Assistant Commissioner of Income-tax, V. M/s. Darode Jog Builders Pvt. Ltd., Pune

ITA 125/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88799 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Search and seizure; Retraction
• Section: 143(3); 133A; 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.125/PN/2014 (ASSESSMENT YEAR: 2007-08) THE ASST. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), PUNE . APPELLANT VS. M/S. DARODE JOG BUILDERS PVT. LTD., 1212, DARODE JOG HOUSE, APTE ROAD, PUNE 411004 PAN: AAACD6436G . RESPONDENT APPELLANT BY : SHRI RAVI PRAKASH RESPONDENT BY : SHRI SUHAS P BORA DATE OF HEARING : 06-01-2015 DATE OF PRONOUNCEMENT : 19-01-2015 ORDER PER SUSHMA CHOWLA, JM: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF C IT(A)- CENTRAL, PUNE DATED 22.10.2013 RELATING TO ASSESSMENT YE AR 2007-08 AGAINST ORDER PASSED UNDER SECTION 143(3) R.W.S. 153A OF THE INCOME- TAX ACT. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD CIT(A) ERRED IN ALLOWING FULL DEPRECIATION ON CAP ITALIZED AMOUNT OF BUILDING INSTEAD OF HALF (50%) AS IT WAS CAPIT ALIZED ON THE LAST DAY I.E. 31.03.2007. 2. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF TH E ASSESSING OFFICER BE RESTORED. 3. APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, AND MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. ITA NO.125/PN/2014 M/S. DARODE JOG BUILDERS PVT. LTD. 2 3. THE ONLY ISSUE RAISED BY THE REVENUE IN THE PRESEN T APPEAL IS AGAINST THE ALLOWANCE OF DEPRECIATION ON BUILDING. 4. THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT, SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE ACT WAS CONDUCTED AT T HE PREMISES OF THE ASSESSEE ON 28.04.2009. THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 153A OF THE ACT, FILED RETURN OF INCOM E DECLARING INCOME OF RS.2,36,75,659/-. THE ASSESSING OFFICER NOTED THAT DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT CON DUCTED ON 21.03.2007, THE ASSESSEE HAD MADE A DECLARATION OF RS.3.04 CRORES, AGAINST WHICH IN THE RETURN OF INCOME FILED FOR THE YEAR UND ER CONSIDERATION, THE ASSESSEE HAD DECLARED THE INCOME AT RS.2,36,75,659/-. THE ASSESSEE WAS ASKED TO EXPLAIN THE DIFFERENCE. IN REPLY, THE ASSESSEE EXPLAINED THAT AT THE TIME OF SU RVEY, THE IMPACT OF INTEREST ON BORROWED FUNDS AND DEPRECIATION WAS NOT C ONSIDERED AND HENCE, THE DIFFERENCE BETWEEN THE INCOME OFFERED AND T HE RETURNED INCOME. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF T HE ASSESSEE. THE ASSESSING OFFICER NOTED ON THE ONE HAND, T HE ASSESSEE HAD CAPITALIZED THE DIFFERENCE IN THE VALUE OF THE PROPERTY AND ON THE OTHER HAND, HAD CLAIMED DEPRECIATION ON THE SAME, WHICH WA S NOT CORRECT. IT WAS FURTHER NOTED BY THE ASSESSING OFFICER T HAT THE VALUE OF THE PROPERTY WAS CAPITALIZED ON 31.03.2007 AND IF THE ASSE SSEE WANTED TO AVAIL THE BENEFIT OF DEPRECIATION ON THE AMOUNT OF DECLAR ATION, THE ASSESSEE WOULD BE ENTITLED FOR SUCH CLAIM ONLY IN THE NEX T FINANCIAL YEAR. