Assessee got depreciation on a mall even if when part of it wasn't commercially exploited

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

a) The Assessing Officer (‘AO’) disallowed the depreciation claim on commercial complex, by holding that its certain areas couldn’t be used by assessee for business purposes;

b) The AO disallowed proportionate depreciation which related to unused portion of the commercial complex;

c) 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;

d) 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.

The Tribunal held in favour of assessee as under:

1) After the amendment made by the Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, w.e.f. April 1, 1988, the individual assets had lost their identity and for the purpose of allowing of depreciation, only the block of assets had to be considered;

2) It had to be seen whether the particular block of assets was owned by the assessee and used for the purpose of business;

3) If block of assets was owned by the assessee and used for the purpose of business, depreciation had to be allowed. The test of user had to be applied upon the block as a whole instead of upon an individual asset;

4) 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;

5) 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 - E-CITY ENTERTAINMENT (INDIA) (P.) LTD. V. ACIT (2013) 39 taxman 120 (Mumbai - Trib.)