M/S SIAC SKH INDIA CAB MANUFATURING PVT. LTD.,NEW DELHI vs. ACIT, NEW DELHI

Briefly, the facts are, assessee is a resident company. For the assessment year under dispute, assessee filed its return of income on 30.09.2012, declaring loss of Rs.12,70,67,656. In course of assessment proceedings, the assessing officer noticed that the assessee has claimed depreciation of Rs.90,85,103 on factory building and office premises. After calling for and examining the details, assessing officer observed that the competent authority has allowed occupancy of part of the premises in May, 2014. Further, assessee itself has shown that the commercial operation of the company had begun w.e.f.

Assessee contested the part disallowance of depreciation before learned Commissioner (Appeals). However, agreeing with the assessing officer that the factory building and office premises was not fully ready to be put to use, learned Commissioner (Appeals) confirmed the disallowance made by the assessing officer.

Before us, learned counsel for the assessee submitted that assessee has constructed the factory building and office premises on an area covering 25% of the land. Drawing our attention to the certificate issued by the Directorate of Town Planning and Country Planning, Haryana, a copy of which is at page 16 of the paper book, learned counsel for the assessee submitted, as on the date of issuance of occupancy certificate on 14.05.2014, the construction of factory building and office premises was complete. Therefore, there is no question of issuance of partial occupation certificate. He submitted, since the factory building and office premises was not put to use for business for a period exceeding six months during the year, the assessee itself has disallowed 50% out of the total amount of depreciation. Whereas, the assessing officer has again disallowed 50% resulting in double disallowance.

Learned Departmental Representative submitted, the assessing officer may be directed to examine assessee’s claim and allow depreciation accordingly.

We have considered rival submissions and perused the material on record. On perusing the assessment order and the order of learned Commissioner (Appeals), we are of the opinion that both of them have not properly appreciated the factual position. From the occupation certificate dated 14.05.2014 issued by the Director of Town and Country Planning, it is evident that by May, 2014, the construction of factory building and office premises was complete and ready for occupation. Therefore, the observation of the assessing officer that the competent authority has issued a part occupation certificate is incorrect. Further, the departmental authorities have not correctly examined assessee’s claim that it has disallowed 50% of the total amount of depreciation, since, the assets were used for less than six months. In case, the aforesaid claim of the assessee is correct, no further disallowance can be made out of the depreciation claimed by the assessee.

In view of the aforesaid, we direct the assessing officer to factually examine assessee’s claim that it has claimed 50% of the total depreciation and accordingly allow assessee’s claim of deduction. The ground is allowed subject to factual verification by the assessing officer.

In the result, the appeal is allowed as indicated above.