M/S. CHEMETALL INDIA PRIVATE LIMITED,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), PUNE

PDF · subscribers
ITA 1535/PUN/2017Status: DisposedITAT Pune24 February 2022AY 2013-146 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the authorities below were not justified in denying depreciation on non-compete fees and market information. It followed its own prior decision which granted depreciation on similar assets.

What were the facts?

The assessee claimed depreciation on intangible assets, including marketing information and non-compete fees, acquired as part of a business purchase. The Assessing Officer and CIT(A) denied this depreciation.

What were the issues?

Whether depreciation is allowable on intangible assets like marketing information and non-compete fees. Whether the Tribunal's prior decision on similar assets is binding.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI

For Appellant: Shri R.D. Onkar
For Respondent: Shri M.G. Jasnani

आदेश / ORDER PER R.S.SYAL, VP : These two appeals by the assessee relating to the assessment years 2012-13 & 2013-14 involve solitary issue of depreciation on certain intangible assets. Because of the commonness in the facts and the grounds of appeal, we are disposing off these two appeals by means of a consolidated order for the sake of convenience.

A.Y. 2012-13 :

2.

Tersely stated, the facts of the case are that the assessee Ltd. vide agreement on 04-11-2011 for a total consideration of Rs.7.25 crore, which included both tangible and intangible assets. The assessee earmarked a sum of Rs.7,18,87,000/- towards certain specified Intangible assets and the remaining amount of Rs.6.13 lakh towards certain tangible assets.

Depreciation was claimed on both the categories of the assets.

1.

In this appeal, we are concerned only with depreciation on Intangible assets claimed by the assessee at Rs.90,99,602/-.

The Assessing Officer (AO) did not grant depreciation on two species of the Intangible assets, namely, Marketing Information comprising of Commercial information, Customer data, Distribution network and Suppliers contract and Non- compete fees. The ld. CIT(A) observed that almost similar Purchase agreement was entered into between the assessee and Conventya India Pvt. Limited during the year in which the assessee transferred its Electroplating business. He countenanced the decision of the AO by observing that the denial of depreciation on Market information and Non- compete fees was upheld by him in the hands of Convetya India Pvt. Ltd. Following similar view, he affirmed the assessment order on this aspect.

3.

We have heard both the sides and perused the relevant material on record. The only question is about the denial of depreciation on two categories of Intangible assets, namely, Non-compete fees and Market information comprising of Commercial information, Customer data, Distribution network and Suppliers contract. Apart from the assessee acquiring the Chemical business of Gramos Chemicals India Limited, it transferred its Electroplating business during the year under consideration to Conventya India Private Limited by receiving certain consideration on similar Intangible assets, inter alia, Marketing information and Non-compete fee. The question of denial of depreciation in the hands of Conventya India Limited came up for consideration before the Tribunal. Vide its order dated 17-02-2020, the Tribunal in and 975/PUN/2017 has ordered to grant depreciation on such intangible assets in the hands of Conventya India Pvt. Limited for the assessment years 2012-13 and 2013-14, a copy of which has been placed at page 86 onwards of the paper book.

In reaching the conclusion for granting depreciation on Non- compete fees, the Tribunal relied on the judgment of Hon’ble Bombay High Court in Pr. CIT Vs. Piramal Glass Limited (2019) 105 CCH 0034 Mum HC. As regards the depreciation on Customer data and Distribution network etc., the Tribunal relied on another decision in Brembo Brake India Pvt. Ltd. Vs. DCIT [TS-5119-ITAT-2015 (Pune)-O]. No contrary decision has been brought to our notice by the ld. DR. In view of the foregoing discussion, it is clear that the sole reason given by the ld. CIT(A) for rejecting the assessee’s claim of depreciation on such categories of capital assets, being, his own decision in the case of Conventya India Limited, does not survive anymore because of its overturning by the Tribunal.

The ld. DR fairly admitted the position about the issue under consideration being a fully covered matter. Respectfully following the precedent, we hold that the authorities below were not justified in denying depreciation on Non-compete fees and Market information comprising of Commercial information, Customer data, Distribution network and Suppliers contract.

A.Y. 2013-14 :

4.

Both the sides are in agreement that the facts and circumstances for the assessment year 2013-14 are mutatis mutandis similar to those of the preceding year. Following the view taken hereinabove, we entitle the assessee to depreciation on Non-compete fees and Market information.

5.

In the result, both the appeals are allowed. Order pronounced in the Open Court on 24th February, 2022.

More judgments on Section 32

All 2,762 judgments and leading authorities on Section 32 →

Recent GST High Court judgments

Search GST case law →