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DCIT,Circle-12(1), New Delhi. Vs. Gateway Impex (P) Ltd., B-26, Qutab Institutional Area, New Delhi.
September, 28th 2015
             DELHI BENCH : SMC : NEW DELHI

                          ITA No.220/Del/2014
                        Assessment Year : 2005-06

DCIT,                              Vs. Gateway Impex (P) Ltd.,
Circle-12(1),                          B-26,
New Delhi.                             Qutab Institutional Area,
                                       New Delhi.
                                       PAN: AAACG6562C

     (Appellant)                               (Respondent)

           Assessee by           :     None
           Department by        :      Shri Amrit Lal, DR
           Date of Hearing      :      23.09.2015
           Date of Pronouncement:      24.09.2015


     This appeal by the Revenue is directed against the order passed by the

CIT(A) on 31.10.2013 in relation to the Assessment Year 2005-06.

2.   The only effective ground raised in this appeal is against restricting

the addition of Rs.21,03,361/- to Rs.2,88,513/- made by disallowing the

excess depreciation claimed by the assessee.

3.   Briefly stated, the facts of the case are that the assessee is engaged in

the business of sale, purchase and development of property and letting it to
                                                              ITA No.220/Del/2014   2

tenants and also providing for the conveniences and services commonly

provided in apartments and business quarters.        The assessee claimed

depreciation on plant and machinery. It was observed by the AO that

besides claiming depreciation on lifts, windows cleaning system, HVAC,

IBMS, etc., the assessee also made allocation of other pre-operative

expenses on proportionate basis.     He noticed that the assessee's main

activity was of giving building on rent. He, therefore, came to hold that the

entire expenditure incurred on fixed assets by the assessee was pertaining to

rental income. Since the assessee was also providing certain maintenance

services, he held that the depreciation was allowable only on those assets,

namely, lifts, windows cleaning system, HVAC, IBMS, uplift trolley and

sound proofing system. As such, he re-determined the opening written

down value of Plant and machinery used for maintenance and services at

Rs.2.39 crore and computed allowable depreciation at Rs.59.83 lac. As the

assessee had claimed depreciation amounting to Rs.80.86 lac, the

differential amount of Rs.21.03 lac was disallowed.             Against the

disallowance of depreciation to this extent, the ld. CIT(A) allowed

depreciation to the tune of Rs.18,14,848/- on pre-operative expenses

capitalized, but, disallowed depreciation on the rent paid to the DDA at
                                                              ITA No.220/Del/2014   3

Rs.2,88,513/-. The Revenue is aggrieved against the relief allowed in the

first appeal.

4.    I have heard the ld. DR and perused the relevant material on record.

An adjournment application was filed by one counsel without there being

any Power of attorney in his favour.       Such adjournment request was

rejected. Accordingly, the appeal is being disposed of on merits ex parte

qua the assessee.

5.   It is observed that the ld. CIT(A) has allowed relief only in respect of

pre-operative expenses which were capitalized by the assessee in the

previous year relevant to assessment year 2003-04.          Not only such

capitalization was allowed by the AO in the assessment completed u/s

143(3) of the Act for that year, but also allowed depreciation on such block

of plant and machinery.        Once the Revenue, after making proper

investigation, has accepted addition to the block of Plant and machinery by

the amount of pre-operative expenses in an earlier year and also allowed

depreciation accordingly, it is impermissible to the AO in a later year to

disturb the opening written down value of such block of assets by opining

that the pre-operative expenses should not have been capitalized. There is

nothing on record to indicate that some proceedings were taken up for the
                                                                 ITA No.220/Del/2014   4

assessment year 2003-04 to rectify the allowing of capitalization of such

pre-operative expenses to plant and machinery. In view of the foregoing

discussion, I am of the considered opinion that the ld. CIT(A) was right in

allowing depreciation on pre-operative expenses capitalized under the head

`Plant and machinery' for business purpose.

6.    In the result, the appeal is dismissed.

      The decision was pronounced in the open court on 24th September,


                                                      (R.S. SYAL)
                                                  ACCOUNTANT MEMBER

Dated: 24th September, 2015.


Copy forwarded to

1.   Appellant
2.   Respondent
3.   CIT
4.   CIT(A)
5.   DR
                                                Dy. Registrar, ITAT, New Delhi
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