Disallowance of Depreciation on Apartment under Passive Use u/s 32 of Income Tax Act: ITAT Remits for Verification of Possession [Read Order]
Depreciation was initially disallowed as the flat was considered under passive use for carrying out interior work, and no possession letter was produced
Disallowance of Depreciation on Apartment, Depreciation on Apartment
Disallowance of Depreciation on Apartment, Depreciation on Apartment
The Mumbai bench of Income Tax Appellate Tribunal (ITAT) remitted a matter relating to the disallowance of Rs. 49.31 lakh depreciation under Section 32 on an apartment under passive use for verification of possession.
The assessee, Deluxe Recycling India Private Limited, started the interior work of the flat No. A-2, 3212 at India Bulls Sky Forest, Mumbai, purchased by it. Assessee undertook the interior work post-registration of the sale agreement for which it had taken possession. Assessee claimed depreciation on this property at the rate of 5% in its rectified return.
However, the AO disallowed the same as, according to him, the property was under passive use for carrying out interior work. The CIT(A) sustained the disallowance so made, though the CIT(A) observed that if possession is taken then, the depreciation should be granted. He took an adverse view because no letter of possession was produced by the assessee.
The assessee claimed that subsequently, this flat was sold in AY 2023-24. While reporting capital gain on this transaction in AY 2023-24, the assessee has taken the Written Down Value (WDV) at a lower figure, i.e., after the claim of depreciation in the year under consideration, which has been accepted by the Department.
The Tribunal noted that in the course of assessment proceedings, the AO attempted to enquire about the details of the transaction of purchase of a flat by the assessee from India Bulls Properties Pvt. Ltd. by issuing a notice to which the AO did not receive any response.
No further verifications were undertaken by the AO in this respect. Also, the acceptance of capital gain on the sale transaction in the subsequent year of AY 2023-24 by the AY 2020-21 Department did not align with the stance taken by the AO while making the disallowance of the depreciation in the year under consideration.
The two-member bench of Sandeep Gosain (Judicial Member) and Girish Agrawal (Accountant Member) remitted the issue back to the file of AO for the limited purpose of verification about possession taken by the assessee and treatment thereof.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
