2017 (3) TMI 1823 - AT - Income Tax

Disallowance of excess claim of depreciation - HELD THAT - As decided in own case 2014 (5) TMI 926 - ITAT MUMBAI direct the AO to allow the depreciation on the machinery that had been acquired from Bilag, and also include incidental expenses incurred on acquisition of assets. Depreciation on goodwill - HELD THAT - As decided in own case 2014 (5) TMI 926 - ITAT MUMBAI relying on Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT - intangibles like goodwill are eligible for depreciation - non compete fee is in the nature of the payment and is now covered u/s 28(va) of the Act, it would be revenue in nature - AO is directed to allow the depreciation on goodwill as per law and consider the payment of non-compete fee, in terms of section 28(va) Decided in favour of Assessee.

Summary

Issues:
1. Disallowance of excess claim of depreciation under section 43(1) of the Income Tax Act.
2. Claim of depreciation on goodwill.

Issue 1 - Disallowance of excess claim of depreciation:
The case involved an appeal by the Revenue against the order of the CIT(A)-8, Mumbai for A.Y. 2009-10, challenging the deletion of disallowance of excess claim of depreciation amounting to &8377; 54,34,110/-. The Revenue contended that the disallowance should not have been deleted as the tax auditors noted the applicability of Explanation 4A to section 43(1) of the Act. However, the assessee relied on previous Tribunal decisions in their favor for A.Y. 2006-07 and 2007-08. The ITAT upheld the CIT(A)'s decision, citing consistency with previous Tribunal decisions in the assessee's favor for A.Y. 2006-07 and 2007-08, thereby dismissing Revenue's appeal on this ground.

Issue 2 - Claim of depreciation on goodwill:
The second issue revolved around the claim of depreciation on goodwill. The Revenue challenged the CIT(A)'s decision to allow the claim of depreciation on goodwill. The assessee, on the other hand, supported the CIT(A)'s decision, citing previous Tribunal decisions in their favor for A.Y. 2006-07 and 2007-08. The ITAT upheld the CIT(A)'s decision, relying on the Hon'ble Apex Court's judgment in Smifs Securities Ltd. and previous Tribunal decisions in the assessee's favor for A.Y. 2006-07 and 2007-08. Consequently, the ITAT dismissed the Revenue's appeal on this ground as well.

In conclusion, the ITAT, comprising Shri Jason P. Boaz, Accountant Member, and Shri Sanjay Garg, Judicial Member, dismissed the Revenue's appeal for A.Y. 2009-10, upholding the CIT(A)'s decisions on both the disallowance of excess claim of depreciation and the claim of depreciation on goodwill. The order was pronounced in the open court on 15th March 2017.