Depreciation can’t be claimed on Factory Building leased out to Earn Rental Income: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that the depreciation cannot be claimed on the factory building leased out to earn the rental income taxable as “Income from House Property” under the provisions of the Income Tax Act, 1961.

The assessee, while filing its return for the relevant assessment year, has claimed a total depreciation of ₹.51,60,173/- in the profit and loss account towards factory building. While completing the scrutiny assessment for the assessment year 2012-13, the Assessing Officer noted that 50% of the factory building was let out to two different parties as such only 50% of the building was actually used by the assessee and 50% depreciation claim was disallowed for the assessment year 2012-13. On verification of the lease deed for letting out the factory building, the Assessing Officer noted that the same was let out from the year 2009-10 onwards and the assessee was in receipt of rental income for letting out the factory building in the company’s hand for the assessment year 2011-12. Accordingly, he rejected the claim of depreciation.

The bench comprising Judicial Member Mr. V Durga Rao and Accountant Member G Manjunathaupheld the orders of the lower authorities and observed that in this case, the assessee is engaged in manufacturing of automobile components and let out 50% of its factory building on lease and earned rental income.

“Thus, the ld. CIT(A) has rightly held the rental income as income under the head “house property”. Having the rental income held as income under the head “house property”, the assessee is not eligible for claim of depreciation on the let out portion. We find no infirmity in the order passed by the ld. CIT(A) and thus, the grounds raised by the assessee are dismissed,” the Tribunal said.

To Read the full text of the Order CLICK HERE