The assessee was entitled to depreciation under section 32 of the Act in respect of the immovable properties taken over by it from the State Government, even though their legal ownership had not been transferred to the assessee –Corporation- J&K Tourism Development Corporation (J&K High Court)I.T. Reference No. 15 / 1983, decided on 19.7.2000.

Where entire cost of property (both land and building) was taken by the assesssee as building only and depreciation was claimed there on. On Sale of the property AO took 1/6 th of the consideration towards building and balance towards land. AO reduced sale allo cated towards building from block and took cost of land at NIL value. Hence entire sale consideration allocated towards land was taken as capital gain. CIT A allocated WDV of property in the same ratio as sale consideration and applied cost of indexation on such deemed value of land. Held by ITAT that stand taken by CIT A is reasoned one and has rightly apportioned the WDV between land and building. [Para 22 Construction Engineers pronounced by ITAT Asr on 18-02-2016]

The Apex Court held that ponds specially designed for rearing of prawns were to be treated as tools of the aqua culture business of the assessee and that depreciation was admissible on the ponds at the rate applicable to plant and machinery. ACIT v Victory Aqua Farm Ltd – (2015) 61 taxmann.com 166 (SC)

On Embroidery machinery, 50% depreciation is allowable ITA 36837/2011/ASR dated 4-6-12 in Amit Emb.

Depreciation would be allowed as long as the asset is kept ready . CIT v. Refrigeration & Allied Industries Ltd 247 ITR 12 (Del), Capital Bus Service Pvt. Ltd. v. CIT (Del)123 ITR 404 and Assistant Commissioner of Income Tax v. Ashima Syntex Ltd. 251 ITR 133 (Guj).

Payment made to retiring partner over and above amount standing to the credit of his account is for acquiring commercial rights depreciable u/s 32 as intangible asset-Swastik Industries [2015] 61 taxmann.com 296 (Ahmedabad - Trib.)/[2015] 41 ITR(T) 277 (Ahmedabad - Trib.)

Assesssee purchased gas cylinders for mfg.unit but leased out them because unit has not started functioning. Assessse’s claim of depreciation against leased out cylinders to be allowed.KM Sugar Mills Ltd.(SC)25.3.2015 57TMC68

Unabsorbed depreciation can be set off against profits taxable u/s 41(2) for sale of business assets even if business is discontinued- Karnataka Instrade Corporation Ltd. [2015] 62 taxmann.com 239 (Karnataka) 09-10-2015

Section 32(2) at the time decision on the subject was delivered by SC in Vermani Industries 216 ITR 607 was similar to provisions as exist post amendmend w.e.f AY 2002-03 [Para 9 of Vermani Industries].It was held by apex court overruling Madras High Court in East Asiatic  in Para 13 of its Judgement that :

1.       Since section 72(1) specifically required same business to be continued, for setting of loss and since there is no similar provision there in 32(2), there is no requirement that same business be continued for setting off unabsorbed depreciation

2.       Also held that there is no requirement that same asset(s) on which unabsorbed depreciation is sought to be allowed as deduction should continue.

3.       Regarding continuance of business , supreme court held that two views are possible in so far as 32(2) says that unabsorbed depreciation to be added to depreciation allowance for the year. However , since 32(2) also says that if there is no depreciation allowance for the year, unabsorbed depreciation shall be deemed to be deprecation allowance for the year, hence there is no requirement for continuance of business.

Further it was held by SC in Jaipuria China Clay Mines (P) Ltd 59 ITR 555 [Para 7] that words “profits or gains” used in 32(2) are different from” profits or gains of business or profession”, hence there is no requirement for continuance of business u/s 32(2)

Karnatka High Court in Karnataka Instrade Corporation Ltd. [2015] 62 taxmann.com 239 (Karnataka) 09-10-2015,hence following supreme court Judgements and its own judgement in Kapila Textiles 129 ITR 458, held that unabsorbed depreciation to be allowed against profits arising from sale of building, plant and machinery taxable u/s 41(2)

1. Depreciation of business and administrative expense to be allowed for business suspended due to govt orders but not discontinued. 2. Interest income from margin money and bank guarantee deposits to be set off against expenses and not to be treated under Income from other sources- .MS. ASSOCIATES vs.ASSISTANT COMMISSIONER OF INCOME TAXSep 21, 2015(2015) 45 CCH 0069 DelTrib

A licensee who is in full control of the building and can exercise the rights of the owner in his own right is entitled to depreciation

CIT vs. Bharat Hotels (Delhi High Court)

(i) Explanation (1) to Section 32 of the Act also acknowledges that depreciation would be claimed by assessee who carries on business “in a building not owned by him but in respect of which the assessee holds a lease or other right of occupancy and any capital expenditure is incurred by the assessee for the purposes of the business or profession on the construction of any structure or doing of any work or in relation to……. the building.” In such event, Section 32 (1) would apply “as if the said structure or work is a building owned by the assessee.

Good will is eligible for Depreciation as Intangible

Supreme Court in the case of SMIFS Securities Ltd., 348 ITR 0302 followed in

St. Angelo’s Computers Ltd. ITA No.6874/Mum/2011 Date of Pronouncement 22/07/2015

Tyssenkrupp elevator (India) (P) Ltd., 167 TTJ 131(Del);  

Worldwide Media Pvt. Ltd., 30 ITR (Trib) 181;

M/s PPG Asian Paints Pvt. Ltd., ITA No.2919/Mum/2013, dated 15-4-15 

M/s Toyo Engineering India Limited, ITA No.3279/Mum/2008, dated 13-10-2014; Birla Global Asset Finance Co. Ltd., 221 Taxman 176(Bombay); 

 KEC International Ltd., Order dated 7-2-2013(Bombay High Court)

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1968-69 - Assessee obtained premises on lease for 39 years - In terms of lease agreement, assessee demolished existing construction and constructed new building to suit its business at its own expenses - In any circumstances assessee would not be entitled for any compensation on account of putting up new construction and it should be treated as tenant subject to payment of rent lower than rent prevailing - Assessee claimed said construction expenditure as revenue expenditure - Assessing Officer rejected its claim and treated said expenditure as capital expenditure - Whether since asset created by assessee by spending amounts did not belong to assessee but assessee got only business advantage of using modern premises at a low rent, thus, saving considerable revenue expenditure for next 39 years, said expenditure should be treated as revenue expenditure - Held, yes

Madras Auto Service (P.) Ltd[1998] 99 TAXMAN 575 (SC)AUGUST 12, 1998

Assessee-company claimed depreciation on LED video display boards - Assessing Officer disallowed said claim - Commissioner (Appeals) held that LED video display boards were purely temporary structures and therefore, assessee was entitled to 100 per cent depreciation - Whether since structure could not be re-used and said structures were put on land not belonging to assessee, order of Commissioner (Appeals) could not be interfered with - Held, yes

Selvel Advertising (P.) Ltd[2015] 58 taxmann.com 196 (Kolkata - Trib.)JANUARY  1, 2015 CIT v. Madras Auto Service (P.) Ltd. [1998] 233 ITR 468/99 Taxman 575 (SC) (para 15) followed

Depreciaiton allowable in hands of finance company acting like a lessor

PKF Finance Ltd 158/2002 dated 13-05-2013
Supreme Court decision in case of ICDS Ltd. vs. CIT 2013 3 SCC 541 followed:

No penalty can be levied for inadvertent depreciation mistake

Somany Evergreen Knits Limited (Bom HC)
Other decisions on non levy of penalty for inadvertent mistake:
Benet Colemn(Bom)
PWC 348 ITR 306(SC)
Sania Mirza(AP)
Societex((Delhi)
Hans Christian Gass(Bom)

Depreciation can not be disallowed where there is no change in facts and circumstances of the case as compared to last year

Depreciation can not be disallowed where there is no change in facts and circumstances of the case as compared to last year. In this case manufacturing activity was closed in last year also and depreciation was allowed . However during the year under consideration the department wants to disallow on the ground of assets not being used for business purposes. However depreciation allowed by Tribunal on the grounds that depreciation was accepted in last year
30 Taxmann.com 221 Delhi Tribunal Hindustan Fertilizer

On Embroidery Machinery 50% depreciation is allowable

ITA 36 & 37/2011/ASR  dated 4-6-12 Amit Embroidery Fair Land Colony
ITA 357/2010/ASR dated 23-4-2012  S.S. Embroiders

The ITAT held that words "processing and garment sector" are wide enough to cover embroidery machinery by inviting refrence to Credit linked Capital Subsidy Scheme

WDV of an asset which had been written off from books on ground of its being obsolete, has to be reduced from WDV of block of assets

Allergan India (P.) Ltd. [2012] 26 taxmann.com 7 (Bangalore - Trib.)

Depreciation on Let Out unused Machinery allowed by P&H HC

ITA 124 of 2004 dated 6-8-2012 CIT Vs. Ranbir Chemicals (P&H HC)

appellant-revenue submitted that the assessee had let out the machinery without there being any commercial expediency and the amount of lease was not increased in spite of providing additional machinery worth ` 45,64,613/-.Held by CIT A and ITAT that once purchase of machinery and letting out was not in doubt depreciation has to be allowed. Order confirmed by High Court

Depreciation on regularisation fee of hospital building held deductible

Dr. K. Senthilnathan FEBRUARY 15, 2012 [2012] 19 taxmann.com 135 (Chennai - Trib.) (TM)

Regularization fees paid by assessee to CDMA under Tamil Nadu Town and Country Planning Act for condoning violations during construction of hospital building has a direct nexus to construction of hospital building; therefore, only account to which regularization fees paid could be booked is construction account of hospital building; amount of regularization fee paid by assessee cannot be excluded in computing eligible depreciation allowance