GOLDSEAL ENGINEERING PRODUCTS PVT.LTD ,MUMBAI vs. ACIT 15(1)(2), MUMBAI

O R D E R

PER RAMIT KOCHAR, Accountant Member:

“1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in sustaining depreciation disallowance of Rs. 14,38,746/- . The learned CIT(A) ignored the documentary evidences and the upholding of the disallowance is thus imaginary and subjective in nature and thus needs to be deleted.

2. On the facts and in the circumstances of the case and in law the learned CIT(A) was duty bound to adjudicate the appeal instead of merely relying of the earlier Order. The upholding of the disallowance without dealing the submissions is arbitrary and needs to be deleted.

“7.We have considered rival contentions and perused the material on record . We have observed that the assessee is engaged in the business of manufacturing of Auto Ancillary parts. The assessee has two factories one located at Bhandup and second at Daman. We have observed from the audited accounts filed in paper book with the tribunal that assessee has reflected two set of building at Bhandup factory (paper book page 18) wherein there are two sets of building one classified as existing building and second is classified as new building and their values are specified separately in the audited financial statements. The assessee also filed leave & licence agreement dated 07.10.2010 wherein the assessee is stated to have given on lease 701 Sq meters of constructed area on leave & licence basis,out of the following area of which the assessee is stated to be in possession and occupation in the said leave and license agreement, as under:- “1. Gold Seal Engg. Products Pvt. Ltd. Is in possession and occupation of title land bearing CST No. 387, admeasuring about 3745 Sq.Mts. and Survey No. 75, Hissa No. 3/8 of Bhandup Division and bearing city Survey No. 389, admeasuring 1254 Sq, Mtrs. Out of Survey No. 75 Hissa No.1, situated at Agra Road, Bhandup, Mumbai 400 078(Annex1) as a Licensee vide a leave and license agreement dated 5.9.97. It was out of this aforesaid area , the assessee has given on leave & licence basis 701 Sq mtrs to Gold Seal Engg Products Limited out of the above area. The assessee has claimed to have filed building plans before learned CIT(A) as an additional evidences which are placed in paper book 57 to 59. These building plans were filed for the first time before learned CIT(A) . The learned CIT(A) on the other hand has given contrary finding that no evidences were filed before him and only bald statements were made. The claim of the assessee is that the said area of 701Sq Mtrs which is let-out is out of the area of 2528.05 Sq. Meters situated in the existing building. The assessee claim is that the balance area of existing building and also the entire new building situated at Bhandup is in its possession of the assessee which is used for its business purposes. Thus it is claimed by the assessee that only the proportionate disallowance of depreciation of building consisting of existing structure to the tune of 27.455% which was let-out can be disallowed as that proportion of income from letting out of the said area is offered for taxation under the head „income of house property’ and there is no provision in the 1961 Act to claim depreciation on the said income from house property but the rest of depreciation on existing building and the entire depreciation on new building is to be allowed to the assessee as the same were used for its business. However deduction on account of repair and maintenance to the tune of 30% u/s. 24(a) is already claimed by the assessee so far as rental income is concerned. We agree with this proposition of the assessee that the depreciation be disallowed to the tune of 27.455% of depreciation claimed on the existing structure as the said area is claimed to have been given on rent, but both the authorities below have given concurrent finding of fact that evidences are not placed before them and in any case building plans were placed before the learned CIT(A) as an additional evidence for the first time . The learned CIT(A)did not call for the remand report from the AO w.r.t. these additional evidences which is in violation of Rule 46A of the Income Tax Rule 1962. We have also carefully gone through the entire spectrum of evidences placed in paper book before the tribunal and we also could not correlate the identification of property let out with identification of property called by the assessee as an existing structure out of which this area of 701 square meter was claimed to be carved out and let-out. These are findings of fact which require proper co-relation and merely filing of documents are not sufficient. Thus,we are principally in agreement with the assessee‟s proposition that the depreciation in proportion of let out constructed area to the total constructed area of the building called as an existing building is to be disallowed but we are remitting the matter back to the file of the AO for limited purposes of verification and correlation by identification of the property consisting of an area of 701 Sq mtrs of area being let- out by the assessee with the land identification of the building and total constructed area of the said building . This ground is allowed for statistical purposes as indicated above.” Thus, tribunal for AY 2012-13 allowed appeal of the assessee for statistical purposes and directing AO to verify as to let our portion to the total constructed area, to compute disallowance of depreciation . We have observed that the AO has disallowed depreciation for the impugned assessment year by following the order of learned CIT(A) for AY 2012-13. The learned CIT(A) for impugned assessment year has dismissed the appeal of the assessee by following the decision of learned CIT(A) for AY 2012-13. The appeal of the assessee for AY 2012-13 is now adjudicated by tribunal vide orders dated 09.05.2018 which are reproduced above , to which one of us being Accountant Member was part of the Division Bench which pronounced the aforesaid order. It is also brought on record by learned counsel for the assessee before the Bench that learned CIT(A) while adjudicating appeal for AY 2015-16 in assessee’s own case in appeal no. CIT(A)- 24/ACIT-15(1)(2)/IT-217/2017-18 vide orders dated 24.04.2019 has followed the aforesaid tribunal order dated 09.05.2018 for AY 2012-13 in assessee’s own case and partly allowed the appeal of the assessee and directions were issued by learned CIT(A) mto AO to compute the disallowance of depreciation to the extent of 36.364% of the total area on which depreciation is claimed. It is explained that factual matrix has remained the same and the AO may be directed to verify the factual matrix of the case as is prevalent in the year under consideration. The learned DR fairly agreed that the matter may be restored to the file of the AO for fresh adjudication by following the ratio of decision dated 09.05.2018 passed by tribunal in assessee’s own case for AY 2012-13 by applying factual matrix of the case as is prevalent in the impugned assessment year. After hearing both the parties and by Respectfully following the ratio of decision of the Mumbai-tribunal in for AY 2012-13 vide orders dated 09.05.2018 in assessee’s own case, we restore the matter to the file of the AO to apply prevailing factual matrix prevalent during the impugned assessment year to the ratio of decision of ITAT, Mumbai dated 09.05.2018 for AY 2012-13 in assessee’s own case and accordingly compute disallowance of depreciation accordingly. We order accordingly 4. In the result, appeal filed by the assessee in AY 2014-15 is allowed for statistical purposes. Order pronounced in the open court on 18.06.2019. आदेश की घोषणा खुऱे न्यायाऱय में ददनांकः 18 .06.2019 को की गई Sd/- Sd/- (SANDEEP GOSAIN) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, dated: 18.06.2019 Nishant Verma Sr. Private Secretary copy to… 1. The appellant 2. The Respondent 5 | P a g e