Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI D.T. GARASIA & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2011-12. The appeal is directed against the order of the Commissioner (Appeals) – 16, Mumbai and arises out of the order u/s 143(3) of the Income Tax Act, 1961 (the ‘Act’).
The grounds of appeal filed by the assessee read as under:
i. The Learned Commissioner of Income-tax (Appeals)-16, Mumbai, [(“Ld. CIT(A)”] erred in confirming the action of the Deputy Commissioner of Income – tax – (OSD) – 8(1), Mumbai [“the A.O.”] in disallowing the appellant’s claim for depreciation on intangible assets, amounting to Rs. 2,30,77,301/-. ii. While doing so, the Ld. CIT(A) erred in solely and mechanically relying upon the earlier year appellate order and disregarding the detailed submissions [on fact as well as in law] made by him. iii. It is submitted that in the facts and the circumstances of the case and in law, no such disallowance was called for.
The Assessing Officer (A.O.) noticed that the assessee had claimed depreciation amounting to Rs. 2,30,77,301/- @ 25% on opening WDV of intangible asset. The assessee has paid compensation of Rs. 25 crores to M/s. Pantaloon Retail (I) Ltd. (PRIL) for which M/s. PRIL has given advertising rights to the assessee. As per provisions of Section 32 of Act, depreciation is allowable to the owner of the assets and since the assessee-company is not the owner of the asset, depreciation on the same cannot be allowed. Further, the assignment of advertisement rights does not fall within the provisions of Section 32(1)(ii) which provides depreciation on intangible assets like know-how, patents, copy rights, trademarks, licenses, franchises or any other business or commercial rights of similar nature. The A.O. noted that the term “any other business or commercial rights of similar nature” has not been defined in the Act. Therefore, the A.O. disallowed depreciation on intangible assets being assignment of rights as claimed by the assessee amounting to Rs. 2,30,77,301/-.
Aggrieved by the order of the A.O., the assessee filed an appeal before the learned CIT(A). We find that the learned CIT(A) has followed the order of his predecessor-in- office and dismissed the appeal filed by the assessee.
Before us, the learned Counsel of the assessee relied on the order of the ITAT “F” Bench, Mumbai in the assessee’s own case for the A.Y. 2007-08, 2008-09 [ITA No. 1134 & 1135/Mum/2012] and 2009-10 [ITA No. 5404/Mum/2013].
On the other hand, the learned DR relied on the order of the learned CIT(A).
We have heard the rival submissions and perused the relevant material on record. We find that similar issue arose before the Co- ordinate Bench in assessee’s own case for the A.Y. 2007-08, 2008-09 and 2009-10. The issue therein was the disallowance of claim of depreciation on intangible assets amounting to Rs. 3,12,50,000/-. The Tribunal held as under:
“11. After giving a thoughtful consideration to the aforementioned clauses of the agreement, a perusal of the statement of accounts of the assessee shows that the only source of income of the assessee is from advertisement. Therefore, it can be safely concluded that by taking such commercial right from PRIL, the assessee is doing its business which also means that the assessee’s business totally depends on the advertisement right acquired from PRIL. By acquiring this commercial right, the assessee is doing its business. Therefore, in the light of the decisions referred to elsewhere, we have no hesitation to hold that the right acquired by the assessee is an intangible asset eligible for depreciation. 11.1. It is clear that the assessee has paid the consideration for the purpose of its business in the field of advertising by acquiring the rights and other advantages attached to the advertisement space. For the sake of completeness, the specific words used in Sec. 32(1)(ii) of the Act reveal the similarity in the sense that all the intangible assets specified are tools of the trade which facilitate the assessee carrying on the business. Therefore, in our considered opinion, the expression “any other business or commercial rights of similar nature” would include such rights which can be used as a tool to carry on the business. If this test is applied, then the rights acquired by the assessee under the agreement would fall within the expression mentioned above, since the right acquired by the assessee was used by it as a tool for enhancing its business. Therefore, we set aside the findings of the Ld. CIT(A) and direct the AO to allow the claim of depreciation on the right so acquired as intangible asset.”
7.1 Facts being same, we follow the above order of the Co-ordinate Bench. We set aside the order of the learned CIT(A) and direct the A.O. to allow the assessee’s claim of depreciation on intangible asset amounting to Rs. 2,30,77,301/-
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 12/05/2017