2021 (5) TMI 252 - AT - Income Tax

Disallowance of depreciation on Intangible assets - Depreciation was claimed on certain Intangible assets technical know-how, goodwill and non-compete fees - HELD THAT - As decided in own case 2018 (1) TMI 12 - ITAT PUNE Tribunal directed grant of depreciation on Intangible assets but on the reduced value imbibing the effect of increase in the value of the Panki land to ₹ 13.00 crore and consequently reducing the value of Intangible assets. In instant case, it is seen that the AO disallowed full depreciation on Intangible assets. However, the ld. CIT(A) overturned the assessment order without noticing the Tribunal order, by which dirction was given to increase the value of Panki plot to ₹ 13.00 crore from ₹ 1.00 lakh initially shown by the assessee and thereby correspondingly reducing the value of Intangible assets and the resultant claim of depreciation thereon. This position was fairly accepted by the ld. AR. Respectfully following the precedent, we set-aside the impugned order and restore the matter to the file of the AO for allowing depreciation on intangible assets but only after giving effect to the afore-extracted direction from para 69 of the Tribunal order. Needless to say, the assessee will be allowed opportunity of hearing in such fresh proceedings. Appeal allowed for statistical purposes.

Summary

Issues:
- Disallowance of depreciation on Intangible assets for the assessment years 2010-11 and 2014-15.

Analysis:

A.Y. 2010-11:
The appellant, a subsidiary of a company from the Netherlands, engaged in manufacturing and selling catalysts, claimed depreciation on Intangible assets like technical know-how, goodwill, and non-compete fees. The Assessing Officer disallowed this depreciation based on past assessment orders. However, the CIT(A) deleted the disallowance, citing Tribunal orders from previous years. The Tribunal, in its earlier order, allowed depreciation on Intangible assets with specific directions regarding the valuation of assets. The Revenue challenged this decision, arguing that the appeal before the Bombay High Court is pending. The Tribunal noted that the CIT(A) did not consider the specific directions from the previous order and set aside the decision, instructing the AO to allow depreciation on Intangible assets after adjusting the asset values as per the Tribunal's direction.

A.Y. 2014-15:
The issues in this assessment year were found to be similar to those in the A.Y. 2010-11. Consequently, the Tribunal followed the same approach as in the earlier year, setting aside the decision and remitting the matter to the AO for reconsideration in line with the Tribunal's directions. Both appeals were partially allowed for statistical purposes, with the Tribunal emphasizing that the assessee should be given a hearing in the fresh proceedings before the AO.

In conclusion, the Tribunal addressed the disallowance of depreciation on Intangible assets for the assessment years 2010-11 and 2014-15, emphasizing the need to follow specific directions from previous Tribunal orders regarding asset valuation. The decisions were set aside, and the matters were remitted to the AO for reconsideration, ensuring the assessee's right to a hearing in the fresh proceedings.