2020 (12) TMI 1107 - AT - Income Tax

Depreciation on customer list and goodwill - Depreciation at the rate of 25% treating them as an intangible asset - HELD THAT - As decided in own case 2018 (7) TMI 2071 - ITAT CHENNAI customer list has been treated as falling within the expression business or commercial rights of similar nature contained in Sec.32(1)(ii) as relied upon the decision of M/s.Areva T D India Ltd. 2012 (4) TMI 79 - DELHI HIGH COURT Assessee is entitled to the depreciation on the intangible asset viz., goodwill/customer list as claimed by him - Decided in favour of assessee.

Summary

Issues:
Depreciation on customer list and goodwill claimed as intangible assets.

Analysis:
The assessee, engaged in pest control services, claimed depreciation on customer list and goodwill at 25% as intangible assets for the assessment year 2013-14. The AO questioned the claim, considering the purchase price as a non-compete fee renamed as customer right/goodwill, leading to disallowance of depreciation. The assessee's contention, based on Accounting Standards-26 and citing the CIT Vs. Smifs Securities Ltd. case, was that customer list and goodwill qualified as intangible assets. The CIT(A) upheld the AO's decision, prompting the assessee to appeal.

On similar grounds, the Ld. AR referenced favorable decisions by the Tribunal for other assessment years, arguing for depreciation on goodwill. The Ld. DR supported the lower authorities' decisions. The Tribunal, citing past judgments, highlighted that the customer list and non-compete fee were recognized as intangible assets entitled to depreciation under Sec.32. It noted the composite nature of the Business Transfer Agreement and upheld the assessee's claim for depreciation on goodwill/customer list.

In conclusion, the Tribunal allowed the appeal, as in previous cases, in favor of the assessee for the assessment year 2013-14. The decision was based on the recognition of customer list and goodwill as intangible assets eligible for depreciation under Sec.32, aligning with previous rulings by the co-ordinate Bench of the Tribunal. The assessee's claim for depreciation on goodwill was upheld, emphasizing the legislative intent to include such intangible assets for depreciation benefits.