ADDL CIT RG 9(1), MUMBAI V. EAGLE BURGMANN INDIA P.LTD, MUMBAI

ITA 3524/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92769 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 22-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 18-05-2012
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Capital asset; Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA NO . 3524 / MUM/20 1 2 ( / ASSESSMENT YEAR : 2008 - 09 ) ACIT, RG.9(1), MUMBAI - 20 VS. M/S EAGLE BURGMANN INDIA PVT. LTD., A.K.INDUSTRIAL ESTATE, MADINA MANZIL COMPOUND, S.V.ROAD, GOREGAON WEST, MUMBAI - 400054 ./ ./ PAN/GIR NO. : A A A C B 0449 E ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI NEIL PHILIP /ASSESSEE BY : NONE / DATE OF HEARING : 2 2 /0 6 / 2015 / DATE OF PRONOUNCEMENT 22/06 /2015 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 19 , MUMBAI , DATED 2 - 3 - 2012 , FOR THE ASSESSMENT YEAR 2008 - 09 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE I.T.ACT . 2. IN THIS APP EAL, THE REVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS. 22,90,795/ - PERTAINING TO THE OFFICE PREMISES ACQUIRED BY THE ASSESSEE. ITA NO. 3524 / 1 2 2 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE IN SPITE OF GIVING THE OPPORTU NITY, THEREFORE, THE BENCH DECIDED TO DISPOSE OFF THE APPEAL AFTER HEARING THE LD. DR AND CONSIDERING THE MATERIAL PLACED ON RECORD. 4. FROM THE RECORD WE FOUND THAT DISALLOWANCE OF CLAIM OF DEPRECIATION ON OFFICE PREMISES WAS DELETED BY CIT(A) AFTER HAVIN G FOLLOWING OBSERVATION : - 4.1 IT IS OBSERVED BY THE ASSESSING OFFICER THAT DURING THE YEAR UNDER REVIEW, THE ASSESSEE HAS PURCHASED OFFICE PREMISES AT VILE PARLE(W), MUMBAI BY PAYING A CONSIDERATION OF RS.4,75,87,899/ - AND CLAIMED A DEPRECIATION UNDER THE BLOCK OF 10 % . THE OFFICE PREMISES INCLUDES LAND AND BUILDING BOTH. IN SPITE OF SEVERAL REQUESTS, THE ASSESSEE COMPANY DID NOT GIVE ANY BIFURCATION ABOUT THE COST OF THE LAND AND BUILDING OF THE OFFICE PREMISES PURCHASED AT VILE PARLE(W), MUMBAI. FURTHER, SINCE THE DEPRECIATION IS A MEASURE OF WEAR AND TEAR, HENCE SHOULD BE RESTRICTED TO THE COST OF CONSTRUCTION OF THE STRUCTURE AS REST OF THE VALUE IS ATTRIBUTABLE TO COST OF LAND, WHICH IS NOT A DEPRECIABLE ASSET, AS DECIDED BY HON'BLE SUPREME COURT IN THE CASE OF CIT VS. ALPS THEATRE 65 ITR 377 (SC). THE ASSESSEE'S ASSERTION THAT PURCHASE AGREEMENT DOES NOT INCLUDE BIFURCATION OF COST OF LAND AND COST OF FLAT IS NOT ACCEPTABLE. THE ASSESSING OFFICER ESTIMATED FAIR AND REASONABLE CONSTRUCTION COST AT RS.17, 72,000/ - . SINCE THE ASSET HAS BEEN USED LESS THAN 6 MONTHS, DEPRECIATION IS ALLOWED @5% I.E. RS.88,600/ - ON BUILDING COST OF RS.17,72, 000 / - . THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS.23,79,395/ - OUT O F WHICH RS.22,90,795/ - (RS.23,79,395 - RS.88,600) IS A DDED TO THE INCOME OF THE ASSESSEE. THE ASSESSING OFFICER HAS ALSO RELIED ON CIT VS. FAZALBHOY INVESTMENT CO.(P) LTD.(1977) 109 ITR 802 (BOM), CIT VS. VIMAL CHAND GOLECHA (1993) 201 ITR 442 (RAJ.) AND ITO VS. VIKAS BEHAL (2010) 36 DTR (KO!.) (TRIB.) 385 IN SUPPORT OF ITS CLAIM. 4.2 IN APPEAL IT IS SUBMITTED BY THE APPELLANT COMPANY THAT HAS PAID THE ENTIRE COST OF RS.4,75,87,899/ - FOR PURCHASE OF OFFICE AND CLAIMED THE DEPRECIATION AMOUNTING TO RS.23,79,395 / - . THE COMPANY HAS NOT PURCHASED LAND BUT OFFICE , BEING A COMPOSITE PURCHASE AND ACCORDINGLY CLAIMED DEPRECIATION ON THIS. THE COMPANY HAS NOT PURCHASED LAND SEPARATELY AND THEN CONSTRUCTED THE BUILDING THEREON, BUT IT HAS MADE A COMPOSITE PURCHASE FROM A BUILDER ACTUALLY A FLAT IN THE BUILDING WHEREIN IT IS NOT POSSIBLE TO BIFURCATE COST OF THE LAND. HENCE, THERE IS NO ATTEMPT FROM THE COMPANY TO CLAIM SOMETHING WHICH IS NOT ALLOWABLE. 4.3. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE SUBMISSIONS OF THE APPELLANT AND ASSESSMENT ORDER. THE AG REEMENT FOR PURCHASE OF OFFICE IS A CONSOLIDATED AGREEMENT AND NOWHERE IT GIVES BIFURCATION BETWEEN THE COST OF LAND AND THE OFFICE PREMISE. THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. MUGNEERAM ITA NO. 3524 / 1 2 3 BANGUR & CO. HAS HELD THAT THE RATIO OF THE DECISION IS THAT WHERE THE PARTIES HAVE AGREED FOR A LUMPSUM CONSIDERATION FOR AN UNDERTAKING AS A WHO L E, WITHOUT PLACING SEPARATE VALUES FOR EACH OF THE ITEMS WHICH GO TO MAKE UP THE UNDERTAKINGS. THE CONTRACT REMAINS A CONTRACT OF SALE OF THE UNDERTAKING AS SUCH FOR LUMPSUM CONSIDERATION. THE LUMPSUM PAYMENT CANNOT BE SEGREGATED INTO TWO. THE HON'BLE SPECIAL BENCH, DELHI IN THE CASE OF MOTOROLA (96 TT J 1) AT PARA NO.173 HAS HELD AS UNDER: ' WE MAY NOW PROCEED TO CONSIDER THE FURTHER QUES AS TO WHETHER THE PAYMENT WAS 'FOR' THE SOFTWARE AS SUCH. IN THIS CONNECTION, IT MUST BE CLARIFIED THAT PAYMENTS FOR THE HARDWARE AND SOFTWARE WERE IN LUMPSUM AND THERE WAS NO SEPARATE CONSIDERATION MENTIONED FOR THE HARDWARE AND SOFTWARE. IT IS THE DEPARTMENT WHICH HAS SPLIT THE CONSOLIDATED PAYMENT INTO FOR HARDWARE AND PAYMENT FOR SOFTWARE. IN OUR OPINION, SINCE THE PARTIES TO THE CONTRACT HAVE NOT AGREED UPON A SEPARATE PRICE FOR THE HARDWARE AND THE SOFTWARE, IT IS NOT OPEN TO I.T. AUTHORITIES TO SPLIT THE SAME AND CONSIDER A PART OF THE PAYMENT FOR SOFTWARE TO BE TREATED AS ROYALTY.' THE MADRAS HIGH COURT IN CASE OF CIT VS. NEYVELI LIGNITE CORPN. 