INCOME TAX ACT, 1961

Section 32

Depreciation - Allowability - Non-compete fees, Distribution of net work rights and Customers' list -

Assessee acquired electroplating business, including payment towards Intangible assets and tangibles assets. Assessee claimed depreciation in respect of such Intangible assets with opening written down value as on 1-4-2013 as increased by an addition of Rs. 1 crore made during the year. AO noticed the break-up of Cost of Intangible assets which includes Non-compete fees, Goodwill, Distribution net work rights and Customers' list. Addition made during the year was in Non-compete fees. He held that Non-compete fees, Distribution net work rights and Customer list included by the assessee under the head `Intangible assets' for claiming depreciation under section 32(1)(ii) were not of the nature as specified in the section. He, therefore, held that no depreciation was eligible on such assets. Held: Against the disallowance of depreciation for the immediately two preceding assessment years, i.e., 2012-13 and 2013-14, assessee approached the Tribunal who allowed depreciation on Intangible assets of Non-compete fees, Distribution net work rights and Customers' list. Authorities have relied on their respective orders for the earlier years, which have been adjudicated by the Tribunal. In absence of any distinguishing facts having been brought to notice by department, it was held that assessee was entitled to depreciation under section 32(1)(ii) on the opening written down value of Non-compete fees, Distribution of net work rights and Customer list.

Followed:Coventya India Private Limited v. Dy. CIT 2020 TaxPub(DT) 1045 (Pune-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2014-15

INCOME TAX ACT, 1961

Section 32

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