Case Law Details
Sophia Automotive Private Vs ITO (ITAT Chennai)
The assessee has claimed a total depreciation of Rs.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. As per lease deed dated 11.05.2009, M/s. Vinay Autoparts Pvt. Ltd. and M/s. Ushas Auto Gears Private Limited have taken on rent the 50% of assessee’s factory building from May 2009 onwards, the Assessing Officer was of the opinion that the assessee was using only 50% of the balance factory building and thus, the assessee is eligible for 50% of depreciation on factory building. Accordingly, the Assessing Officer restricted the claim of eligible depreciation to 50% and the balance claim was brought to tax. Further, the assessee company had offered the rental income of Rs. 9.30 lakhs as income from other sources. However, on verification of the lease deeds concerning the let out properties, the Assessing Officer noted that the agreed lease consideration works out to Rs. 12.56 lakhs yearly and accordingly, the rental income from letting out of the two portions of the assessee’s building was taken at Rs.12,56,400/- and assessed as “Income from House Property”.
ITAT gone through the judgement relied upon by the assessee in the case of Chennai Properties and Investments Limited 373 ITR 673 (SC), wherein, the main object of the assessee-company, as stated in its memorandum of association, was to acquire and hold the properties known as “Chennai House” and “Firhavin Estate” both in Chennai and to let out those properties as well as make advances upon the security of lands and buildings or other properties or any interest therein. The entire income which accrued and was assessed was from letting out of these properties and there was no other income of the assessee except the income from letting out of these two properties. Therefore, the Hon’ble Supreme Court has held that the rental income earned by the assessee cannot be treated as “Income from the house property”.
Whereas, 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.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
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