| The Tax Publishers2020 TaxPub(DT) 3821 (Bom-HC) : (2020) 429 ITR 0054 : (2020) 317 CTR 0377 : (2020) 275 TAXMAN 0106 INCOME TAX ACT, 1961
Section 32
Where assessee-builder paid a premium to State Government in lieu of grant of additional FSI (floor space index), and got permission to increase size of total building by constructing additional floors or additional building to extent of FSI available, as additional FSI cannot be said to be a business or commercial right falling within realm and scope of intangible asset within meaning of section 32(1)(ii), thus payment for additional FSI was eligible for depreciation at rate applicable to building, i.e., 10 per cent, and not 25 per cent as applicable to an intangible right under section 32(1)(ii).
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Depreciation - Allowability - Assessee-builder paid a premium to State Government in lieu of grant of additional FSI (floor space index) - Payment for additional FSI, whether eligible for depreciation at rate applicable to building, i.e., 10 per cent
Assessee-builder paid premium to Government of Maharashtra and BMC in lieu of grant of additional FSI (floor space index). Assessee got permission to increase size of total building by constructing additional floors or additional building to extent of FSI available and claimed depreciation on same at 25 per cent claiming it to be a business/commercial right. AO alleged that grant of FSI was not in the nature of any asset and only a payment made to the government for increasing the size of the building and thus, depreciation on same was not allowed. CIT(A) allowed depreciation at the rate applicable to buildings, i.e., @ 10%. Held: Amount spent by assessee would add to value of existing building as additional FSI would be available to assessee. Amount spent was for purpose of business and was of enduring nature. Since it related to the building block of the asset, the overall cost of the building block would increase by this amount, therefore CIT(A) rightly directed AO to add the amount spent during the year to the building block of asset and allow depreciation as per law, i.e., on the rate applicable to the building which is 10% and not 25%. Additional FSI cannot be said to be a business or commercial right falling within realm and scope of intangible asset within meaning of section 32(1)(ii). Thus, payment for additional FSI would be eligible for depreciation at rate applicable to building i.e., 10 per cent, and not 25 per cent as applicable to an intangible right under section 32(1)(ii).
REFERRED : Pr. CIT v. Tulip Hospitality Service Ltd. [Income Tax Appeal Nos. 835 and 836 of 2016, decided on 17-12-2018] : 2019 TaxPub(DT) 0032 (Bom-HC) M/s. V Hotels Ltd. v. DCIT [ITA Nos. 3189, 3190, 3191, 2546, 4216, 4215, 3732/Mum/2012, C.O. No. 25/Mum/2016, dt. 26-8-2016] : 2016 TaxPub(DT) 4454 (Mum-Trib)
FAVOUR : In assessee's favour
A.Y. : 2006-07
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