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TMI Blog2021 (8) TMI 1328X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds in the instant appeal: "1) The order of the Learned Commissioner (Appeals) is contrary to the facts and law on the points in dispute. 2) The learned Commissioner (Appeals) erred in denying weighted deduction U/s 35(2AB) amounting to Rs.1,45,67,871 towards Expenditure incurred for Research and Development on the ground of Non furnishing of Certificate in Form 3CL from Department of Scientific and Industrial Research (DSIR). 3) The learned Commissioner (Appeals) having noted that the assessee has furnished the relevant application to Department of Scientific and Industrial Research (DSIR) before completion of assessment, should have allowed the deduction as the relevant expenditure was actually incurred during the relevant pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f depreciation claimed on Lease Hold Rights. 5.1 The Facts: During the FY 2010-11 the appellant has entered into a Lease Deed with APIIC (Andhra Pradesh Industrial Infrastructure Corporation Ltd) for acquiring leasehold rights on land to setup a unit in SEZ. As per the Lease Deed, the appellant is given 16.47 (11.97+4.50) acres of Land on lease for which an amount of Rs.5,85,30,062/- (Rs.4,18,95,000 - 11.97 acres Rs.57,50,000 - 4.50 acres + Rs.8,85,062 - Stamp and Registration Charges) shall be paid as a one-time premium to acquire the leasehold rights of the land. In addition to the above lease premium, an amount equal to 2% of the Lease Premium i.e. Rs.11,52,900/ -shall be paid as Annual Lease Rentals as per Para 1(d) of the Lease Deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed:- a. In the case of any block of assets, such percentage on the written down value thereof as may be prescribed b. In the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed As per Rule 5(1) of Income tax rules 1962 "Subject to the provisions of sub-rule (2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any blo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is to be amortized over a period of lease. Considering the terms of the lease deed, the entire lease premium is paid before entering into the agreement which itself showed that the payment of lease premium was a condition precedent for acquiring the leasehold rights. It cannot be treated as a rent as it is a onetime premium and additional annual rentals are also being discharged by the appellant. Considering the entire deed as a whole, such premium paid is nothing but a price for obtaining the leasehold rights and in view of the same, the premium in question is capital in nature and not revenue expenditure. The lump sum premium paid is a commercial right acquired by the appellant to carry on its business activities. Commercial rights ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the term and scope of expression 'intangible asset' as defined under the provisions of sec. 32(1)(ii) of the Act. I have to adjudicate whether leasehold rights partake character of land or intangible asset. Intangible asset has 'been defined in the section 32(1)(ii) of the Act. The term 'intangible assets' has been defined being know-how, patents, copy rights, trade marks, license, franchises or any other business or commercial rights of similar nature. Obviously, leasehold rights on land do not fall in the category of above categories. It does not fall even in residuary category of any other business or commercial rights of similar nature. Because the term 'rights of similar nature' qualifies that even to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 79 taxmann.com 375 (SC)/[2017] 247 Taxman 12 (SC)/[2017] 392 ITR 628 (SC) /[2017] 294 CTR 25 (SC) held that since the assessee (lessee) had not become the owner of the immovable property in question, depreciation could not be allowed to the taxpayer as per section 32 of the Income-tax Act, 1961. The title in the immovable property could not be passed from lessor when its value was more than INR 100, unless it was executed on a proper stamp paper and was duly registered with. the sub-registrar. In the absence thereof the taxpayer could not be said to be the owner, of the immovable property and depreciation could not be allowed in such circumstances. On the alternative argument of claiming depreciation under Explanation 1 to section 32, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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