2012 (12) TMI 200 - AT - Income Tax

Depreciation on the rented building Held that - Area of self occupation and let out has not been specified. CIT (A) had only directed to allow depreciation on the W.D.V. of the rented portion of the building. Since assessee had not filed all rent agreements which specify the area - assessee shall submit all the necessary agreements and also the evidences to justify the claim of the self occupied area of the building - matter restored to the file of the Assessing Officer Addition on account of depreciation on mould and dies - alleged that the claim of depreciation was made on the moulds and dies. These assets were leased out. The income from letting out of these moulds and dies is to be assessed as income from other sources Held that - Whether the rental income received by the assessee of Rs.12 lacs pertains to the rental of moulds and dies. To whom these assets were let out - All these facts are necessary to ascertain the correct nature of the income and only then the claim of depreciation on these assets could be entertained. Whether the depreciation is to be allowed for passive use or it has to be allowed under section 57(ii) of the Income-tax Act. Under which head of income the rental income received on account of letting out moulds and dies is to be assessed matter remanded to the file of Assessing Officer Addition of expenses incurred on exempted income on the ground that not allowable under section 14A of the Income-tax Act - issue regarding expenditure under the head building repairs, rates and taxes and insurance had not been thrashed out properly Held that - Some of the buildings or parts thereof were let out and the income from the same is being assessed as income from house property, on which deductions are allowed as per sections 23 & 24 of the Income-tax Act - facts need clarity about the expenses to which these expenses pertain matter remanded to the file of Assessing Officer - appeal of the revenue is allowed for statistical purposes.

Summary

Issues:
1. Deletion of addition of depreciation under section 22 of the Income-tax Act, 1961.
2. Deletion of addition of depreciation on moulds and dies.
3. Deletion of addition of expenses, including those not allowable under section 14A of the Income-tax Act.
4. Deletion of addition of expenses disallowed in computation of total income.

Issue 1: Deletion of Addition of Depreciation under Section 22 of the Income-tax Act, 1961:
The appeal by the revenue challenges the deletion of the addition of depreciation by the Assessing Officer. The CIT (A) upheld the disallowance of depreciation on the whole of the properties but directed to allow depreciation on the W.D.V. of the rented portion of the building. However, the area of self-occupation and let-out properties was not specified. As a result, the matter was restored to the file of the Assessing Officer for further examination. The CIT (A) emphasized the need for the submission of all necessary agreements and evidence to justify the claim of self-occupied area.

Issue 2: Deletion of Addition of Depreciation on Moulds and Dies:
The revenue contested the deletion of the addition of depreciation on moulds and dies by the CIT (A). The Assessing Officer had disallowed the depreciation due to the absence of manufacturing activities. The matter was deemed unclear as crucial details such as the nature of rental income received and agreements related to the assets were not provided. The issue was remanded to the Assessing Officer for a fresh decision on whether depreciation should be allowed for passive use or under section 57(ii) of the Income-tax Act.

Issue 3: Deletion of Addition of Expenses Not Allowable under Section 14A:
The issue involved the deletion of an addition of expenses, including those not allowable under section 14A of the Income-tax Act. The Assessing Officer's computation of income from net profit as per the P&L account was questioned. The matter was deemed to lack clarity regarding expenses related to building repairs, rates and taxes, and insurance. The Assessing Officer was directed to reconsider these expenses and their relevance to self-occupied properties for business purposes.

Issue 4: Deletion of Addition of Expenses Disallowed in Computation of Total Income:
The final issue pertained to the deletion of expenses disallowed in the computation of total income. The Assessing Officer's approach in calculating income from net profit and disregarding returned income was challenged. The issue required further verification and clarification, leading to its restoration to the file of the Assessing Officer for a fresh decision.

In conclusion, the judgment involved a detailed analysis of various issues related to depreciation, expenses, and income categorization under the Income-tax Act, 1961. The decisions highlighted the importance of providing clear and complete documentation to support claims and emphasized the need for precise assessment of income and expenses for accurate tax computation.