Depreciation cannot be disallowed on ground that some areas in mall remained unutilized

Case: E-City Entertainment (India) Pvt Ltd Vs. ACIT (Mumbai – Trib)

Facts:  The assessee was the owner of a mall of which certain areas were unutilized. AO disallowed the depreciation claim on commercial complex, by holding that its certain areas couldn’t be used by assessee for business purposes.

 

On appeal before the CIT (A), the assessee contended that the entire commercial space was put to use but only a part of it was leased out and it would not mean that the unutilised area was used for non-business purposes or personal purposes. It further contends that it was owner of the entire building so the depreciation couldn’t be disallowed. The CIT (A) allowed the claim of the assessee. Aggrieved-revenue filed the instant appeal.

 

 

HELD by the Tribunal in favour of assessee:

 

·         For the purpose of allowing of depreciation, only the block of assets had to be considered;

·         It had to be seen whether the particular block of assets was owned by the assessee and used for the purpose of business. If block of assets was owned by the assessee and used for the purpose of business, depreciation had to be allowed

·         The observation of the AO, that the depreciation on complex would be allowed to the extent of the area which was used for business purpose, was devoid of any merit

·         Once it was proved that block of asset was used for the purposes of assessee’s business and there was no finding as to whether the block of assets was used for other business purposes, proportionate disallowances of depreciation was not warranted. Thus, the addition made by AO was to be deleted

 

CA Rahul Jain

rahuljain@rpmd.in