DCIT, New Delhi V. M/s. Gateway Impex (P) Ltd., New Delhi

ITA 220/DEL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97310 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 23-09-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER ITA NO.220/DEL/2014 ASSESSMENT YEAR : 2005-06 DCIT, CIRCLE-12(1), NEW DELHI. VS. GATEWAY IMPEX (P) LTD., B-26, QUTAB INSTITUTIONAL AREA, NEW DELHI. PAN: AAACG6562C (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI AMRIT LAL, DR DATE OF HEARING : 23.09.2015 DATE OF PRONOUNCEMENT: 24.09.2015 ORDER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 31.10.2013 IN RELATION TO THE ASSESSMENT YEAR 2005-06. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL IS AGAINST RESTRICTING THE ADDITION OF RS.21,03,361/- TO RS.2,88,513/- MAD E BY DISALLOWING THE EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF SALE, PURCHASE AND DEVELOPMENT OF P ROPERTY AND LETTING IT TO ITA NO.220/DEL/2014 2 TENANTS AND ALSO PROVIDING FOR THE CONVENIENCES AND SERVICES COMMONLY PROVIDED IN APARTMENTS AND BUSINESS QUARTERS. THE ASSESSEE CLAIMED DEPRECIATION ON PLANT AND MACHINERY. IT WAS OBSERVE D BY THE AO THAT BESIDES CLAIMING DEPRECIATION ON LIFTS, WINDOWS CLE ANING SYSTEM, HVAC, IBMS, ETC., THE ASSESSEE ALSO MADE ALLOCATION OF OT HER PRE-OPERATIVE EXPENSES ON PROPORTIONATE BASIS. HE NOTICED THAT T HE ASSESSEES MAIN ACTIVITY WAS OF GIVING BUILDING ON RENT. HE, THEREF ORE, CAME TO HOLD THAT THE ENTIRE EXPENDITURE INCURRED ON FIXED ASSETS BY THE ASSESSEE WAS PERTAINING TO RENTAL INCOME. SINCE THE ASSESSEE WAS ALSO PROVIDI NG CERTAIN MAINTENANCE SERVICES, HE HELD THAT THE DEPRECIATION WAS ALLOWAB LE ONLY ON THOSE ASSETS, NAMELY, LIFTS, WINDOWS CLEANING SYSTEM, HVAC, IBMS, UPLIFT TROLLEY AND SOUND PROOFING SYSTEM. AS SUCH, HE RE-DETERMINED TH E OPENING WRITTEN DOWN VALUE OF PLANT AND MACHINERY USED FOR MAINTENA NCE AND SERVICES AT RS.2.39 CRORE AND COMPUTED ALLOWABLE DEPRECIATION A T RS.59.83 LAC. AS THE ASSESSEE HAD CLAIMED DEPRECIATION AMOUNTING TO RS.8 0.86 LAC, THE DIFFERENTIAL AMOUNT OF RS.21.03 LAC WAS DISALLOWED. AGAINST THE DISALLOWANCE OF DEPRECIATION TO THIS EXTENT, THE LD . CIT(A) ALLOWED DEPRECIATION TO THE TUNE OF RS.18,14,848/- ON PRE-O PERATIVE EXPENSES CAPITALIZED, BUT, DISALLOWED DEPRECIATION ON THE RE NT PAID TO THE DDA AT ITA NO.220/DEL/2014 3 RS.2,88,513/-. THE REVENUE IS AGGRIEVED AGAINST TH E RELIEF ALLOWED IN THE FIRST APPEAL. 4. I HAVE HEARD THE LD. DR AND PERUSED THE RELEVANT MATERIAL ON RECORD. AN ADJOURNMENT APPLICATION WAS FILED BY ONE COUNSEL WITHOUT THERE BEING ANY POWER OF ATTORNEY IN HIS FAVOUR. SUCH ADJOURNM ENT REQUEST WAS REJECTED. ACCORDINGLY, THE APPEAL IS BEING DISPOSED OF ON MERITS EX PARTE QUA THE ASSESSEE. 5. IT IS OBSERVED THAT THE LD. CIT(A) HAS ALLOWE D RELIEF ONLY IN RESPECT OF PRE-OPERATIVE EXPENSES WHICH WERE CAPITALIZED BY TH E ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2003-04. NOT ONLY SUCH CAPITALIZATION WAS ALLOWED BY THE AO IN THE ASSESSM ENT COMPLETED U/S 143(3) OF THE ACT FOR THAT YEAR, BUT ALSO ALLOWED D EPRECIATION ON SUCH BLOCK OF PLANT AND MACHINERY. ONCE THE REVENUE, AFTER MA KING PROPER INVESTIGATION, HAS ACCEPTED ADDITION TO THE BLOCK O F PLANT AND MACHINERY BY THE AMOUNT OF PRE-OPERATIVE EXPENSES IN AN EARLIER YEAR AND ALSO ALLOWED DEPRECIATION ACCORDINGLY, IT IS IMPERMISSIBLE TO TH E AO IN A LATER YEAR TO DISTURB THE OPENING WRITTEN DOWN VALUE OF SUCH BLOC K OF ASSETS BY OPINING THAT THE PRE-OPERATIVE EXPENSES SHOULD NOT HAVE BEE N CAPITALIZED. THERE IS NOTHING ON RECORD TO INDICATE THAT SOME PROCEEDINGS WERE TAKEN UP FOR THE ITA NO.220/DEL/2014 4 ASSESSMENT YEAR 2003-04 TO RECTIFY THE ALLOWING OF CAPITALIZATION OF SUCH PRE-OPERATIVE EXPENSES TO PLANT AND MACHINERY. IN VIEW OF THE FOREGOING DISCUSSION, I AM OF THE CONSIDERED OPINION THAT THE LD. CIT(A) WAS RIGHT IN ALLOWING DEPRECIATION ON PRE-OPERATIVE EXPENSES CAP ITALIZED UNDER THE HEAD PLANT AND MACHINERY FOR BUSINESS PURPOSE. 6. IN THE RESULT, THE APPEAL IS DISMISSED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 4 TH SEPTEMBER, 2015. SD/- (R.S. SYAL) ACCOUNTANT M EMBER DATED: 24 TH SEPTEMBER, 2015. DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI