2017 (5) TMI 1479 - HC - Income Tax

Depreciation on DLF Centre which is partly self occupied by the Assessee - whether asset can be said to be stock in trade? - Held that - It was clarified by Mr Ajay Vohra, learned Senior counsel appearing for the Assessee, that for the purpose of income tax when an audit report is presented by the Petitioner, the said asset is shown as part of a block of assets on which depreciation is claimed. According to him, therefore the treatment of the said asset for the purpose of accounts and for the purpose of calculating the tax is different and this is an accepted practice under the income tax law. The Respondent will file an affidavit clarifying the above position within two weeks with an advance copy to the counsel for the Revenue who is permitted to respond thereto before the next date of hearing. Rent receipt from DLF Centre which also includes air conditioning charges - Income from House property or - income from other sources - Held that - The position that Assessee is not claiming the depreciation on the airconditioning plant to the extent it is used for letting out the air-conditioned building. Accordingly question (v) is answered in favour of the Assessee and against the Revenue by holding that the rent receipt from DLF Centre which also includes air conditioning charges is Income from House property .

Summary

Issues:
1. Correctness of accounting method for income detection
2. Accounting for sale price of properties at possession time
3. Cost reworking for land in a complex
4. Depreciation on self-occupied DLF Centre
5. Treatment of rent receipts from DLF Centre

Analysis:
1. The first three issues were resolved in favor of the Assessee in a previous order for AY 1994-1995. The questions related to the correctness of the accounting method, sale price accounting, and land cost reworking were decided against the Revenue.

2. Issue four pertains to the Assessing Officer's denial of depreciation on the partly self-occupied DLF Centre. The debate centered on whether the asset can be considered stock in trade and thus eligible for depreciation. The Assessee's counsel highlighted the distinction between accounting treatment and tax calculation, indicating that depreciation was claimed as per audit reports.

3. For issue five, the question revolved around categorizing rent receipts from DLF Centre, including air conditioning charges, as 'Income from House Property' or 'income from other sources.' The court ruled in favor of the Assessee, stating that the letting out was for the space in the air-conditioned building, not the air conditioning equipment separately. This decision was based on the interpretation of Section 52(2)(iii) of the Act.

4. The court considered arguments from both sides regarding the depreciation claim on the air conditioning plant. The clarification provided by the CIT (A) for AY 1996-97 highlighted that the Assessee did not claim depreciation on the air conditioning plant used for letting out the building. Consequently, the court reaffirmed that the rent receipts from DLF Centre, inclusive of air conditioning charges, should be treated as 'Income from House Property.'

5. The judgment concluded with a direction to list for further consideration on a specific date to address any pending questions. The detailed analysis of each issue showcased the court's meticulous examination of the facts and legal provisions to arrive at a just decision.