2011 (4) TMI 1507 - AT - Income Tax

Summary

Issues involved: Appeal against deletion of addition of depreciation on Marketing & Distribution Right and Licence to use Trademark and deletion of addition of claim for Royalty treated as revenue expenditure.

Issue 1 - Depreciation on intangible assets:
The appeal was filed by the Revenue against the deletion of addition of depreciation on Marketing & Distribution Right and Licence to use Trademark. The Assessing Officer (AO) contended that the assessee was not entitled to depreciation as the ownership of the trademark had not been transferred. However, the CIT(A) referred to past decisions where the stand of the assessee was affirmed. The ITAT Bench cited a previous case where depreciation on intangible assets was allowed under section 32(1)(ii) of the Income-tax Act, 1961. The Tribunal upheld the CIT(A)'s decision, stating that the intangible assets fell under the category eligible for depreciation. As the Revenue's ground had been dismissed in the past, the Tribunal dismissed this ground as well for the current year.

Issue 2 - Claim for Royalty as revenue expenditure:
The second ground of appeal involved the deletion of the addition of claim for Royalty treated as revenue expenditure. The AO disallowed 1/4th of the royalty claim, similar to a past assessment order. However, the CIT(A) referred to a Tribunal decision from a previous year where the disallowance of royalty expenses was deleted. The Tribunal upheld the CIT(A)'s decision based on judicial propriety and consistency with past decisions. As there was no material to distinguish the facts, the Tribunal dismissed the Revenue's appeal on this ground as well.

In conclusion, the Revenue's appeal was dismissed by the ITAT Ahmedabad, upholding the decisions of the CIT(A) regarding the depreciation on intangible assets and the treatment of royalty as revenue expenditure.