2023 (11) TMI 803 - AT - Income Tax

Disallowance of depreciation on Lifts - assets given on hire - area given on rent and standard deduction claimed - nexus of claim of depreciation on Fixed Assets used in maintenance business and business of Hiring of assets from which these was income with earning of rental income - Revenue stated that maintenance services provided to tenants were related to the building given on rent by the assessee and assessee has claimed deduction u/s 24(a) @ 30% of rent received and standard deduction in respect of house property income which covers deduction in respect of all repairs, maintenance charges, depreciation charges etc.- HELD THAT - The contention of the Revenue is contrary of facts on record as assessee has not claimed standard deduction @ 30% in respect of maintenance income received and offered to tax under the head 'Business income'. There were two separate agreements for providing maintenance services with tenants. There were of maintenance income and rental income which are totally different and expenses of different business cannot have same ratios and expenses cannot be disallowed simply on the basis of ratio of income of different business. The activity of maintenance and rental income is totally separate and identifiable activity and nothing to do with area given on rent and standard deduction was claimed in respect of rental income and not in respect of maintenance charges which can be verified from the computation - The property was given on Rent and no depreciation on Property was claimed on by assessee. There was no nexus of these maintenances expenses incurred and claimed with earning of rental income. It is a fact on record that in the AY 2013-14 no disallowance has been made on the same issue and the return income has been accepted. Assessment proceedings on similar facts for AY 2011- 12 and AY 2013-14 , AY 2014-15 are completed without making any addition / disallowance in respect of same assessee on same set of facts on this issue which shows that no such disallowances and additions were made in case of same assessee on same facts in earlier as well as later years. Rule of consistency demand that the same should be allowed in the year under consideration as well as there is no change in the facts. Reliance is being placed on the decision rendered in the case of CIT vs. Excel Industries 2013 (10) TMI 324 - SUPREME COURT Wherein it was held that, once having accepted this position, the Assessing Officer cannot change his opinion in immediate next and previous assessment year without there being any change in facts and circumstances. Taking into consideration the action of the Revenue in the case of the assessee for different years , and considering the of judicial pronouncements we hold that no disallowances is called for in this case. Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of Maintenance Expenses
2. Disallowance of Depreciation on Fixed Assets

Summary:

1. Disallowance of Maintenance Expenses:
The assessee, a company engaged in real estate and maintenance services, filed a return declaring a loss of Rs. 23,57,18,238/-. The assessment was completed with an income of Rs. 4,57,03,589/- after making additions and disallowances totaling Rs. 28,14,21,827/-. The CIT(A) provided relief on several additions but confirmed the disallowance of Rs. 7,22,62,040/- related to maintenance expenses. The assessee contended that these expenses were wholly and exclusively incurred for maintenance services, separate from rental income. The Tribunal noted that the assessee had separate maintenance agreements with tenants and that these expenses were related to maintenance income, not rental income. The Tribunal held that no disallowance was warranted as the maintenance income and rental income were separate and identifiable activities. The appeal of the assessee on this ground was allowed.

2. Disallowance of Depreciation on Fixed Assets:
The Revenue appealed against the CIT(A)'s decision to allow depreciation on fixed assets other than lifts. The Revenue argued that these assets were part of the building given on rent, and the assessee had already claimed a 30% deduction under Section 24. The Tribunal found that the assessee had claimed depreciation on assets used for maintenance and hire, which were offered to tax under "Business Income." The Tribunal noted that the AO's disallowance of depreciation based on the ratio of maintenance income to total income was erroneous. The Tribunal emphasized that the assessee's activities of rental, maintenance, and hiring of assets were separate and identifiable. The Tribunal directed the AO to compute the allowance as per the CIT(A)'s directions and dismissed the Revenue's appeal.

Conclusion:
In conclusion, the Tribunal allowed the assessee's appeal regarding the disallowance of maintenance expenses and dismissed the Revenue's appeal concerning the disallowance of depreciation on fixed assets. The Tribunal emphasized the separation of maintenance and rental activities and the consistency in the assessee's treatment of these expenses in previous years.