2019 (6) TMI 1208 - AT - Income Tax

Disallowance of depreciation on galas as given on rent - assessee earned rental income by letting out certain office premises against which statutory deduction allowed u/s 24 - HELD THAT - The assessee has earned rental income from certain office premises which forms part of the block of assets. The rental income from these premises has been assessed under the head Income from House Property against which statutory deduction u/s 24 has already been allowed to the assessee. The assessee is not disputing the disallowance of office maintenance charges claimed against the premises as business expenditure but disputing the claim of depreciation against office premises. The perusal of block of asset reveal that the assessee is in possession of various Galas 12 to be precise out of which few galas have been let out during the year and few galas have been used by the assessee for its own use. The depreciation on galas used for the business purposes is not under dispute. However depreciation on galas as given on rent amount to 4.34 Lacs which have been disallowed by Ld. AO. Against the rental income the assessee has already been allowed statutory deduction u/s 24 and this depreciation is being claimed as business expenditure over and above the statutory deduction which has been allowed u/s 24. The primary condition as envisaged by Section 32 to claim the depreciation is that the assets should be used for the purposes of assessee s business which has remained unfulfilled for galas given on rent. Therefore we are unable to concur with the stand of Ld. AR in this regard. - Decided against assessee.

Summary

Issues:
1. Disallowance of depreciation on office premises let out by the assessee.
2. Eligibility of the assessee to claim depreciation on premises let out during the assessment year.

Issue 1: Disallowance of Depreciation on Office Premises:
The appeal contested the order of the Ld. Commissioner of Income-Tax (Appeals) confirming the disallowance of depreciation amounting to ?4,34,854 on office premises. The appellant argued that depreciation should have been allowed as the office premises were part of the block of assets, despite being let out during the year. The assessment for the impugned Assessment Year (AY) 2013-14 was framed by the Ld. Deputy Commissioner of Income Tax, determining the assessee's income at ?119.93 Lacs after adjustments. The appellant, a resident individual engaged in the financial service sector as a Share Broker, e-filed a return with an income of ?50.15 Lacs.

Issue 2: Eligibility to Claim Depreciation on Let Out Premises:
The main subject of the appeal was to determine if the assessee could claim depreciation on premises let out during the AY and earning rental income assessed as Income from House Property. The assessee claimed office maintenance charges and depreciation against these premises as business expenditure, which was disallowed by the Ld. AO. The first appellate authority upheld the disallowance, stating that once an asset forms part of the block of assets and is let out, depreciation cannot be claimed along with standard deduction u/s 24. The Ld. CIT(A) observed that allowing depreciation on let-out premises after standard deduction would amount to double deduction, which is impermissible under the law. The tribunal concurred with this view, noting that the assets should be used for the assessee's business to claim depreciation, a condition unmet for the let-out premises.

In conclusion, the tribunal dismissed the appeal, upholding the disallowance of depreciation on the office premises let out by the assessee. The decision was based on the premise that the assets should be used for the assessee's business to claim depreciation, which was not the case for the premises generating rental income assessed under the head Income from House Property. The tribunal distinguished previous case laws cited by the appellant, emphasizing the factual differences. The judgment highlighted that allowing depreciation on let-out premises after standard deduction would result in double deduction, contrary to the law.