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Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI AMARJIT SINGH & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2014-15. The appeal is directed against the order passed by the Pr. Commissioner of Income Tax-4 Mumbai (in short ‘Pr. CIT’) u/s 263 of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
filed by the assessee read as under:
1. The learned CIT erred in revising u/s 263 the assessment order passed u/s. 143(3) dt. 14/12/2016 with respect to the issue of claim of depreciation on tenancy rights without appreciating that the said assessment order was neither erroneous nor prejudicial to the interest of the revenue and hence the order of revision is bad in law.
2. The learned CIT failed to appreciate that on the issue of depreciation on tenancy rights two possible views exist and thus when two views are possible than the assessment order cannot be termed as erroneous and prejudicial to the interest of the revenue and hence the order of revision is bad in law.
3. The learned CIT failed to appreciate that assessee had furnished all details pertaining to the issue of depreciation on tenancy rights during the course of assessment proceedings and the Assessing Officer had allowed the claim after application of mind and thus the assessment order was neither erroneous nor prejudicial to the interest of the revenue hence the order of revision is bad in law.
4. The learned CIT failed to appreciate that in the facts of the present case tenancy rights fell within the ambit of the expression "any other business or commercial rights of similar nature" and thus was entitled to depreciation u/s. 32 and hence the order of revision is bad in law.
5. The learned CIT erred in deciding the issue of depreciation on tenancy rights on merits though he held that the said issue was not decided by the Assessing officer while passing the assessment order and hence the order of revision is bad in law.
6. Without prejudice to the above, the learned CIT has no jurisdiction to decide the issue on merit in revision jurisdiction by applying the wrong principle of law and relying on the case laws which are not applicable to the facts of the appellant.
The Ld. counsel for the assessee submits that there has been a delay of 177 days in filing this appeal before the Tribunal against the order dated 06.09.2018 passed by the Pr. CIT u/s 263 of the Act. It is stated by him that Shri Mahesh Patankar, Senior Manager, Taxation was handling the accounts and tax litigation and he appeared before the Pr. CIT in proceedings u/s 263 of the Act ; on 11.09.2018 Smt. Snehal Pokale, Accounts Executive had received the impugned order and handed over the same to Mr. Patankar on the same day ; during that time it was the period for completing the tax audit and then filing the income tax return of the whole group ; Shri Patankar, due to work load was totally engrossed in the tax audit and filing of income tax return till 31.10.2018 ; the last day for filing appeal was 10.11.2018 and as the appeal was filed on 06.05.2019 there is a delay of 177 days in filing the appeal. Narrating the above, the Ld. counsel drew our attention to the affidavit filed by the Director Mr. Arif Fazlani and Senior Manager Taxation Mr. Mahesh Patankar. Relying on the judgment of the Hon’ble Supreme Court in the case of N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123 and Collector, Land Acquisition v. Katiji 167 ITR 471 (SC), it is explained by him that the expression ‘sufficient cause’ must receive a liberal construction so as to advance substantial justice and generally delays in preferring the appeals are required to be condoned in interest of justice. On the other hand, the Ld. Departmental Representative (DR) submits that there is no reason to condone the delay of 177 days in the present appeal. We have heard the rival submissions and perused the relevant materials on record. We find that the basis on which the Pr. CIT has passed the order u/s 263 in the impugned assessment year was very much there for the immediate previous assessment year 2013-14. On merits the issue reached the Tribunal. We find that the ITAT ‘D’ Bench, Mumbai (ITA No. 3495/Mum/2018) vide order dated 03.01.2019 has allowed the assessee’s appeal. Therefore, keeping in mind the ratio laid down in Katiji (supra) by the Hon’ble Supreme Court that “when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right, injustice being done because of non-deliberate delay”, we condone the delay of 177 days in the instant appeal.
