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PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order passed by ld. Pr. CIT, Ajmer u/s 263 dated 27.03.2019 for A.Y 2015-16.

2. Briefly stated, the facts of the case are that the assessee had filed its return of income on 28.09.2015 declaring total income of Rs. 25,49,070/-. The matter was taken up for complete scrutiny under CASS and thereafter, the assessment order was passed u/s 143(3) on 29.12.2017 assessing total income at Rs. 27,14,560/-. Subsequently, assessment records were examined by the ld. Pr. CIT, Ajmer and a show cause u/s 263 dated 05.03.2019 was issued to the assessee. In response, the assessee filed its submissions and thereafter, considering the submission of the assessee but not found the same acceptable, the assessment order so passed by the AO M/s Arsh Vision Vs. DCIT, Ajmer was held by the ld Pr. CIT as erroneous and prejudicial to the interest to the Revenue and was set aside to file of the AO to the limited extent as stated in the revision order for making a fresh inquiry and deciding the same afresh. Against the said order and directions passed by the ld Pr. CIT, the assessee is in appeal before us.

4. Coming to the each of the matters raised by the ld. Pr. CIT in his show cause notice, firstly, regarding the claim of depreciation on the residential properties, the ld. AR submitted that, the subjected property is being used by the assessee firm for the purpose of business purpose i.e. for godown and office which fact was brought before the AO also and after necessary verification, he has accepted the same. In support, the reference was drawn to the Question No. 2 of the questionnaire dated 02.08.2017 issued by the AO and the reply filed by the assessee. It was submitted that the AO was M/s Arsh Vision Vs. DCIT, Ajmer aware of the fact of the said building, though described as residential, after discussion with the AR, he was satisfied that the said property is being used for business purpose only. It was submitted that before the Pr. CIT also, the assessee firm, in support has produced photographers of the subject property wherein the office setup and goods stored in such premises can be clearly seen. It was further submitted that the status of a particular property i.e. whether it is residential or commercial, is of no relevance while claiming depreciation under the Income Tax Act. For claiming depreciation under the Act, all that it required is that the property must be used for business purpose and it was accordingly submitted that the status of the property as per municipality records i.e. being residential or commercial is of no relevance. Hence, this ground for revision deserves to be dismissed.

6. Regarding the matter relating to interest on FDR of Rs. 3,36,620/- not included while calculating allowable remuneration to partners u/s 40(b), it was submitted that the assessee during the revisionary proceeding has stated that the said FDRs were given as guarantee to Sony India Pvt. Ltd and Canon Ltd. who are supplier of printers and thus the interest on FDRs being M/s Arsh Vision Vs. DCIT, Ajmer business income should be included for calculating allowable remuneration u/s 40(b) of the Act. This fact is evident from an agreement entered between the assessee and M/s Canon India Private Ltd and M/s Sony India Pvt. Ltd. It was submitted that the ld. Pr. CIT has wrongly stated that no evidence was furnished. In support, the reliance was placed on the Co-ordinate Bench decision in case of M/s S.P. Equipment & Services CIT (2010) 33 DTR 265 (JP). It was submitted that the assessee firm was required to submit performance bank guarantee to Cannon and Sony and it could not have proceeded further to take dealership of the company to sell its products in absence of the same. This way, it was an operational and compelling necessity on the part of the assessee to get the FDRs prepared and pledged with the concerned banks. In support, the reliance was placed on the Co-ordinate Bench decision in case of ITO vs. Maya Construction (ITA No. 510 & 43/JU/2013).

M/s Arsh Vision Vs. DCIT, Ajmer

14. Firstly, regarding claim of depreciation on the residential property and whether the same is used by the assessee firm for business purposes, the ld A/R has referred to questionnaire dated 2.08.2017 issued by the Assessing officer and the response filed by the assessee vide submission dated 22.08.2017. On perusal of the same, we find that the question which has been raised by the Assessing officer relates to addition to fixed assets by way of construction of a building worth Rs 46,92,600/- wherein he has asked for documentary evidence, detailed construction account of new building and whether the cost of construction includes cost of land and whether any valuation has been done from a Registered valuer. In response to the same, the assessee has submitted that they have not constructed any property but purchase one property for which copy of registry was also submitted. There is no finding of the Assessing officer in terms of whether he has examined the contents of the said registry. Further, there is nothing on record which suggests that the AO has raised any query to the assessee regarding the actual usage of such property for business purposes especially given the description and site plan of the property and eligibility of the assessee to claim depreciation thereon. We find that there is no such finding on face of the assessment order and further, nothing has been brought to our notice either in terms of any further queries by the AO and submissions filed by the assessee or any entry in this regard recorded by the AO in the order sheet. The ld. Pr CIT has examined the contents of the Registry and has stated that the description of the property in terms of site plan and internal construction shows that it was a residential property and not a commercial property and the photographs so submitted by the assessee during the revisionary proceedings doesn't support the claim of the assessee that the property has been used for business purposes. We are therefore of the view that had the AO carried out even preliminary verification and examined the contents of the registry, the AO would have noted the similar description of the property M/s Arsh Vision Vs. DCIT, Ajmer which is clearly discernable from the reading of the contents of the Registry and would have raised similar questions regarding conversion and more importantly, the usage of such property for business purposes in order to examine the assessee's eligibility to claim depreciation. However, we don't find any such basic enquiries and investigation being carried out by the AO. We therefore find that it is case of complete lack of enquiry on part of the AO to examine the description of the property and also whether the same is used for business purposes in order to examine the eligibility of the assessee to claim depreciation where one of the cardinal rule is the property should be used for purposes of business. A reference can be drawn to observations of the Coordinate Bench in case of Subhlakshmi Vanijya (P.) Ltd. vs Commissioner of Income-tax-I, Kolkata, reported in 60 taxmann.com 60 (Kolkata - Trib.) wherein it was held under: