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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 ..... gned disallowance is that the assessee ought to have amortized the same u/s.35 - HELD THAT:- We find no merit in the instant contention per se in view of the fact that neither there is any specific provision in the Act nor is any CBDT circular to this effect. Hon'ble apex court s recent decision in Taparia Tools Ltd. [ 2015 (3) TMI 853 - SUPREME COURT] rather holds that the claim of revenue expenditure is not to be denied merely because the same could also be split over a period of years. Coupled with this, this tribunal s Special Bench in ACIT Vs. Progressive Constructions Ltd. [ 2017 (3) TMI 1167 - ITAT HYDERABAD] decides the issue in assessee s favour that a right to operate any asset forms an intangible asset u/s.32(1)(ii) of the Act entitled for depreciation. Assessee in the instant case has taken land on lease to set up an SEZ and therefore, the same ought not to be taken as eligible for depreciation - We find no substance in the instant last plea as well as the assessee has claimed the impugned relief qua lease premium of Rs.5,85,30,062/- than regarding acquisition of the land along with its title. We therefore distinguish the Revenue s arguments based on case law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sole reason that the then taxpayer had failed to file corresponding Form-3CL issued by the prescribed authority i.e., Department of Scientific and Industrial Research DSIR . Case file indicates that the assessee has filed its additional evidence petition dt.08-10-2020 placing on record the DSIR s approval in Form- 3CI, dt.28-11-2017 whereas the CIT(A) s order under challenge is dt.30-10-2017. We therefore deem it appropriate to restore the instant former issue back to the Assessing Officer to be examined afresh in light of the DSIR approval dt.28-11-2017 issued in assessee s case in AYs.2014-15 to 2016-17; as the case may be. Ordered accordingly. 4. Next comes the latter issue of disallowance of depreciation of Rs.86,06,701/-. The CIT(A) s detailed discussion to this effect reads as under: 5. Disallowance of Rs.86,06,701/- of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to these rules on the written down value of such block of assets as are used for the purposes of the business or profession of the assessee at any time during the previous year. Assessment Proceedings: The assessing officer after verifying the facts, stated in the assessment order that the lease premium paid is a capital expenditure and that' the appellant is eligible for depreciation. However, the learned assessing officer concluded that the lease premium paid is nothing but a rent for the premises and it is neither a right nor an intangible asset and same shall be amortized for a period of 33 years starting from the AY 2011-12. The assessing officer is not correct in treating the premium as rent without considering the fact that the appellant pays ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umal Music Centre the facts are entirely different. 5.3.2 The Land is a non-depreciable Asset. So Depreciation will not be allowed on any leased right on land as per the provisions of the Act. Further, in Income Tax Act, in case of Lease, since ownership has not transferred, depreciation on Depreciable asset will be available to the lessor. Since Land is not a depreciable asset depreciation will not be available. 5.3.3 One of the arguments of the appellant is that the leasehold rights fall 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital expenditure incurred by him by way of renovation, extension or improvement to the building and not on the construction carried out by the owner, the cost of which was subsequently reimbursed by the lessee . 5. The Revenue s vehement contention in support of the impugned disallowance is that the assessee ought to have amortized the same u/s.35 of the Act. We find no merit in the instant contention per se in view of the fact that neither there is any specific provision in the Act nor is any CBDT circular to this effect. Hon'ble apex court s recent decision in Taparia Tools Ltd. Vs. JCIT (2015) [372 ITR 605] (SC) rather holds that the claim of revenue expenditure is not to be denied merely because the same could also be split over a period of years. Coupled with this, this tribunal s Special Bench in ACIT Vs. Progressive Constructions Ltd., (2018) 92 taxmann.com 104 (Hyd) decides the issue in assessee s favour that a right to operate any asset forms an intangible asset u/s.32(1)(ii) of the Act entitled for depreciation. 6. Learned departmental representative at this stage sought to highlight the fact that the assessee in the instant case has taken land on lease t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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