2013 (5) TMI 254 - AT - Income Tax

Depreciation on assets used in providing services denied - as per CIT(A) appellant cannot claim depreciation on the same infrastructural facilities on which it has already claimed deduction u/s 24 - Held that - The loss returned by the assessee includes claim of depreciation which depreciation being less than 30% was claimed against 30% statutorily allowable u/s 24(a) would therefore lead to double deduction. Therefore no infirmity in the order of the CIT(A). Licence fees - income from house property v/s income from other source - CIT(A) held the same to be computed under the head income from house property - Held that - No infirmity in the order of the CIT(A) for the simple reason that the assessee himself had bifurcated the income to be shown as income as licencee and income from house property. It was the case that on the basis of facts and circumstances the assets have been put to use or in other words whether it can be allocated to be claimed as income from house property, in so far as, as per the contention of the assessee also providing facilities such as cable, telephone, water which the assessee proposes to hold as assets being put to use for the purpose of rendering income cannot be the end of earnings from its assets, in so far as, CIT(A) rightly considered that section 24(1) provides for claiming of such type of expenditure repairs and maintenance which repairs and maintenance are basically for claiming of depreciation without having actually incurred are in line with the proposition that the assessee cannot claim depreciation after having put them to use. Appeal of the revenue dismissed.

Summary

Issues:
1. Depreciation on assets used in providing services.
2. Treatment of license fees as income from house property instead of income from other source.

Depreciation on assets used in providing services:
The case involved appeals by both the Revenue and the assessee regarding the order of the ld. CIT(A) for Assessment Year 2005-06. The assessee, engaged in providing infrastructure services for townships, had filed a return of income showing a loss. The AO treated rent received as license fee as income from other sources instead of house property income and disallowed certain deductions. The CIT(A) considered the license fee as income from house property and service charges as business income. However, the claim for depreciation on assets used in providing services was disallowed. The CIT(A) upheld the disallowance, stating that as the appellant had already claimed deductions for repairs and maintenance, depreciation on the same infrastructural facilities could not be claimed. The Tribunal found no infirmity in the CIT(A)'s order, noting that the assets were used for generating income from house property and the claim of depreciation would lead to double deduction. Therefore, the appeals on this issue were dismissed.

Treatment of license fees as income from house property:
The issue of treating license fees as income from house property instead of income from other sources was also addressed. The CIT(A) directed the assessing officer to assess the license fees from open land with common facilities as income from house property based on the principle of consistency. The Tribunal upheld the CIT(A)'s decision, emphasizing that the assets were put to use for generating income and should be considered as part of earning income from house property. The license fees and service charges were deemed to be part of the income from house property, not income from other sources. The appeals by both parties were dismissed, affirming the treatment of license fees as income from house property.

In conclusion, the Tribunal upheld the CIT(A)'s order on both issues, dismissing the appeals by the Revenue and the assessee. The treatment of license fees as income from house property and the disallowance of depreciation on assets used in providing services were found to be appropriate under the provisions of the Income Tax Act.