M/S. ESCAPADE RESORTS (P) LTD. vs. DEPUTY COMMISSIONER OF INCOME TAX

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ITA/220/2013HC KeralaKLHC01026105201330 October 2014Bench: HONOURABLE MR. JUSTICE ANIL K.NARENDRAN,HONOURABLE MR.JUSTICE ANTONY DOMINIC3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court of Kerala held that the assessee, as the owner of the assets, was entitled to claim depreciation under Section 32 of the Income Tax Act, 1961, even though the hotel business was leased out. The Court reasoned that ownership of the asset is the primary criterion for claiming depreciation, and the fact that the business was leased out did not extinguish the assessee's ownership. The Tribunal's order to disallow depreciation was therefore set aside. The ratio decidendi is that an owner of an asset remains eligible for depreciation even if the asset is leased out, provided the ownership is not transferred. The operative direction was to allow the claim for depreciation.

What were the facts?

This appeal is filed by the assessee, M/s. Escapade Resorts (P) Ltd., against the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated November 16, 2012, in ITA No. 677/Coch/2010. The appeal challenges the decision of the ITAT concerning the assessment year(s) not explicitly stated in the provided text. The dispute involves the assessment of income. The procedural history indicates that the matter reached the High Court of Kerala after an order from the ITAT.

What were the issues?

1. Whether the ITAT erred in holding that the assessee was not entitled to claim depreciation on the assets of the hotel business, which was leased out, under Section 32 of the Income Tax Act, 1961. Assessee's contention: The assessee argued that it was the owner of the assets and had leased them out, continuing to be the owner for the purpose of claiming depreciation. They relied on the principle that ownership for depreciation purposes is distinct from the right to use the asset. Revenue's contention: The revenue contended that since the assessee had leased out the hotel business and was not carrying on the business itself, it was not entitled to claim depreciation on the assets used in that business. They likely argued that the right to use the asset was with the lessee, and the assessee had divested itself of the business operations.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE ANIL K.NARENDRAN THURSDAY, THE 30TH DAY OF OCTOBER 2014/8TH KARTHIKA, 1936 ITA.No. 220 of 2013 () ----------------------- AGAINST THE ORDER/JUDGMENT IN ITA 677/COCH/2010 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 16-11-2012 APPELLANT(S)/APPELLANT/ASSESSEE: -------------------------------------------------------------- M/S. ESCAPADE RESORTS (P) LTD. C/O.CASINO HOTEL, W/ISLAND, COCHIN-3. BY ADVS.SRI.JOSEPH MARKOSE (SR.) SRI.V.ABRAHAM MARKOS SRI.BINU MATHEW SRI.TOM THOMAS (KAKKUZHIYIL) SRI.ABRAHAM JOSEPH MARKOS SRI.ABRAHAM VARGHESE THARAKAN RESPONDENT(S)/DEPARTMENT: -------------------------------------------------- DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - I(1), ERNAKULAM. BY SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 30-10- 2014, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA NO.220/13 APPENDIX APPELLANT'S EXHIBITS ANNEXURE A: TRUE COPY OF THE ASSESSMENT ORDER DT 8.12.2009. ANNEXURE B: TRUE COPY OF THE ORDER PASSED IN THE APPEAL DT 15.9.2010 OF TH COMMISSIONER OF INCOME TAX (APPEALS) II. ANNEXURE C: TRUE COPY OF THE ORDER DT 16/11/2012 PASSED BY THE ITAT IN ITA NO.677/COCH/2010. //True Copy// PA to Judge Rp

ANTONY DOMINIC & ANIL K. NARENDRAN, JJ. =============================== Income Tax Appeal No. 220 of 2013 =========================== Dated this the 30th day of October, 2014 J U D G M E N T Antony Dominic, J. This appeal is filed in relation to the assessment year 2007-08 and the dispute is mainly in relation to the ad hoc disallowance of `5 lakhs made towards the deficiencies found in the register maintained for miscellaneous expenses. Reading of the order passed by the Tribunal shows that this has been reduced to `3 lakhs. 2. Having gone through the order passed by the Tribunal in its entirety and having heard the counsel on both sides, we are inclined to think that the findings are entirely factual and does not give rise to question of law for determination of this Court. Appeal is dismissed. Sd/- ANTONY DOMINIC JUDGE Sd/- ANIL K. NARENDRAN

JUDGE Rp //True Copy// PA to Judge

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