2011 (2) TMI 1406 - AT - Income Tax

Summary

Issues Involved:
1. Depreciation on intangible assets for AY 2000-01.
2. Depreciation on intangible assets for AY 2005-06.

Summary:

Issue 1: Depreciation on intangible assets for AY 2000-01

The assessee acquired Compaq Computers (India) Ltd. as a going concern, with a significant portion of the purchase price attributed to intangible assets. The assessee initially claimed depreciation on these intangible assets, which was denied by the assessing authority and the first appellate authority. The case was remitted back to the AO by the earlier Bench to reconsider the claim in light of the Supreme Court ruling in Empire Jute Co. Ltd. v. CIT (124 ITR 1 (SC)). The AO, after detailed deliberation, denied the depreciation claim on the grounds that the amount paid was capital in nature and not eligible for depreciation.

Upon appeal, the CIT (A)-LTU allowed the depreciation, referencing the agreement and valuation certificate that classified the intangible assets as eligible for depreciation u/s 32(1)(iii) of the Act. The Revenue contested this decision, arguing that the intangible assets did not meet the criteria specified in s.32 and that the valuation was ad-hoc. The Tribunal, after considering various judicial precedents, including the cases of Bosch Ltd. and Skyline Caterers Pvt. Ltd., upheld the CIT (A)'s decision, confirming that the assessee was entitled to depreciation on the intangible assets u/s 32(1)(ii).

Issue 2: Depreciation on intangible assets for AY 2005-06

For AY 2005-06, the AO disallowed the depreciation claim on intangible assets, citing the same reasons as for AY 2000-01. The CIT (A) allowed the depreciation, referencing the earlier appellate order for AY 2000-01. The Revenue appealed, reiterating the arguments made for AY 2000-01. The Tribunal, finding the issue identical to that of AY 2000-01, upheld the CIT (A)'s decision, allowing the depreciation claim for AY 2005-06 as well.

Conclusion:

The Tribunal dismissed the Revenue's appeals for both assessment years, confirming the assessee's entitlement to depreciation on intangible assets u/s 32(1)(ii) of the Act.