Loading judgment…
Facts
The Revenue appealed against an order allowing depreciation on intangible assets like dealer network, vendor relationship, customer database, and trained employee base. The CIT(A) had deleted the adjustments made by the Assessing Officer regarding these assets.
Held
The Tribunal held that the assessee was entitled to claim depreciation on intangible assets such as dealer network, vendor relationship, customer database, and trained employee base, as they were part of a business transfer and taken into account in the books of accounts.
Key Issues
Whether dealer network, vendor relationship, customer database, and trained employee base qualify as depreciable intangible assets under Section 32(1)(ii) of the Income Tax Act, 1961.
Sections Cited
32(1)(ii), 32(1)(ii)
AI-generated summary — verify with the full judgment below
Before: Shri M. Balaganesh & Shri S.S. Viswanethra Ravi
The Income Tax Officer, Vs. Doosan Bobcat India Pvt. Ltd., HTC Towers, 6th Floor, No. 41, GST Corporate Ward 2(1), Chennai. Road, Guindy Industrial Estate, Chennai 600 032. [PAN: AACCD6529L] (अपीलाथ�/Appellant) (��थ�/Respondent/Cross Objector) अपीलाथ� की ओर से / Appellant by : Shri Ashik Shah, CA ��थ� की ओर से/Respondent by : Shri C.P. Solomon, JCIT सुनवाई की तारीख/ Date of hearing : 23.10.2025 घोषणा की तारीख /Date of Pronouncement : 28.10.2025 आदेश /O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the Revenue is directed against the order dated 30.05.2025 passed by the ld. Commissioner of Income Tax (Appeals) 16, Chennai for the assessment year 2012-13.
The Appellant-Revenue raised 6 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in allowing assessee’s claim of depreciation under section 32(1)(ii) of the Income Tax Act, 1961 [“Act” in short] on the intangible assets of dealer network, vendor relationship, customer database & relationship and trained employee base in the facts and circumstances of the case.
3. It is noted that the Assessing Officer made adjustments on account of depreciation on dealer network, vendor relationship, customer database & relationship and trained employee base and in first appeal, the ld. CIT(A) deleted the above said adjustments. Having aggrieved by the order of the ld. CIT(A), the Appellant-Revenue is in appeal before us.
The ld. DR Shri C.P. Solomon, JCIT argued that the ld. CIT(A) erred in allowing depreciation on dealer network, vendor relationship, customer database & relationship and trained employee base without appreciating that the said assets do not fall within the scope of intangible assets as defined in Explanation 3(b) to section 32(1)(ii) of the Act. He vehemently argued that the ld. CIT(A) failed to appreciate that the assets claimed by the assessee are not identifiable, transferrable or enforceable proprietary rights akin to know-how, patents, copyrights, trademarks, licenses or franchises. He submits that the ld. CIT(A) erred in holding that the dealer network or vendor/customer relationship constitutes a depreciable intangible asset without any evidence of legal right, contractual enforceability or independent transferability of such network. Further, he submits that the ld. CIT(A) erred in law in treating trained employee base as a depreciable asset despite the settled position that human capital does not confer any enduring or proprietary benefit to the assessee. He argued vehemently that the impugned order passed by the ld. CIT(A) is contrary to the provisions of section 32(1)(ii) of the Act and the intent of the legislature, which requires that only certain specifically enumerated intangible assets are eligible for depreciation. He prayed to set aside the order of the ld. CIT(A) to the extent relating to deletion of disallowance of depreciation on the above mentioned intangible assets.
The ld. AR Shri Ashik Shah, CA submits that the only issue is relating to depreciation and relied on the order of the ld. CIT(A) and drew our attention to the synopsis of arguments.
After hearing both the parties and perusal of the material available on record, it is noted that pursuant to the merger, all assets & liabilities of Doosan International India Private Limited were transferred to the assessee at their book values with effect from appointed day. The said assets include intangible assets acquired by Doosan International. It is noted that said Doosan International India Private Limited claimed depreciation prior to merger on the aforementioned intangible assets and the assessee, in the present case also claimed depreciation post merger. We find the details of dealer network, vendor relationship, customer database & relationship and trained employee base in pages 10 & 11 of the impugned order. To verify the genuineness of the issue, the ld. CIT(A) examined the business transfer agreement and found satisfied the comprehensive schedules regarding distributors/dealers contract, share distributor/dealer contract, list of intellectual properties, etc. According to the ld. CIT(A), the above said intangible assets, were taken into the books of Doosan International India Private Limited in FY 2007-08 [AY 2008-09] and observed that the said assets were forming part of transfer and taken into books of accounts with the assessee in FY 2011-12 relating to the AY 2012-13, which is the year under consideration before us after merger as per the approved scheme of amalgamation. We find the ld. CIT(A) discussed the issue in detail from para 5.3.4 of the impugned order with supporting case law and on perusal of the same, we find no infirmity in the order of the ld. CIT(A) by holding that the assessee is entitled to claim depreciation on dealer network, vendor relationship, customer database & relationship and trained employee base and accordingly, we hold so. Thus, the grounds raised by the Appellant-Revenue fails and dismissed.
CO No. 75/Chny/2025 7. On perusal of the grounds raised by the assessee in the present CO, we find the assessee is not entitled to reliefs sought for on law and facts and therefore, grounds therein, are dismissed.
In the result, the appeal filed by the Revenue and the CO filed by the assessee are dismissed. Order pronounced on 28th October, 2025 at Chennai.