONDENT BY : DR. ANITA SUMANTH, ADVOCATE SHRI VIJAY KUMAR PUNNA, ADVOCATE 2 0 3' / DATE OF HEARING : 02.08.2016 45* 0 3' / DATE OF PRONOUNCEMENT : 23.09.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGA INST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, CHENNAI, DATED 28.01.2016 AND PERTAIN TO ASSESSMENT YEARS 2010- 11 AND 2011-12. SINCE COMMON ISSUES ARISE FOR CONS IDERATION IN 2 I.T.A. NO.1000/MDS/16 BOTH THE APPEALS, WE HEARD THESE APPEALS TOGETHER A ND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DEPRECIATION CLAIMED BY THE ASSESSEE ON WINDMILL. 3. SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ASSESSEE CLAIMED DEPRECIATION ON THE CIVIL WORK MADE FOR INSTALLATION OF WINDMILL, AT THE RATE OF 8 0%. ACCORDING TO THE LD. D.R., THE CIVIL WORK IS TOTALLY DIFFERENT F ROM WINDMILL, THEREFORE, THE ASSESSEE CANNOT CLAIM DEPRECIATION A T THE RATE OF 80% ON THE CIVIL WORK CARRIED OUT FOR INSTALLATION OF WINDMILL. REFERRING TO THE ASSESSMENT ORDER, MORE PARTICULARL Y PARA 7.4, THE LD. D.R. SUBMITTED THAT THE CIVIL CONSTRUCTION CANN OT BE CONSTRUED AS PART AND PARCEL OF WINDMILL. THEREFORE, THE ASSESS EE IS NOT ELIGIBLE FOR DEPRECIATION AT THE RATE OF 80%. AT THE BEST, THE CIVIL CONSTRUCTION CAN BE CONSTRUED AS ORDINARY BUILDING USED FOR BUSINESS AND ENTITLED FOR DEPRECIATION AT THE RATE OF 10%. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 3 I.T.A. NO.1000/MDS/16 4. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS TO NECESSA RILY ERECT THE WINDMILL ON THE CIVIL FOUNDATION. THE WINDMILL CAN NOT EXIST WITHOUT ANY CIVIL FOUNDATION. THEREFORE, IT CANNOT BE SAID THAT THE CIVIL CONSTRUCTION MADE BY THE ASSESSEE FOR THE PURPOSE O F INSTALLING THE WINDMILL IS NOT PART AND PARCEL OF WINDMILL. ACCOR DING TO THE LD. COUNSEL, WITHOUT THE CIVIL CONSTRUCTION, THE WINDMI LL CANNOT EXIST. THEREFORE, WHEN THE ASSESSEE CONSTRUCTED BUILDING F OR ERECTING THE WINDMILL, ACCORDING TO THE LD. COUNSEL, THE BUILDIN G CONSTRUCTED BY THE ASSESSEE FOR THE PURPOSE OF WINDMILL HAS TO BE CONSTRUED AS PART AND PARCEL OF THE WINDMILL. THEREFORE, ACCORD ING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE C LAIM OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE QUESTION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE CONST RUCTED A BUILDING FOR THE PURPOSE OF ERECTION OF WINDMILL, WHETHER SU CH A BUILDING WOULD FORM PART OF WINDMILL? THIS TRIBUNAL IS OF T HE CONSIDERED OPINION THAT THE WINDMILL CANNOT EXIST WITHOUT A CI VIL FOUNDATION. THEREFORE, THE CIVIL WORK / BUILDING CONSTRUCTED BY THE ASSESSEE FOR 4 I.T.A. NO.1000/MDS/16 THE PURPOSE OF INSTALLATION OF WINDMILL HAS TO BE N ECESSARILY CONSTRUED AS PART OF WINDMILL. IN OTHER WORDS, THE WINDMILL CANNOT EXIST WITHOUT CIVIL CONSTRUCTION. THEREFORE, THE C IVIL CONSTRUCTION AS WELL AS THE WINDMILL HAS TO BE CONSTRUED AS SINGLE UNIT FOR THE PURPOSE OF DEPRECIATION. ACCORDINGLY, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AT THE RATE OF 80%. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUT HORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DEPR ECIATION ON DG SETS, HVAC, ETC. TO THE EXTENT OF ` 1,90,37,191/-. 