243 ITR 459 AND THE DELHI HIGH COURT IN THE CASE OF CIT VS.MITSUI ENGG. & SHIP BUILDING CO. LTD. 259 ITR 248 HELD THAT LUMPSUM CON SIDERATION CANNOT BE SEGREGATED INTO TWO. 4.4 IN THE INSTANT CASE, THE TRANSACTION IS A COMPOSITE ONE AND NO BIFURCATION BETWEEN LAND COST AND OFFICE COST IS POSSIBLE. NO CLEAR CUT IDENTITY IN RESPECT OF PRICE PAID FOR THE LAND AND OFFICE PREMISE IS VISI BLE IN THE AGREEMENT OF PURCHASE FILED BY THE APPELLANT. 4.5 THE CASE LAWS ON WHICH THE ASSESSING OFFICER HAS RELIED ARE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE INSTANT CASE. IN THE CASE OF ALPS THEATRE THE COST OF THE LAND IS SHOWN SEPARATELY. THE CASE OF CIT VS. FAZALBHOY INVESTMENT CO. (P) LTD. RELATES TO INCOME FROM HOUSE PROPERTY AND IT IS CONCLUDED IN THAT CASE THAT TRANSFER OF PROPERTY ACT APPLIES TO LEASE AND NOT TO LICENCE. CIT VS. VIMAL CHAND GOLECHA RELATES TO CAPITAL GAIN AND IN THAT CAS E ALSO THE ASSESSEE HAS PURCHASED THE LAND SEPARATELY AND BUNGLOW WAS BUILT AT A LATER DATE. THE CASE OF ITO VS. VIKAS BAHAL PERTAINS TO CAPITAL GAINS AND TRANSFER OF LAND TO DEVELOPERS UNDER DEVELOPMENT AGREEMENT. THUS, FROM ABOVE FACTS, IT IS AMPLY CLE AR THAT THE INSTANT CASE IS CLEARLY DISTINGUISHABLE FROM THE CASES CITED BY THE ASSESSING OFFICER. 4.6 IN VIEW OF THE AFORESAID DISCUSSION AND ALSO FOLLOWING THE HON'BLE SUPREME COURT IN THE CASE OF MUGNEERAM BANGUR & CO.(SUPRA) AND DECISION OF SPECIAL B ENCH, ITAT, DELHI IN THE CASE OF MOTOROLA(SUPRA), I AGREE WITH THE CONTENTION OF THE APPELLANT THAT OFFICE PREMISES IS A COMPOSITE PURCHASE AND NO ARTIFICIAL SEGREGATION OF COST OF LAND AND PREMISE CAN BE MADE. IN THE EVENT APPEAL IS ALLOWED RESTRICTING TH E DEPRECIATION ASSETS HAS B EE N USED FOR LESS TH AN 6 MONTHS . ITA NO. 3524 / 1 2 4 5. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT THE AO HAS DECLINED ASSESSEES CLAIM OF DEPREC IATION ON THE FLAT PURCHASED BY ASSUMING THAT SUBSTANTIAL PART OF THE SALE CONSTRUCTION OF THE FLAT WAS IN RESPECT OF THE LAND. HOWEVER, THERE WAS A COMPOSITE DEAL OF PURCHASE OF FLAT AND THERE WAS NO BIFURCATION OF COST OF LAND AND SUPERSTRUCTURE THEREON IN THE SALE DEED . ACCORDINGLY, AFTER RELYING ON VARIOUS DECISION OF THE HONBLE HIGH COURTS AS WELL AS HONBLE SUPREME COURT AND EVEN AFTER DISCUSSING THE CASE LAWS RELIED ON BY THE AO, THE CIT(A) HAS DIRECTED THE AO TO ALLOW THE CLAIM OF DEPRECIATION ON THE FL AT SO PURCHASED. 7. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING CLAIM OF DEPRECIATION ON THE AMOUNT OF FLATS SO DEBITED IN THE BALANCE SHEET. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . O RDER PRONOUNCED IN THE O PEN COURT ON THIS 22 /06 / 201 5 . SD/ - SD/ - ( ) ( SANJAY GARG ) ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 22 /06 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. ITA NO. 3524 / 1 2 5 / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//