2020 (11) TMI 452 - AT - Income Tax

Depreciation on non-compete fees - whether non-compete fees is not an asset and is a right available against the contracting parties only and hence not an asset? - HELD THAT - This Tribunal in assessee s own case for A.Y. 2012-13 2018 (7) TMI 2148 - ITAT MUMBAI has upheld the order of the CIT(A) in deleting the disallowance of depreciation - Decided against revenue.

Summary

Issues:
Appeal against order of CIT(A) regarding depreciation on non-compete fees for assessment year 2015-16.

Analysis:
The Revenue appealed against the CIT(A) order concerning the allowance of depreciation on non-compete fees amounting to ?8,34,91,830. The Revenue argued that non-compete fees should not be considered an asset eligible for depreciation. The Tribunal noted that the issue was previously addressed in the assessee's case for A.Y. 2012-13. The Assessing Officer disallowed the depreciation on non-compete fees, initiating penalty proceedings under section 271(1)(c) for inaccurate income particulars. However, the CIT(A) deleted the disallowance, relying on previous Tribunal decisions and his own orders for earlier years. The CIT(A) directed the AO to grant depreciation on intangible assets based on appellate decisions for A.Y. 2012-13, 2013-14, and 2014-15. The Tribunal upheld the CIT(A) order, citing relevant case laws from the High Courts of Madras and Karnataka. Consequently, the Revenue's appeal was dismissed, affirming the CIT(A) decision.

This judgment highlights the interpretation of non-compete fees as depreciable assets, the significance of appellate decisions in determining depreciation eligibility, and the importance of consistency in tax assessments across multiple years. The Tribunal's reliance on precedent from higher courts underscores the legal principles governing depreciation allowances for intangible assets. The case also emphasizes the role of the CIT(A) in reviewing and rectifying Assessing Officer decisions, ensuring fair treatment and compliance with tax laws. Overall, the judgment provides clarity on the treatment of non-compete fees for depreciation purposes and sets a precedent for future similar cases.