2012 (10) TMI 509 - AT - Income Tax

Disallowance of depreciation on leased asset - Assessee did not use the auto corners for its business purposes, but leased out the same - Shown the lease income under the head business income and thereby claimed depreciation on the same AO disallow the same on ground that leasing out of assets is not the business of the assessee Held that - As leasing of auto corners by the assessee is not treated as its business then also depreciation is allowable u/s 57(ii). We find that none of the lower authorities has given its finding in respect of allowability of depreciation on auto corners u/s 57(ii). It is not discernible whether the lease rent received by the assessee was assessed under the head business income or under the head income from other sources . In our considered opinion, if the relevant lease rent derived from leasing of auto corners is assessed under the head business income then assessee is eligible for depreciation u/s 32 and in case the said lease rent is assessed under the head income from other sources, then assessee is eligible for depreciation u/s 57(ii). Remand back to AO In favour of assessee TDS u/s 40(a)(ia) - JV was dated 10.6.2008 for commission payment on which TDS deducted and paid to the credit of the Central Government on 5.7.2008 Deduction allowed in A.Y 2009-10 or 2008-09 Held that - As the method of accounting employed is mercantile. Therefore, the expenditure for which liability accrued to the assessee on or before 31.3.2008 is allowable to the assessee in assessment year 2008-09 irrespective of the date of entry made in the books of account. We find that both the lower authorities have not examined as to the date on which such commission became payable by the assesse. Issue remand back to AO

Summary

Issues:
1. Disallowance of depreciation on auto corner leased by the assessee.
2. Disallowance of brokerage and commission.

Analysis:

Issue 1: Disallowance of depreciation on auto corner leased by the assessee
The assessee's appeal contested the disallowance of depreciation on auto corners leased during the year. The Assessing Officer disallowed depreciation as the auto corners were not used for business purposes, relying on a decision of the Hon'ble Allahabad High Court. The CIT(A) upheld this disallowance. The assessee argued that depreciation should be allowed as the assets were part of the 'block of assets,' citing a Delhi High Court decision. The ITAT found that none of the lower authorities had considered the allowability of depreciation under section 57(ii) of the Act. It was observed that if the lease income was assessed under 'business income,' depreciation under section 32 would be allowed; if assessed under 'income from other sources,' depreciation under section 57(ii) would be applicable. The ITAT directed the Assessing Officer to allow depreciation accordingly, setting aside the lower authorities' orders.

Issue 2: Disallowance of brokerage and commission
The Revenue's appeal challenged the deletion of disallowance of brokerage and commission. The Assessing Officer disallowed the deduction as the relevant voucher indicated a date for the assessment year 2009-10, not 2008-09. The CIT(A) allowed the deduction, citing a retrospective amendment extending the TDS payment deadline. The ITAT noted that the liability for commission accrued before 31.3.2008, making it allowable in the assessment year 2008-09. However, both lower authorities had not examined when the commission became payable. The ITAT directed the issue to be sent back to the Assessing Officer for verification and adjudication, allowing both parties an opportunity to present their case. Consequently, the appeals of both the assessee and the Revenue were allowed for statistical purposes.