2015 (10) TMI 2858 - HC - Income Tax

Depreciation on the contract maintenance portfolio u/s 32 (1) (ii) - HELD THAT - The finding recorded by the ITAT is that the Assessee had acquired maintenance contracts for 3578 elevators, which was the main source of revenue for the Assessee. Maintenance contracts for 1001 elevators which were under warranty period were expected to start yielding revenue once the warranty period expired. The ITAT has, in the impugned order, rightly noted that since the maintenance portfolio was purchased by the Assessee as part of the purchase by way of slump-sale , it constituted the basic income earning apparatus and was therefore entitled to depreciation under Section 32 (1) (ii) of the Act. The Court finds that the decision of this Court in Areva T D India Limited 2012 (4) TMI 79 - DELHI HIGH COURT answers a similar question in favour of the Assessee and against the Revenue. In that decision it was held that know-how, business contracts, business information, etc. acquired as part of a slump sale were entitled for depreciation u/s 32 (1) (ii) of the Act. Whether the goodwill is an asset within the purview of Section 32? - Question stands answered in favour of the Assessee and against the Revenue by the decision of Smifs Securities Limited 2012 (8) TMI 713 - SUPREME COURT

Summary

The High Court dismissed the Revenue's appeal against the ITAT order regarding depreciation on 'contract maintenance portfolio' acquired in a slump sale. The Court cited precedent to support the Assessee's entitlement to depreciation. The Court also ruled in favor of the Assessee regarding the treatment of goodwill as an asset under Section 32 of the Income Tax Act. No substantial question of law arose, and the appeal was dismissed.