Briefly stated, the facts of the case are that the assessment u/s 143(3) was completed by the Assessing Officer (AO) in the instant case on 14.12.2016 at an assessed loss of Rs.2,01,67,887/-. Thereafter, the Pr. CIT on perusal of the assessment records for the impugned assessment year, found that the AO has not made any verification of claim of depreciation of Rs.2,99,45,064/- on tenancy rights (claimed as being an intangible asset) under the head ‘depreciation’ allowable as per the Act. The Pr. CIT vide order u/s 263 dated 06.09.2018 held as under :
“The assessee company has claimed the Depreciation on tenancy rights of immoveable property by claiming the same as an Intangible Asset entitled for the depreciation @25% by considering the same to be of the nature of Brand, copyright, licence or any other right of similar nature. In the case of Dabur India, it has been held by the Tribunal that Depreciation on Tenancy Rights will not be allowed as it is not in line of intangible asset to be treated as "any other business or commercial rights". Accordingly, it is held that the claim of Depreciation of Rs. 2,99,45,064/-on tenancy rights (claimed as being intangible asset) is not allowable as per the Act and the same has to be disallowed to assess the taxable income of the assessee company. This wrong allowance of the claim of Depreciation on Tenancy Rights as an Intangible Asset has rendered the impugned assessment order passed u/s 143(3) of the Act, erroneous, in so far as it is prejudicial to the interests of revenue, in terms of explanation 2 to Section 263 of the Act. In view of this, the assessment orders for assessment year 2014-15 passed u/s 143(3) by the Assessing Officer on 14/12/2016 are set aside to the Assessing Officer for giving effect to the issue decided herein.”
Before us, the Ld. counsel for the assessee submits that the above issue is decided in favour of the assessee by the order of the ITAT in assessee’s own case for AY 2013-14.
On the other hand, the Ld. DR supports the order passed by the Pr. CIT.
We have heard the rival submissions and perused the relevant materials on record. It is found that the same issue arose before the Tribunal in assessee’s own case for the immediate previous assessment year. The Tribunal vide order dated 03.01.2019 held as under :
“10. We have heard both the counsel and perused the records. First of all we note that the claim of deprecation on tenancy right was very much there in the deprecation schedule and the computation of income. It was on the basis of these documents that the claim of deprecation was allowed by the A.O. In this view of the matter, the decision of Hon'ble jurisdictional High Court in the case of State bank of India (supra) comes into play. The Hon’ble High Court in this case has expounded as under: Thus, it must necessarily be inferred that the Assessing Officer has applied his mind at the time of passing an assessment order to this particular claim made in the basic document viz. computation of the income by not disallowing it in proceedings under Section 143(3) of the Act as he was satisfied with the basis of the claim as indicated in that very document. Therefore, where he accepts the claim made, the occasion to ask questions on it will not arise nor does it have to be indicated in the order passed in the regular assessment proceedings.
Under the touchstone of the above decision of Hon’ble High Court, it can be said that the A.O. has allowed the claim of deprecation after proper application of mind. Hence, the ld. CIT(A)’s view that the A.O. has not applied his mind on this issue, is not sustainable.
We further note that the A.O.’s view is a legally permissible view and is supported by the following case laws:
CIT vs. D.P. Sandu Bros. Chembur (P.) Ltd. (supra) 2. CIT vs. M/s. Areva T & D India Limited (supra) 3. Techno Shares and Stocks Ltd. vs. CIT (supra) 4. CIT vs Smifs Securities Ltd 348 ITR 302 (supra)
In the decision of D.P. Sandu Bros. Chembur (P.) Ltd (supra) the receipt on transfer of tenancy right has been accepted as capital receipt.
In the decision of M/s. Areva T & D India Limited (supra) tenancy right has been accepted as capital asset eligible for depreciation.
In the decision of Techno Shares and Stocks Ltd. (supra) depreciation on amount spend for acquisition of BSE membership card has been accepted as eligible to depreciation. In the decision of Smifs Securities Ltd (supra) depreciation on claim of goodwill has been accepted.
Hence, we are of the opinion that the view adopted by the A.O. was possible one. In this regard, we place reliance upon the decision of the Hon’ble Apex Court in the case of Malabar Industrial Co. Ltd. (supra) and CIT vs. Max India Ltd. (2007) 295 ITR 282 (SC) if there are two views possible and the A.O. has adopted one view, with which the ld. CIT is not in agreement, the order cannot be said to be liable to be visited with the revisionary order by the ld. CIT. Accordingly, the order under 263 passed by the ld. CIT is hereby quashed. Accordingly, we decide the issue in favour of the assessee.”