*FSI purchased from Government of Maharashtra- held eligible for depreciation at the rates applicable to the Building @ 10% and not to Intangible assets @ 25%*

The Bombay High court in the case of *PCIT-3 Vs V Hotel Limited in ITA No 1734 of 2017 on 21/09/2020 * was considering whether *FSI purchased was eligible for depreciation as an intangible asset. * The Court allowing the reasoning of the ITAT held that the view taken by the Tribunal is a reasonable one, having regard to the provisions contained in sections 32 (1)(ii) and 43(6)(c) of the Act. That apart, the amount spent by the assessee would add to the value of the existing building as additional FSI would be available to the assessee; the amount spent was for the 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 and thus allowed depreciation by adding FSI payment 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%.

This judgement will be helpful to those Real Estate players who construct building by using FSI for their own purposes.

Ramesh Patodia
05-10-2020