2019 (3) TMI 1983 - AT - Income Tax

Disallowance of depreciation on buildings - scope of rule of consistency - HELD THAT - Revenue Authorities continuously allowed depreciation on building in earlier Assessment Years 2009-10 2010-11 2012-13 2014-15 but specifically change its stand in this particular year as well as in Assessment Year 2013-14 without giving proper reasoning towards the same. Thus following Rule of Consistency Ground No.1 is allowed. Depreciation on building pertaining to rental portion of buildings - HELD THAT - As from the records it can be perused that the assessee purchased the fully constructed building i.e. industrial built up factory and not the land. Therefore bifurcating the value of land by the Registrar does not specify the value of land and building separately. Therefore in light of the decision in case of Oswal Agro Mills Ltd. ( 2010 (12) TMI 947 - DELHI HIGH COURT wherein it is held that it is difficult to maintain the details of each assets separately in respect of the land and building constructions and the same will frustrate the very purpose of the provisions if it is done so. The Hon ble High Court further held that it is also essential to point that the Revenue is not put to any loss by adopting such method and allowing depreciation as the same forms part of the block of assets even when that particular asset is not in use in the relevant Assessment - Ground No.2 is allowed. Disallowance at 10% of Vehicle Maintenance - HELD THAT - The details of expenses were given to the Assessing Officer by the assessee during the assessment proceedings which was not considered by the Assessing Officer as well as CIT(A). Besides that the CIT(A) has enhanced 5% to 10% which is not as per the specific provision prescribed u/s 37(1) of the Act. There is no basis for enhancing the expenses and first of all the expenses were properly explained by the assessee during the assessment proceedings. Therefore we set aside the order of the CIT(A). Ground No.3 is allowed.

Summary

Issues Involved:
1. Disallowance of depreciation on building.
2. Disallowance of vehicle maintenance, vehicle depreciation, and telephone expenses.

Issue 1: Disallowance of Depreciation on Building:
The appellant challenged the disallowance of Rs.5,00,000/- out of depreciation on the building, arguing that the depreciation on land made by the Assessing Officer was unjust. The appellant contended that the value paid was for the industrial built-up factory, not for land separately. The Revenue Authorities had allowed depreciation on the building in previous years, and the change in stance lacked proper reasoning. The Tribunal allowed this ground based on the Rule of Consistency.

Regarding the disallowance of Rs.3,87,595/- out of depreciation on the building, the appellant argued that the building was a separate block of asset and could not be segregated for disallowance. The Tribunal referenced the decision of the Hon'ble Delhi High Court, stating that it is challenging to maintain separate details for land and building constructions. The Tribunal allowed this ground, citing the decision in the case of CIT vs. Oswal Agro Mills Pvt. Ltd.

Issue 2: Disallowance of Vehicle Maintenance, Vehicle Depreciation, and Telephone Expenses:
The appellant contested the enhancement of disallowance from 5% to 10% of vehicle maintenance expenses without proper reasoning. The appellant provided detailed documents to justify the expenses, which were not adequately considered by the Assessing Officer and CIT(A). The Tribunal noted that the CIT(A) had enhanced the disallowance without adhering to the specific provisions under section 37(1) of the Act. As the expenses were properly explained during the assessment proceedings, the Tribunal set aside the CIT(A) order and allowed this ground.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing the importance of consistency in decision-making and adherence to specific provisions of the Income Tax Act.