7. SHRI SHIVA SRINIVAS, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ASSESSEE-COMPANY LET OUT A SHOPP ING MALL AND EARNED LEASE RENTALS, WHICH WAS OFFERED UNDER THE H EAD INCOME FROM HOUSE PROPERTY. AFTER CLAIMING DEDUCTION UND ER SECTION 24 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'), THE ASSESSEE DISCLOSED A LOSS OF ` 13,43,88,740/- UNDER THE HEAD BUSINESS. THE ASSE SSEE IS ALSO CLAIMING DEPRECIATION ON PLANT AND MACHINER Y, DG SETS, HVAC AND OTHERS. THE LD. D.R. POINTED OUT THAT WHE N THE ASSESSEE HAS CLASSIFIED THE INCOME FROM LETTING OUT THE SHOPPING MALL UNDER THE HEAD INCOME FROM PROPERTY, DEPRECI ATION CANNOT BE 5 I.T.A. NO.1000/MDS/16 ALLOWED. THE ASSESSEE CANNOT TAKE A BENEFIT OF 30% DEDUCTION UNDER SECTION 24 OF THE ACT AND ALSO DEPRECIATION U NDER SECTION 32 OF THE ACT. SECTION 32 OF THE ACT, ACCORDING TO TH E LD. D.R., IS AVAILABLE ONLY WHEN THE INCOME WAS COMPUTED UNDER T HE HEAD INCOME FROM BUSINESS. SINCE THE ASSESSEE ITSELF DECLARED THE INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY, THERE CANNOT BE ANY CLAIM OF DEPRECIATION. 8. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUNS EL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ADMITTEDLY LETTING OUT THE SHOPPING MALL AND ALSO MAINTAINING THE SHOPPING MAL L. THE ASSESSEE IS CLAIMING DEPRECIATION ONLY ON DG SETS, HVAC AND OTHER DEPRECIABLE ITEMS, WHICH ARE PUT TO USE FOR SERVING THE COMMON AREA OF THE SHOPPING MALL. NO DOUBT, ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS LETTING OUT THE SHOPPING MALL AND D ISCLOSED THE INCOME AS INCOME FROM HOUSE PROPERTY UNDER SECTIO N 24 OF THE ACT. WITH REGARD TO OTHER ACTIVITIES AND FACILITIE S SPECIFICALLY PROVIDED TO THE LESSEE, THE ASSESSEE ACCOUNTED THE PROFIT AS BUSINESS INCOME. THE OTHER ACTIVITIES AND FACILITI ES INCLUDE MAINTENANCE OF BUILDING, PROVISION FOR SECURITY, AD VERTISEMENT BOARDS AND HOARDINGS, WINDMILL, MAINTENANCE OF PARK ING AREA, 6 I.T.A. NO.1000/MDS/16 PROVIDING UNINTERRUPTED ELECTRICITY, ETC. THE INCO ME FROM THESE ACTIVITIES IS CLASSIFIED AS BUSINESS INCOME. ACCOR DING TO THE LD. COUNSEL, THE ASSESSEE IS NOT CLAIMING DEPRECIATION ON THE BUILDING OF THE SHOPPING MALL. DEPRECIATION WAS CLAIMED ONLY I N RESPECT OF THE PLANT AND MACHINERY USED FOR PROVIDING FACILITIES I N THE COMMON AREA. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE IS LETTING OUT SHOPPING MALL AND MAINTAINI NG THE SHOPPING MALL. THE ASSESSEE DISCLOSED THE INCOME FROM LETTI NG OUT THE SHOPPING MALL AS INCOME FROM HOUSE PROPERTY UNDER SECTION 24 OF THE ACT. APART FROM LETTING OUT THE PROPERTY, THE ASSESSEE ALSO CLAIMS THAT IT PROVIDED FACILITIES SUCH AS MAINTENA NCE, SECURITY, ADVERTISEMENT BOARDS AND HOARDINGS, UNINTERRUPTED P OWER SUPPLY THROUGH WINDMILL AND DG SETS, LETTING OUT PROFESSIO NAL, PARKING AREA, ETC. IN RESPECT OF THE PLANT AND MACHINERY USED FO R PROVIDING THESE ACTIVITIES / FACILITIES, THE ASSESSEE CLAIMS THAT T HE SAME ARE BUSINESS IN NATURE AND DECLARED THE INCOME OUT OF SUCH ACTIV ITIES AS BUSINESS INCOME. THE ASSESSEE IS CLAIMING DEPRECIATION ONLY IN RESPECT OF 7 I.T.A. NO.1000/MDS/16 THOSE PLANT AND MACHINERY USED FOR PROVIDING FACILI TIES TO THE LESSEE. WHEN THE ASSESSEE HAS NOT CLAIMED DEPRECIATION IN R ESPECT OF THE BUILDING AND CLAIMS DEPRECIATION ONLY IN RESPECT OF PLANT AND MACHINERY USED FOR PROVIDING COMMON FACILITIES, THI S TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ENTITLE D FOR DEPRECIATION UNDER SECTION 32 OF THE ACT IN RESPECT OF PLANT AND MACHINERY WHICH IS USED FOR BUSINESS OF THE ASSESSEE FOR PROVIDING FACILITIES IN THE COMMON AREA TO THE LESSEE. THEREFORE, THIS TRIBUNA L DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUT HORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 10. IN THE RESULT, BOTH THE APPEALS FILED BY THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED ON 23 RD SEPTEMBER, 2016 AT CHENNAI. SD/- SD/- ( ! .#$#% ) ( . . . ) (ABRAHAM P. GEORGE) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 23 RD SEPTEMBER, 2016. KRI. 8 I.T.A. NO.1000/MDS/16 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-1, CHENNAI-34 4. PRINCIPAL CIT-1, CHENNAI 5. 9< .3 /DR 6. =% > /GF.