IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : SMC : NEW DELHI
BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER
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
ORDER
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,
2015.
Sd/-
(R.S. SYAL)
ACCOUNTANT MEMBER
Dated: 24th September, 2015.
dk
Copy forwarded to
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Dy. Registrar, ITAT, New Delhi
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