×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
Aforesaid appeal has been filed by the assessee challenging the final assessment order dated 27th February 2017, passed under section 143(3) r/w section 144C(13) of the Income Tax Act, 1961 (for short "the Act") for the assessment year 2012–13, pursuant to the directions of the Dispute Resolution Panel–2 (DRP), Mumbai.
2. Grounds no.(i), (ii) and (iii), are without prejudice to each other. However, they are on the issue of deduction / depreciation claimed on non–compete fee.
3. Brief facts are, the assessee company is engaged in the business of manufacturing and sale of glass containers and vials for pharma and non–pharma markets. The assessee is also engaged in generation of power and investment activity. In the assessment year under dispute, the assessee had acquired Glass Division from Nicholas Piramal India Ltd. In connection with the said acquisition, assessee had paid an amount of ` 18 crore towards non–compete fee. The assessee allocated the non–compete fee to various fixed assets and claimed depreciation at the rate applicable to those assets. While framing the draft assessment order the Assessing Officer, however, disallowed assessee’s claim of depreciation following his decision in earlier assessment years. Challenging the disallowance of depreciation, assessee raised objections before learned DRP.
4. Learned DRP also sustained the disallowance made by the Assessing Officer relying upon the decision of the Tribunal in assessment year 1999–2000. Further, learned DRP also disallowed alternative claim of depreciation on non–compete fee @ 25% by treating it as an intangible asset. It is further relevant to observe, learned DRP also rejected assessee’s claim of deduction on account of write–off of non–compete fee to the extent of 1/18th spread over a period of 18 years.
5. The learned Counsels appearing for both the parties have agreed before us that the issues raised in these grounds are covered by the decisions of the Tribunal in assessee’s own case for preceding assessment years.
6. We have considered rival submissions and perused the material on record. As could be seen, the dispute relating to assessee’s claim of depreciation on non–compete fee is a recurring issue between the parties from the assessment year 1999–2000 onwards. While deciding the issue in Assessment Year 1999–2000 the Tribunal altogether disallowed assessee’s claim of depreciation on both the count i.e., depreciation on allocation of non–compete fee to various fixed assets as well as claim of depreciation by treating non–compete fee as an intangible asset. However, while deciding assessee’s appeal in subsequent years, the Tribunal allowed assessee’s claim of depreciation @ 25% by treating non–compete fee as an intangible asset. In the latest order passed by the Tribunal in assessee’s own case for the assessment year 2005–06 in ITA no.4777/Mum./2016, dated 30th April 2019, the Tribunal following its earlier order has decided the issue as under:–
“8. We have considered rival submissions and perused material on record. The issue before us is, whether assessee’s claim of depreciation on non–compete fee @ 25% by treating it as an intangible asset is acceptable or not. As could be seen, this is a recurring dispute between the parties since the assessment year 1999–2000. Though, while deciding the issue in the assessment year 1999–2000, vide ITA no.4842/Mum./2004, dated 5th April 2013, the Tribunal has disallowed assessee’s claim of depreciation on non–compete fee by treating it as an intangible asset, however, while deciding assessee’s appeal in assessment year 2001–02 in ITA no. 9645/Mum./2004, dated 2nd March 2016, the Tribunal though was conscious of its own contrary decision in assessment year 1999–2000, however, taking note of the decisions of Hon’ble Madras High Court and Hon’ble Karnataka High Court, referred to above, allowed assessee’s claim of depreciation by treating the non– compete fee as an intangible asset. The same view was reiterated by the Tribunal while deciding assessee’s appeal for the assessment year 2006–07 in ITA no.5360/ Mum./2010, dated 16th December 2016, and in assessment year 2011–12 in ITA no.157/Mum./2011, dated 4th January 2007. Therefore, facts being identical, following the consistent view of the Tribunal in the orders referred to above, as well as the decision of different High Courts cited supra, we uphold the decision of the learned Commissioner (Appeals) on the issue. Ground is dismissed.”
7. The facts being identical, respectfully following the consistent view of the Tribunal, we direct the A.O. to allow deprecation on non– compete fee @ 25% by treating it as an intangible asset.
8. Thus, ground no.(i) is dismissed and ground no.(ii) is allowed.
9. In view of our decision in ground no.(ii), ground no.(iii) becomes infructuous, hence, dismissed.