2021 (3) TMI 762 - AT - Income Tax

Depreciation u/s 32(1)(ii) which is to be amortized in the five consecutive years - Assessee submitted that the difference was on account of excess of liabilities over the tangible assets and had to be treated on account of intangible asset being on account of business or commercial rights of similar nature covered under section 31(1)(ii) of the Act and the depreciation should be allowed on the same - HELD THAT - AO was not justified in applying the ratio laid down by the Hon'ble Jurisdictional High Court in Techno Shares Stock Ltd. 2009 (9) TMI 18 - BOMBAY HIGH COURT The expenditure claimed by the assessee on acquisition of the Bank is capital in nature which is corroborated by the decision of the Tribunal, Pune Bench, in M/s. Cosmos Co-operative Bank Ltd. v/s DCIT 2014 (1) TMI 1696 - ITAT PUNE wherein it has been held that the cost of acquisition was intangible in nature and it was on account of business or commercial rights of similar nature which is covered under section 32(1)(ii) of the Act. Consequently, we do not find any infirmity in the order passed by the learned Commissioner (Appeals) by allowing the claim of the assessee. We also note that the facts of the decision of the Hon'ble Supreme Court in Techno Shares and Stock Ltd. 2010 (9) TMI 6 - SUPREME COURT are distinguishable in nature insofar as the facts of the present issue is concerned. Therefore, the case law relied upon by the Revenue is not applicable to the facts of the present appeal. Accordingly, the order of the learned Commissioner (Appeals) is hereby upheld by dismissing the grounds raised by the Revenue.

Summary

Issues:
1. Dispute over depreciation entitlement under section 32(1)(ii) of the Income Tax Act for the assessment year 2009-10.

Analysis:
The appeal filed by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the assessee's entitlement to depreciation under section 32(1)(ii) of the Act. The Co-operative Bank in question had acquired another bank, and the dispute arose over the treatment of the acquisition cost for depreciation. The Assessing Officer disallowed the claim, citing a High Court judgment regarding intellectual property rights. The Commissioner (Appeals) allowed the assessee's appeal, emphasizing a Supreme Court judgment that supported depreciation for certain business or commercial rights. The Tribunal concurred with the Commissioner's decision, highlighting that the acquisition cost represented intangible assets falling under section 32(1)(ii) of the Act.

During the proceedings, the Assessing Officer relied on a High Court judgment regarding intellectual property rights to disallow the depreciation claim. However, the Commissioner (Appeals) and the Tribunal referenced a Supreme Court judgment that supported the depreciation claim for certain business or commercial rights. The Tribunal further cited a Pune Bench decision to support the capital nature of the acquisition cost, qualifying it for depreciation under section 32(1)(ii) of the Act. The Tribunal found the Revenue's case law inapplicable to the current appeal, upholding the Commissioner's decision to allow the depreciation claim.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's decision to allow the depreciation claim for the acquisition cost of the bank. The judgment highlighted the distinction between intellectual property rights and business or commercial rights, emphasizing the eligibility of certain intangible assets for depreciation under section 32(1)(ii) of the Act.