FREUDENBERG GALA HOUSEHOLD PRODUCT PRIVATE LIMITED ,MUMBAI vs. INCOME TAX OFFICER CIRCLE 15(1)(1), MUMBAI

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ITA 1124/MUM/2025Status: DisposedITAT Mumbai27 June 2025AY 2012-133 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee is entitled to claim depreciation on the written-down value (WDV) of intangible assets, including goodwill, trade marks, copy rights, patents, and non-compete rights. The reasoning was based on the fact that the financial statements clearly showed the WDV of these assets as of March 31, 2012, and depreciation was claimed on this brought-forward WDV. The Tribunal found no reason to disallow depreciation on the WDV when it had been allowed in previous assessment years on the same block of assets. Consequently, the Assessing Officer was directed to allow the claim of depreciation. The substantial grievance of the assessee was allowed. The Tribunal also noted that charging of interest is mandatory but consequential, and the AO shall charge interest as per law. Other grounds were dismissed as not pressed.

What were the facts?

The assessee, Freudenberg Gala Household Product Private Limited, is in appeal against the order dated 29/01/2025 passed by the NFAC, Delhi, for the Assessment Year 2012-13. The core of the assessee's grievance concerns the disallowance of depreciation claimed on intangible assets, specifically distribution network rights, non-compete rights, and goodwill. The financial statements for the relevant period show a written-down value (WDV) for these intangible assets as of March 31, 2012, on which depreciation was claimed. The assessee had claimed depreciation on the brought-forward WDV of these assets, with no additions made to the block during the year.

What were the issues?

1. Whether the assessee is entitled to claim depreciation on the written-down value (WDV) of intangible assets, namely distribution network rights, non-compete rights, and goodwill, for the Assessment Year 2012-13, under Section 32 of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that depreciation should be allowed on the WDV of these intangible assets, as it had been allowed in previous assessment years on the same block of assets. The financial statements clearly show the WDV as of March 31, 2012, and depreciation was claimed on this brought-forward WDV. Revenue's Contention: The judgment does not record any specific arguments made by the revenue on this issue.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE

For Appellant: Ms. Ashwini Bhide/Mr. Nilesh Dhedia, A/Rs
For Respondent: Ms. Kavita P. Kaushik, Sr. D/R
Hearing: 25/06/2025Pronounced: 27/06/2025

आदेश/O R D E R

PER NARENDRA KUMAR BILLAIYA, AM:

1.

This appeal by the assessee is preferred against the order dt. 29/01/2025 by NFAC, Delhi [hereinafter “the ld. CIT(A)”] pertaining to AY 2012-13.

2.

The grievance of the assessee relates to the disallowance of depreciation on distribution network rights, non-compete rights and on good-will.

3.

Representatives were heard at length, case records carefully perused and the relevant documentary evidence brought on record duly considered.

4.

4.1. A perusal of the above chart clearly shows that under the block tangible assets, comprising of good-will, trade marks, copy rights and patents and non-compete rights, written down value (WDV) as at 31st March, has been shown on which the depreciation has been claimed. The WDV is the broughtforward WDV as on 31/03/2011 which means that the assessee has claimed depreciation on the WDV of the assets there being no addition in the block. Therefore, we do not find any reason why the depreciation on the WDV should be disallowed when the depreciation has been allowed in the assessment year on the same block of assets. We accordingly direct the AO to allow the claim of depreciation. The substantial grievance of the assessee is allowed.

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