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD AVAILED EXCESS BENEFIT OF RS.26,54,214/-, WHICH WAS DISALLOWED. FURTH ER, DISALLOWANCE WAS MADE ON ACCOUNT OF INTEREST ON BORROWE D FUNDS OF RS.15,92,456/- AND THE INCOME OF THE ASSESSEE FOR THE YEA R UNDER CONSIDERATION WAS COMPUTED. ITA NO.125/PN/2014 M/S. DARODE JOG BUILDERS PVT. LTD. 3 5. BEFORE THE CIT(A), THE CONTENTION OF THE ASSESSEE WAS THAT WHERE THE DECLARATION HAD BEEN MADE UNDER SECTION 133A OF THE ACT, THE SUBSEQUENT CLAIM OF DEPRECIATION ON THE VALUE OF THE BUILDING, D OES NOT AMOUNT TO RETRACTION. FURTHER, IT WAS POINTED OUT BY TH E LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE AS SESSING OFFICER HIMSELF HAD OBSERVED THAT THE ASSESSEE HAD CAPITALIZED TH E DIFFERENCE OF VALUE IN PROPERTY IN THE BOOKS OF ACCOUNT AFTER SURVE Y, THEREFORE, THE ASSESSEE WOULD BE ENTITLED TO THE SAID CLAIM IN THE NEXT FINANCIAL YEAR. THE INFERENCE DRAWN BY THE ASSESSEE IN THIS REGARD WAS THAT, THE ASSESSING OFFICER HAD NOT DOUBTED THE OWNERSHIP OF THE AS SET BY THE ASSESSEE VIS--VIS THE UTILIZATION OF THE ASSET FOR THE PUR POSE OF BUSINESS. THE ASSESSEE POINTED OUT THAT IT HAD RECEIVED RENTAL INCOME WHICH WAS ACCEPTED AS BUSINESS RECEIPTS BY THE ASSESSIN G OFFICER AND HENCE, THIS CONDITION WAS ALSO FULFILLED. ON SUCH UTILIZATION OF TH E ASSET, THE ASSESSEE WAS ENTITLED TO CLAIM OF DEPRECIATION AS BUILDING WAS A TANGIBLE ASSET. THE ASSESSEE ALSO FURNISHED THE AU DITED FINANCIAL STATEMENT SHOWING DEPRECIATION AS PER INCOME TAX ACT. THE CIT(A) NOTED THAT THE ADMISSIBILITY OF THE CLAIM OF DEPRECIATION WAS NOT DENIED BY THE ASSESSING OFFICER, BUT HE HAD STATED THAT T HE SAME COULD BE CLAIMED BY THE ASSESSEE FOR THE SUBSEQUENT YEAR. TH E CIT(A) FURTHER OBSERVED THAT MERELY BECAUSE THE CLAIM OF DEPRECIATION W AS NOT TAKEN INTO ACCOUNT AT THE TIME OF RECORDING STATEMENT D URING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT, DOES NO T DIS-ENTITLES THE ASSESSEE TO THE SAID CLAIM. FURTHER, THE CIT(A) HELD T HAT IN VIEW OF THE EXPLANATION (5) TO SECTION 32(1) OF THE ACT, THE CLAIM O F DEPRECIATION WAS MANDATORY AND HAD TO BE ALLOWED EVEN IF THE ASSES SEE HAD NOT CLAIMED THE SAME. IN VIEW THEREOF, THE ADDITION MA DE BY THE ASSESSING OFFICER WAS DELETED BY THE CIT(A). FURTHER, THE C IT(A) ALSO ALLOWED THE CLAIM OF INTEREST EXPENDITURE TO THE TUNE OF RS.15,92,456/- ITA NO.125/PN/2014 M/S. DARODE JOG BUILDERS PVT. LTD. 4 6. THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN ALLOWING FULL DEPRECIATION ON THE CAPITALIZED AMOUNT OF BUILDING INSTEAD OF 50% SINCE THE ASSET WAS CAPITALIZED ON THE LAST DAY I.E. 31.03.2007. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLA CED RELIANCE ON THE ORDER OF ASSESSING OFFICER. 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSES SEE POINTED OUT THAT THE TOTAL ADDITION IN THE BUILDING ACCOUNT AFTER 3 0.09.2006 WAS RS.7.98 CRORES ON WHICH DEPRECIATION WAS ALLOWABLE AT 1 0%, BUT SINCE THE ASSET WAS ADDED FOR A PERIOD LESS THAN 180 D AYS, THE DEPRECIATION WAS CLAIMED ONLY AT RS.39,92,093/-. IT WAS FUR THER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FO R THE ASSESSEE THAT PERUSAL OF THE LIST OF FIXED ASSETS AND THE CLAIM OF DEPRECIATION AT PAGE 37 OF THE PAPER BOOK WOULD REFLECTS THAT THE TOTAL DEPRECIATION CLAIMED ON ALL THE BLOCKS INCLUDING BUILDING FOR THE YEAR UNDER CONSIDERATION WAS RS.66,46,907/-. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE STRESSED THAT ONLY 50 % OF TOTAL CLAIM OF DEPRECIATION WAS CLAIMED BY THE ASSESSEE AND WAS ALLOWED BY THE CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. SURVEY UNDER SECTION 133A OF THE ACT WAS CARRIED OUT A T THE BUSINESS PREMISES OF THE ASSESSEE ON 21.03.2007, IN WHICH THE ASSES SEE DECLARED THE VALUE OF INVESTMENT IN THE BUILDING AS ADDITIONA L INCOME. FURTHER, SEARCH UNDER SECTION 132 OF THE ACT WAS ALSO CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 28.04.2009. IN RESPONS E TO THE NOTICE ISSUED UNDER SECTION 153A OF THE ACT, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.2.36 CRORES AS AGAINST ITA NO.125/PN/2014 M/S. DARODE JOG BUILDERS PVT. LTD. 5 SURRENDERED INCOME OF RS.3.04 CRORES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUISITIONED THE ASSESSEE TO FURNISH THE EXPLANATION FOR THE DIFFERENCE BETW EEN THE DECLARATION MADE AND THE AMOUNT RETURNED IN THE RETURN OF INCOM E. IN REPLY, IT WAS CONTENDED BY THE ASSESSEE THAT THE DIFFERE NCE WAS ON ACCOUNT OF CLAIM OF DEPRECIATION ON THE BUILDING, VALUE OF WHICH WAS SURRENDERED DURING THE COURSE OF SURVEY. 10. THE ASSESSEE HAS FURNISHED ON RECORD THE AUDIT RE PORT ALONG WITH THE AUDITED BALANCE SHEET AND PROFIT & LOSS ACCOUNT . THE LIST OF FIXED ASSETS AND THE DEPRECIATION THEREON FOR THE YEAR UNDER CONSIDERATION IS PLACED AT PAGE 37 OF THE PAPER BOOK. TH E PERUSAL OF THE DETAILS REFLECTS THAT UNDER BLOCK-1, THE ASSESSEE HAD DECLARED ADDITION TO THE IMMOVABLE PROPERTY AT RS.7.98 CRORES AND THE SAID ADDITION HAS BEEN DECLARED TO HAVE BEEN MADE AFTER 30.09 .2006. THE ASSESSEE HAS FURTHER DECLARED THAT THE RATE OF DEPRECIA TION ON THE SAID BUILDING WAS 10% AND ON ASSET VALUE OF RS.7.98 CRORES, THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.39,92,093/-. THE SAID DEPREC IATION CLAIMED BY THE ASSESSEE IS @ 5% ON THE TOTAL VALUE OF THE IMMOVABLE ASSETS I.E. 50% OF THE TOTAL CLAIM WAS CLAIMED BY THE ASSESS EE AS AN ALLOWABLE DEDUCTION. THE ASSESSING OFFICER HAD REJECTED TH E CLAIM OF THE ASSESSEE. HOWEVER, THE SAME HAS BEEN ALLOWED BY TH E CIT(A). THE REVENUE IS IN APPEAL ONLY AGAINST THE RATE AT WHICH THE DEPRECIATION IS TO BE ALLOWED TO THE ASSESSEE. THE ASSESSING OFFICER HAD PICKED UP THE FIGURE OF DEPRECIATION AT RS.66,46,907/- BEING RELATABLE TO THE BUILDING. HOWEVER, THE PERUSAL OF THE DETAILS FURNISHED AT PAGE 37 OF THE PAPER BOOK REFLECTS THAT THE SAID FIGURE OF DEPRECIATION IS EQUIVALE NT TO THE DEPRECIATION ALLOWABLE ON ALL ASSETS UNDER BLOCK-1 TO BLOCK- 4 FOR THE YEAR UNDER CONSIDERATION. HOWEVER, ON THE ADDITION MADE IN THE ITA NO.125/PN/2014 M/S. DARODE JOG BUILDERS PVT. LTD. 6 IMMOVABLE PROPERTY ACCOUNT, THE ASSESSEE HAD CLAIMED DEP RECIATION OF RS.39,92,093/- ONLY. THE SAID CLAIM OF DEPRECIATION WAS @ 5 0% OF THE TOTAL CLAIM AND IN VIEW OF THE FACT THAT THE SAID IMMOVABLE ASSET WAS ADDED TO THE ASSETS OF THE ASSESSEE COMPANY AFTER 30.0 9.2006, THE ASSESSEE WAS ONLY ENTITLED TO DEPRECIATION @ 5% BEING 50 % OF THE 10% I.E. THE RATE OF DEPRECIATION TO BE ALLOWED ON IMMOVABLE ASS ETS. WHERE THE ASSESSEE HAD ONLY CLAIMED 50% OF DEPRECIATION ON THE VALUE OF THE IMMOVABLE ASSETS ADDED TO ITS LIST OF FIXED ASSETS AFTER 30 .09.2006 AND THE SAME HAVING BEEN ALLOWED BY THE CIT(A), WE FIND NO ERRO R IN THE ORDER OF CIT(A). UPHOLDING THE SAME, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF JANUARY, 2015. SD/- SD/- (R.K. PANDA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 19 TH JANUARY, 2015. GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1) THE DEPARTMENT; 2) THE ASSESSEE; 3) THE CIT(A)-CENTRAL, PUNE; 4) THE CIT-CENTRAL, PUNE; 5) THE DR A BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., PUNE