Case Law Details
Radisson Hospitality Vs ACIT (ITAT Delhi)
ITAT Delhi held that depreciation in respect of the assets shared with the sister concern under the license agreement cannot be claimed u/s. 32 of the Income Tax Act, 1961.
Facts- The assessee/ appellant is a company incorporated under the Companies Act, 1956 and engaged in the business of providing sales and marketing and reservation support services to Carlson Rezidor Group’s affiliated hotels. Case was taken for scrutiny assessment and statutory notice u/s 143(2) of the Act was issued. AO inquired as to why half of the depreciation that is Rs. 4,82,865/- claimed by the assessee should not be disallowed in the light of the fact that assets are jointly held by M/s. Carlson Hotels (South Asia) Pvt. Ltd. The assessee vide reply dated 26.12.2018 submitted that assets are held/ utilized jointly with a sister concern as they share same premises for conducting business operations and accordingly the assets are capitalized in the proportion of ownership and therefore proportionate depreciation has been claimed. AO however, disallowed the depreciation.
CIT(A) upheld the same. Being aggrieved, the present appeal is filed.
Conclusion- Held that by merely entering into an agreement or understanding of user of a asset, a License may be created in favour of user, however, that does not vest the user with the interest of any nature akin to owner for the purpose of Section 32(1) of the Act. So also no claim of depreciation beyond the law is allowable on mutual understanding between the owner and the user.
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