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Facts
The assessee appealed against the order of the CIT(A) for AY 2015-16. The assessee had claimed rental income from letting of factory premises and plant/machinery as 'Income from House Property' and 'Income from Business'. The Assessing Officer treated it as 'Income from Other Sources' and the CIT(A) confirmed this. The assessee also raised an additional ground regarding depreciation on building.
Held
The Tribunal admitted the additional ground regarding depreciation on building. It noted that the Assessing Officer in paragraph 3.7 of the Assessment Order had stated that depreciation under Section 57(ii) would be allowed, but failed to do so in computation. The Tribunal directed the AO to allow depreciation on the building.
Key Issues
Whether rental income from letting of factory premises and plant/machinery is to be treated as Income from House Property/Business or Income from Other Sources, and whether depreciation on the building is allowable.
Sections Cited
143(3), 56(2)(iii), 23, 24(a), 139(1), 234A, 234B, 57(ii)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, C BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER Indo Allied Protein Foods Pvt. Ltd., 303, Salvation Apartment, Gokhale Road (South), Dadar(W), Mumbai - 400028 [PAN: AABCI2111C] …………. Appellant Deputy Commissioner of Income Tax- Vs Circle 6(3)(1), Mumbai, Room No. 506, Aayakar Bhavan, Respondent M.K. Road, Mumbai - 400020 ………….
Appearance For the Appellant/Assessee : Shri M.S. Sheth For the Respondent/Department : Shri H.M. Bhatt
Date : 29.05.2024 Conclusion of hearing : 28.06.2024 Pronouncement of order
O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Assessee has challenged the order, dated 18/12/2023, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘the CIT(A)’] for the Assessment Year 2015-16, whereby the Ld. CIT(A) had partly allowed the appeal of the Assessee against the Assessment Order, dated 26/12/2017, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) as rectified by the Rectification Order, dated 05/02/2018. Assessment Year 2015-16
The Assessee has raised following grounds of appeal:
“In the facts and the circumstance of the case and in law, the Commissioner of Income-Tax (Appeals), NFAC (hereinafter referred to as the 'the CIT(A)' has erred in: a) upholding the order of Dy. Commissioner of Income Tax Circle6(3)(1), Mumbai ('The learned Assessing Officer') treating Rs: 72,13,144/- being 'Rent Income from letting of Plant and Machinery 'as 'Income from Other Sources' as against 'Income from Business' claimed by the appellant. b) upholding the order of the 'learned Assessing Officer treating Rs: 14,40,000/- being Rent Income from letting of Factory Building as 'Income from Other Sources' as against 'Income from House Property' claimed by the appellant and thereby denying deduction of Rs: 75,172/- towards property tax as claimed u/s 23 of the Income Tax Act, 1961 ('the Act') and Rs: 4,09,448/-being deduction u/s 24(a) of the Act. c) Not addressing ground No (5) of appeal memo to CIT (Appeal) relating to adhoc additions of Rs: 40,873/- being 10% out of Expenses Rs: 4,08726/- on account of Travelling Expenses and Miscellaneous Expenses. d) Not addressing ground No (6) of appeal memo to CIT (Appeal) relating to Rs: 65,491/-towards interest levied u/s 234A of the Act by the learned Assessing Officer in spite of Return of Income filed by the appellant before due date specified u/s 139(1) of the Act. e) The consequential interest levied u/s 234B of the Act may please be deleted.” 3. The Assessee has also raised the following Additional Grounds of appeal: “Without prejudice to the grounds of appeal filed on 14th February 2024 1. We pray that the consequential expenses associated withdeviation made i.e. depreciation on building etc. may please be allowed while calculating the Income from other Sources.” 4. The relevant facts in brief are that Appellant filed return of Income for the Assessment Year 2015-16 declaring total income
2 Assessment Year 2015-16 of INR 2,92,96,030/-. The case of the Appellant was selected for scrutiny assessment and assessment under Section 143(3) of the Act was framed on the Appellant vide order dated 26/12/2017 assessing total income of the Appellant at INR 3,70,67,848/- after making additions of INR 87,27,204/- on various grounds. In the return of income, the Appellant had treated the rental income from letting out of factory premises together with plant & machinery as 'Income from House Property whereas the Assessing Officer treated the same as 'Income from Other Sources' under Section 56(2)(iii) of the Act holding that letting of building was inseparable from letting of plant and machinery/furniture; and therefore, the rent from letting of factory premises and letting of plant & machinery & other movable assets is composite rent.
The Appellant carried the issue in appeal before the CIT(A). Vide order dated 18/12/2023, confirmed the order of the Assessing Officer to the extent of treatment of composite rent as 'Income from Other Sources'.
Being Aggrieved, the Appellant has preferred the present appeal before the Tribunal.
When the appeal was taken up for hearing, after briefly advancing submissions on the grounds raised in appeal memo, the Learned Authorized Representative restricted his submissions to the Additional Grounds raised vide letter dated 27/05/2024. 8. We have heard both the sides on the Additional Grounds raised.
The additional ground raised by the Appellant is a legal ground which can be adjudicated without inquiring into new facts. Thus,
3 Assessment Year 2015-16 in view of the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT: 229 ITR 383, the additional ground raised by the Appellant is admitted.
It was contended on behalf of the Appellant that in paragraph 3.7 of the Assessment Order, while taxing the lease rental income in the hands of the Appellant as 'Income from Other Sources', the Assessing Officer has mentioned that depreciation under Section 57(ii) of the Act is hereby allowed However, while computing assessable income, the learned Assessing Officer did not allow depreciation on the building. Therefore, the Assessing Officer be directed to allow depreciation on building which works out to INR 21,15,168/-. The Ld. Departmental Representative could not controvert the aforesaid submissions made on behalf of the Appellant. We find that in paragraph 3.7 of the Assessment Order, the Assessing Officer has recorded as under:
“3.7. In the view of above, the lease rental income is taxed as income from other sources. Considering the provisions of Section 57, no deduction is allowable in respect of deduction u/s 24 of the I T Act, and other expenses debited to the P&L a/c in respect of rental property. Entire rental income of Rs. 86,53,144/- is treated as “income from other sources”. Depreciation u/s 57(ii) of the I T Act is hereby allowed.” (Emphasis Supplied)
In view of the above, accepting the contention of the Appellant, we direct the Assessing Officer to allow depreciation under Section 57(ii) of the Act in respect of building (rental income from which has been brought to tax as ‘Income from Other Sources’ in the hands of the Appellant). Thus, Additional Grounds raised by the Appellant is allowed, while all the other grounds raised by the Appellant are dismissed as being not pressed during the course of hearing.
4 Assessment Year 2015-16
In result, the appeal preferred by the Assessee is partly allowed.
Order pronounced on 28.06.2024. (Amarjit Singh) Judicial Member मुंबई Mumbai; िदनांक Dated : 28.06.2024 Alindra, PS
5 Assessment Year 2015-16 आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant ""थ" / The Respondent. 2. 3. आयकर आयु"/ The CIT 4. "धान आयकर आयु" / Pr.CIT 5. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file.
आदेशानुसार/ BY ORDER, स"ािपत "ित //// उप/सहायक पंजीकार /(Dy./Asstt.