2018 (12) TMI 106 - AT - Income Tax

Disallowance of depreciation in respect of property acquired by the assessee - building was not put to use during the year - date on possession of property received - Held that - From the record, we found that the assessee had purchased the office premises. The said premise was handed over by the builder to the assessee on 29/6/2011. The objection raised by the AO that the possession letter dated 29/6/2011 refers to the registered document dated 6/7/2011 is only a technical issue. The possession was handed over on 29/6/2011 and thereafter the letter was issued by the builder by referring to the registered document. Besides this the assessee has provided various other documents in the form of maintenance bills, amenities bill, shifting of files, parking space letter, computer installation report, registration with government authorities, etc. These documents are acknowledged by third party. The documents have not been doubted by the AO. We also found that the assessee had applied to TATA power and the assessee has provided bill for January and February 2012 to the AO. The assessee has provided the computer installation and - testing report and also the certificate from the Deputy Director of industries to prove that the assessee had commenced business from the said premises on 1st August 2011. Thus we observe that assessee has beyond doubt proved that the assessee was the owner of the office premises and had used the said premises during the previous year from 1/8/2011. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of depreciation in respect of property acquired by the assessee.
2. Disallowance made under section 14A.

Analysis:
1. Disallowance of Depreciation:
- The Revenue appealed against the deletion of disallowance of depreciation by the CIT(A).
- The AO disallowed depreciation as the building was not put to use during the year.
- The AR of the assessee provided various documents to support the claim of possession and use of the property.
- CIT(A) deleted the disallowance after considering all documents and explanations provided.
- CIT(A) found that the possession of the property was with the appellant firm during the relevant year.
- The AO's objections regarding possession letter and electricity bills were addressed by the appellant with supporting evidence.
- The CIT(A) concluded that the appellant was in possession of the property and used it for business purposes, justifying the depreciation claim.
- The ITAT upheld CIT(A)'s decision, stating that the appellant had proved ownership and use of the property for business, making it eligible for depreciation.

2. Disallowance under Section 14A:
- The assessee's cross objection was against the disallowance made under section 14A.
- The AO disallowed the amount under Rule 8D 2(ii) for investing interest-bearing funds for earning exempt income.
- The AR argued that surplus funds were invested to ensure regular payment of salaries to the workforce.
- The ITAT, following relevant case laws, found no merit in the disallowance as the investments were made from the assessee's surplus funds.
- The Cross Objection filed by the assessee was allowed, overturning the disallowance made under section 14A.

In conclusion, the ITAT Mumbai upheld the CIT(A)'s decision to delete the disallowance of depreciation, as the appellant had demonstrated possession and use of the property for business purposes. Additionally, the ITAT allowed the Cross Objection filed by the assessee, overturning the disallowance made under section 14A due to investments made from surplus funds.