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Income Tax Appellate Tribunal, “SMC”, BENCH MUMBAI
Before: SHRI R.C.SHARMA, AM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by the revenue against the order of CIT(A)- 49, Mumbai dated 24/05/2017 for A.Y.2013-14, in the matter of order passed u/s.250 of the IT Act.
Rival contentions have been heard and record perused. During the course of assessment, AO disallowed assessee’s claim of depreciation on the plea that there was no working during the year.
By the impugned order CIT(A) allowed assessee’s claim after observing as under:- 6.0. I have carefully examined the facts of the case, the stand taken by the A.O in the assessment order, the grounds of appeal and the written submissions filed by the appellant during the hearing proceedings.
M/s. Nepean Holding Reality Ltd., 6.1. The A.O. has disallowed the entire depreciation claimed at Rs.98,11,9647- on the ground that the building/premise at Bandra, purchased in the earlier year, was not used for the purpose of any business activity during the A.Y.2013-14 since there is no credit of any business receipts to the profit and loss account. The A.O. has also observed civil/furniture work etc was going on in the said newly purchased premises and the asset was neither ready to use nor it had been put to use for the purpose of the business during the year. 6.2. From the details and submissions filed by the appellant, I find that the said premise at 36 C Turner Road, Bandra, which was purchased by the appellant vide sale deed dated 14th of October 2011 from M/s. TBZ Nirmal Zaveri P.Ltd, through its partner Nandini J. Singh, included Unit No.1 admeasuring about 1275 sq.ft on ground floor, Unit No.4 admeasuring about 500 sq.ft., Unit No.5 admeasuring about 500 sq.ft. and Unit No.6 admeasuring about 500 sq.ft. in the upper ground floor of the Building known as 36 Turner Road. The purchase of the said premises included furnitures and fixtures and office equipments and appliances as per Annexure T' to the agreement which included ACs, security system, lift, telephone system, sound system, electrical installation etc. Further, I find that depreciation on the said building premises was allowed in the A.Y.2012-13, which is the assessment year relevant to the year of purchase, vide assessment order u/s.143(3) dated 26.2.2015. 6.2.1. The appellant is engaged in the business of trading of painting, artefacts and antique art material. The appellant has business receipts in the nature of sales in the preceding as well as subsequent years and it has made purchases during the relevant previous year and in earlier year as well as subsequent years, except in F.Y.2011-12 as under: Financial Year Purchases Sales (in Rupees) (in Rupees) 2010-11 4,04,835 18,83,000/- 2011-12 - 11,35,000/- Nil 2012-13 1,14,500 2013-14 36,24,395 10,08,300/- 2014-15 30,90,694 42,24,417/- From above, it is apparent that the appellant has engaged in the business of dealing in paintings and artefacts and the same is going concern. The appellant has also submitted that it had stock of painting as well as other artefacts which had been stored7displayed in the said building premises during the year and it amounted to the use of the building for the business purpose. I find that the appellant's address has M/s. Nepean Holding Reality Ltd., been mentioned as 36 Turner Road, Bandra (W) in the purchase bill / tax invoice dated 1.3.2013 relevant to A.Y.2013-14 as well as in the sale invoices relevant to A.Y.2012-13. Various bills relating to the renovation work (civil work, electrical work etc.) going on at the said premises since last week of September 2012 also have the address of Nepean Holdings Reality LLP, 36 Turner Road, Bandra (W),Mumbai. These facts clearly show that the appellant was using the said premises for its business activities during the A.Y.2013-14, as a going concern and merely because there was no sale receipt during the said assessment year cannot be a sufficient ground to hold that there was no business activity of the appellant from the said building. 6.2.2. In fact, even if it is held that there is a temporary lull in the business activity, the same cannot be a ground for disallowing the entire depreciation claimed by the appellant which include depreciation on the building/office in Block No.1 of the block of assets as well as the depreciation on furniture, fixture and electrical installation in Block No.2 and ACs and other equipments in Block No.3,since the business of the appellant has not been closed down once and for all. In this regard reliance is placed on the decision of the Hon'ble Delhi High Court in the case of CIT vs. Integrated Technologies Ltd(ITA No.530/2011) dated 16.12.2011. In that case the assessee had debited expenses including depreciation, bad debts, administrative stock written off etc in the absence of any purchase, sale or manufacturing activity being carried out .While allowing the claim for depreciation and other expenses the Hon'ble High Court adjudicated as under; "The Tribunal has referred to the judgments in Capital Bus Setvice (supra), CIT Vs. Refrigeration and Allied Industries Ltd. (supra) & CIT Vs. Panacea Biotech Ltd. (supra) and has applied the ratio laid down therein to the facts of the present case. The ratio in brief is that it is not X necessary that the plant and machinery owned by the assessee should be actually put to use in the relevant accounting year to justify the claim of depreciation and that even if the plant and machinery or other asset is kept ready for use in the assessee's business, the assessee would, be entitled to depreciation. The only condition is that the business should not have been closed down once for all and that the assessee should demonstrate that the hopes of the business being revived are alive and real. It is however not a matter that can turn entirely on the assessee's hopes alone. There should be evidence or material to show that the assessee took efforts to keep the business alive in the hope of reviving the same. Maintaining the office and establishment, complying with the statutory formalities, not disposing of the plant and machinery, incurring expenses on the repair of plant and machinery etc. are some of the indications of nurturing the hopes of reviving the business. The above are only illustrative instances and are by no means exhaustive and the question as to whether the assets were kept ready for use in the business is largely to be decided on the facts and circumstances of each case. In our opinion, the Tribunal has not committed any error in applying the ratio laid down in the judgments of this Court to the facts of M/s. Nepean Holding Reality Ltd., the present case in order to uphold the assessee's claim for depreciation." 6.2.3. The decision cited by the A.O, in the case of Liquidators of Pursa Ltd ( [1954] 25 ITR 265(SC) is based on different facts and is relevant for disallowance in respect of section 41(2) read with Sec.28(i) of the I.T, Act 1961, corresponding to Section 10(2) (vii), read with section 10(i) of the I.T. Act 1922 in respect of A.Y. 1945-46. Similarly the decision in the case of Dinesh Kumar Gulabchand Agarwal 267 ITR 768 is based on different facts of the case and is distinguishable. 6.3. In view of above discussion, it is held that the building premise at 36 Turner Road belonging to the appellant was used for the purpose of business during A.Y.2013-14 and the A.O. was not correct in disallowing depreciation of Rs.98,11,964/-. The A.O. is directed to allow the depreciation claimed as per IT. Act of Rs.98,11,964/- and recompute the total income. The grounds taken by the appellant are allowed.
I have considered rival contentions and found that during the year under consideration the assessee has business receipts in the nature of sales in the preceding as well as subsequent years and it has made purchases during the relevant previous year and in the earlier year as well as subsequent years, except F.Y. 2011-12. I also found that the purchase invoice for the relevant P.Y. and the Sales invoice for the Preceding P.Y. bore the address of the said Bandra premises. Thus, the presumption drawn by the assessing officer that asset was not put to use is baseless. The asset was already a part of the block. Also, depreciation on the said building premises was allowed in A.Y. 2012-13 which is the assessment year relevant to the year of purchase. Furthermore, detailed finding recorded by CIT(A) at para 6 has not been controverted by bringing any positive material on record. The issue under consideration is also covered by the decision of Bombay High Court in case of G.N. Agarwal 75 Taxman M/s. Nepean Holding Reality Ltd., Accordingly, I do not find any reason to interfere in the order of CIT(A) for allowing assessee’s claim of depreciation. 30. In the result, appeal of the revenue is dismissed.