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2013 (12) TMI 1009 - AT - Income TaxDepreciation on tenancy rights - Held that - There is a vast difference between know-how, patents, copyrights, trade marks, licences, franchises etc. on one hand and tenancy rights on the other - Tenancy rights cannot be construed as intangible assets falling within the meaning of Explanation 3 to section 32(1) - The tenancy right cannot be treated as an intangible asset, there is no question of allowing depreciation on it - Decided against assessee. Book profits u/s 115JB - Held that - The amount disallowable u/s 14A is always part of the expenses specifically debited to the profit and loss account - It is axiomatic that unless any expenditure is incurred and claimed as deduction, there can be no question of any hypothetical disallowance u/s 14A - The amount disallowable u/s 14A is covered under clause (f) of Explanation (1) to section 115JB(2) - Following M/s. RBK Share Broking Pvt.Ltd. v. ITO 2013 (12) TMI 74 - ITAT MUMBAI - Decided against assessee.
Issues:
1. Denial of depreciation on tenancy rights. 2. Addition to book profit under section 115JB by disallowance under section 14A. Issue 1: Denial of Depreciation on Tenancy Rights The appeal was against the denial of depreciation on tenancy rights for the assessment year 2009-2010. The Assessing Officer rejected the claim based on previous years' decisions. The Tribunal referred to a previous judgment and the definition of "intangible assets" under section 32(1)(ii). The Tribunal emphasized that the term "intangible assets" includes know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature. The Tribunal applied the rule of noscitur a sociis, which means that general words draw meaning from specific words they accompany. It concluded that tenancy rights do not fall under intangible assets eligible for depreciation, as they are not similar to know-how, patents, copyrights, trademarks, licenses, franchises. The judgment of the Hon'ble Supreme Court in a similar case was distinguished, stating that tenancy rights are not akin to intangible assets. Therefore, the appeal on this ground was dismissed. Issue 2: Addition to Book Profit under Section 115JB by Disallowance under Section 14A The second ground of appeal concerned the addition to book profit under section 115JB by disallowance under section 14A. The Assessing Officer computed disallowance under section 14A using rule 8D, which was added to the book profit under section 115JB. The Tribunal analyzed the provisions of section 115JB and section 14A. It noted that section 115JB requires adding back expenditures related to exempt income under clause (f) of Explanation 1. The Tribunal compared the language of section 14A and clause (f) of Explanation 1, emphasizing that any expenditure related to exempt income should be added back. The Tribunal rejected the argument that expenses disallowed under section 14A cannot be traced to the profit and loss account, stating that the provision explicitly covers expenditures related to exempt income. Referring to previous tribunal decisions, the Tribunal upheld the disallowance under section 14A and its addition to book profit under section 115JB. Consequently, the appeal on this ground was dismissed. In conclusion, the Tribunal upheld the decisions of the authorities below on both issues, denying depreciation on tenancy rights and confirming the addition to book profit under section 115JB by disallowance under section 14A. The appeal was dismissed accordingly.
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