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Facts
The assessee filed an appeal against the order of the CIT(A) which confirmed additions made by the AO on account of depreciation on immovable property. The AO disallowed depreciation claimed on a house property, and also made additions under section 115JB of the Act.
Held
The Tribunal noted that the grounds of appeal were intricately linked and required factual verification. The Tribunal found it appropriate to remand the issue back to the CIT(A) for a fresh examination after providing the assessee with an opportunity to be heard.
Key Issues
Whether the CIT(A) erred in confirming the addition of depreciation on immovable property claimed by the assessee and consequential additions under section 115JB, especially when the assessee claimed no such depreciation was claimed.
Sections Cited
143(3), 154, 115JB
AI-generated summary — verify with the full judgment below
Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to the order u/s. 143(3)/154 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 27.01.2021 as passed by the Income Tax Officer, Ward-42(1)(2), Mumbai for the Assessment Year [A.Y.] 2018-19. P a g e | 2 A.Y. 2015-16 Essay Commercial Resources Private Limited, Mumbai
The Revised grounds of appeal are as below:-
On the facts and under the circumstances of the case, and in law, the Ld. CIT(A) erred in confirming an addition of income amounting to Rs. 7,71,199 on account of depreciation on immovable property ignoring the fact that the Appellant has not claimed deduction of such depreciation in the Return of Income.
On the facts and under the circumstances of the case, and in law, the Learned CIT(A) erred in confirming addition of depreciation on immovable property of Rs. 16,00,401 for the purpose of computing profits under the provisions of section 115JB of the Income Tax Act, 1961(Act) made in consequence of addition of depreciation on immovable property under the normal provisions of the Act.
On the facts and under the circumstances of the case, and in law, the Learned CIT(A) erred in confirming the addition by the Ld. AO on account of depreciation on immovable property at Rs. 16,00,401 under section 115JB of the Act as against addition made under the normal provisions of the Act only to the extent of Rs. 7,71,199. 3. In ground no.1, the assessee has claimed that AO erred in disallowing a sum of Rs. 7,71,199/- on account of depreciation on immovable assets. While passing order under section 143(3) of the Act, he added back a sum of Rs. 7,71,199/-, being claim of depreciation on ground that the same was claimed on the house property. During the appellate proceedings, it was contented that the AO failed to appreciate the fact that the assessee had not claimed such amount as deduction in computation of total income. The assessee submitted that it has claimed depreciation only on plant and machinery and no depreciation has been claimed on the investment property while arriving at total income as per provisions of the Act. Such a disallowance would tantamount to disallowing the same amount twice, thus, leading to double taxation of P a g e | 3 A.Y. 2015-16 Essay Commercial Resources Private Limited, Mumbai the same amount. Thus, the disallowance of Rs. 7,71,199/- ought to be deleted. The ld.CIT(A) observed that from the audit report that assessee had shown the closing value of building as on 31.03.2014 at Rs 2,24,61,2013/- and opening value on 01.04.2014 at Rs 2,33,53,415/- after taking into consideration the amount of depreciation of Rs. 8,92,202/- as on 01.04.2014, Further, depreciation of Rs 7,71,199/- was taken for the year under consideration under the head ‘Building’ of ‘Non-Current Investment’. In view of the same, it could be concluded that depreciation was being claimed on the building and therefore, he did not find any infirmity in the action of AO in adding the amount of Rs. 7,71,199/- on account of depreciation on ground. Hence, the decision of AO was upheld.
In related ground no.2 and 3,also the issue pertains to confirming addition of depreciation on immovable property of Rs. 16,00,401/- for the purpose of computing profits under the provisions of section 115JB of the Act made in consequence of addition of depreciation on immovable property under the normal provisions of the Act which is also the subject matter for adjudication in ground no.1 above. It is submitted that Ld CIT(A) erred in confirming the addition by the Ld. AO on account of depreciation on immovable property at Rs. 16,00,401/- under section 115JB of the Act as against addition made under the P a g e | 4 A.Y. 2015-16 Essay Commercial Resources Private Limited, Mumbai normal provisions of the Act only to the extent of Rs. 7,71,199/-.It is prayed that the addition under section 115JB of the Act being consequential to the addition made under the normal provisions of the Act, where additions under the normal provisions of the Act is not sustained as referred to in Ground 1, the AO may also be directed for deletion of consequential addition of depreciation on immovable property made under section 115 JB of the Act.
In this regard, the ld.AR has pointed out that during the relevant assessment year, in the order passed under section 143(3) of the Act, the AO concluded that the immovable property being residential flat at Bangalore was not utilised for the purpose of the business and accordingly any depreciation calculated on it should not be allowed to be claimed as deduction under the normal provisions of the Act. Thereafter, the Ld. AO disallowed book depreciation as deduction under the normal provisions of the Act which was already disallowed by the assessee while computing income under the provisions of the Act. Further, under the impugned order under section 154, the Ld. AO. disallowed book depreciation on the aforesaid immovable property to the extent of Rs. 16,00,401 (i.e. opening depreciation of Rs. 8,92,202 and depreciation of Rs. 7,71,199 for the relevant year) while computing income under the provisions of MAT. Explanation 1 to section 115JB of P a g e | 5 A.Y. 2015-16 Essay Commercial Resources Private Limited, Mumbai the Act provides for additions and disallowances to be made to the net profit for computing book profits under the provisions of MAT. Further, as per the said explanation, there is no provision to disallow depreciation except to the extent it pertains to revaluation of asset. The assessee submits that the above depreciation does not pertain to revaluation of asset. In view of the above, the book depreciation ought not to have been disallowed for computing profit under the provisions of MAT.
We find that all the above grounds are intricately linked to the issue involving disallowance of depreciation on certain immovable property for the purposes of section 115JB of the Act as also for normal computation of income although the ld.AR has vehemently pointed out that no addition in respect of depreciation on immovable property was warranted since the assessee did not claim any such depreciation. Therefore, the findings in respect of ground no.1 would have consequential effect on these grounds as well. We are of the view that all the above grounds require factual verification of the contentions of the assessee from the records by the authorities below before making any disallowance of depreciation either for the normal or deemed provisions of section 115JB of the Act of the Act.
P a g e | 6 A.Y. 2015-16 Essay Commercial Resources Private Limited, Mumbai
1 Before us, the ld.AR has repeated the claim that no depreciation was claimed under the head building. However, the CIT(A) has referred to its depreciation chart on Non Current Investment whereby the above amount is reflected. We consider it appropriate to remand this issue back to the file of ld.CIT(A) to examine it afresh thoroughly after allowing adequate opportunity of hearing to the assessee to explain the matter qua records and decide the issue in accordance with the provisions of law.
In the result, the appeal is allowed for statistical purposes.
Order pronounced in the open court on 06.08.2025. SANDEEP GOSAIN PRABHASH SHANKAR (न्याययक सदस्य /JUDICIAL MEMBER) (लेखाकार सदस्य/ACCOUNTANT MEMBER)
Place: म ुंबई/Mumbai ददनाुंक /Date 06.08.2025 Lubhna Shaikh / Steno
आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai
P a g e | 7 A.Y. 2015-16 Essay Commercial Resources Private Limited, Mumbai 5. गार्ड फाईल / Guard file.
सत्यावपि प्रवि //// आदेशानुसार/ BY ORDER,
उि/सहायक िंजीकार (Dy./Asstt.