2021 (9) TMI 681 - AT - Income Tax

Disallowance of deduction claimed towards depreciation, repairs, maintenance and rates and tax - HELD THAT - Property on which the assessee has claimed depreciation is different from the properties on which the assessee has received rental income. It is observed, the properties from which the assessee had declared rental income are situated at Ahmedabad and Coimbatore. Whereas, depreciation has been claimed in respect of a property at 3rd and 4th Floor V.V. Gandhi Marg, Mumbai, which according to the assessee has exclusively been used for its business - the depreciation claimed by the assessee on the aforesaid property has been allowed in earlier as well as subsequent assessment years. That being the case, we allow assessee s claim of depreciation. As regards repairs and maintenance expenses expenditure has been incurred in respect of the property at Dr. V.V. Gandhi Marg, Mumbai used for assessee s business. Thus, it is not in respect of the properties from which the assessee has offered rental income. Even, the rates and taxes are in respect of property other than the property from which assessee has offered rental income. Thus, in our view, the departmental authorities have disallowed the assessee s claim of deduction under misconception of facts - we are also of the view that the allegation of the departmental authorities that the assessee has not furnished details/evidences in support of its claim that such expenditure relate to property which have been rented out, is incorrect. In view of the aforesaid, we are inclined to delete the disallowance - Decided in favour of assessee.

Summary

Issues:
Challenge to disallowance of deduction claimed towards depreciation, repairs, maintenance, and rates and tax.

Analysis:
The appellant, a resident company engaged in investment and financing, contested the disallowance of deductions totaling ?6,71,808 for the assessment year 2008-09. The initial assessment was completed under section 143(3) of the Income Tax Act, 1961, with subsequent appeals leading to the current dispute. The Tribunal had previously granted relief on some issues and remanded others to the assessing officer. The appellant's appeal before the Commissioner (Appeals) resulted in partial relief, with the disallowance of ?6,71,808 related to rental income expenses being sustained.

The appellant argued that the depreciation claimed was for a property used for business purposes, with evidence provided for repairs, maintenance, and rates and taxes expenses. The Departmental Representative contended that no evidence was furnished to support the claimed expenditures. The Tribunal examined the records and found that the properties for which depreciation was claimed were distinct from those generating rental income. It noted that the appellant had substantiated the expenses for the property used for business, not rental properties. Therefore, the disallowance was deemed unjustified, and the claim for depreciation and other expenses was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the appeal and overturning the disallowance of deductions. The judgment emphasized the distinction between properties used for business and those generating rental income, highlighting the necessity of supporting evidence for claimed expenses. The decision underscored the importance of factual accuracy in assessing deductions under the Income Tax Act, ultimately resulting in the appellant's success in challenging the disallowance.