2018 (6) TMI 1723 - 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.
2. Allowing depreciation on goodwill.

Disallowance of excess claim of depreciation:
The appeal by the revenue challenged the order of the Commissioner of Income Tax (Appeals) relating to the disallowance of excess claim of depreciation. The Ld. A.R. of the assessee argued that the grounds of appeal raised by the revenue were previously decided in favor of the assessee for assessment year 2006-07. The Tribunal had ruled in favor of the assessee in previous years as well. The Ld. D.R. for the revenue acknowledged that the grounds of appeal were covered in favor of the assessee. The Tribunal considered the arguments of both parties and reviewed the orders of the lower authorities. Ground No.1 specifically related to deleting the disallowance of excess claim of depreciation amounting to ?42,84,671. The Tribunal referred to its decision in the assessee's case for assessment year 2006-07, where it was held that the additional depreciation claimed on machinery should be allowed as it forms part of the cost for depreciation purposes. The Tribunal dismissed the appeal by the revenue based on the consistent decisions in favor of the assessee in previous years.

Allowing depreciation on goodwill:
Ground Nos.2 & 3 of the appeal related to allowing depreciation on goodwill. The Tribunal noted that a similar ground of appeal was raised by the assessee for assessment year 2006-07, where the Tribunal directed the Assessing Officer to allow depreciation on goodwill as per law. The Tribunal also addressed the non-compete fee, stating that it should be considered as revenue expenditure. The Tribunal further observed that its decision for assessment year 2006-07 was consistently followed in subsequent years from 2007-08 to 2009-10. Based on the previous rulings and the legal principles established by the Hon'ble Supreme Court, the Tribunal dismissed the appeal by the revenue. The final order pronounced on 25-06-2018 resulted in the dismissal of the revenue's appeal.

In conclusion, the judgment by the Appellate Tribunal ITAT Mumbai addressed the issues of disallowance of excess claim of depreciation and allowing depreciation on goodwill. The Tribunal relied on past decisions and legal principles to rule in favor of the assessee, ultimately dismissing the appeal filed by the revenue.