The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the depreciation is allowable on intangible assets such as marketing information comprising of Commercial information, Customer data, Distribution network and Suppliers contract and Non-compete fees.
The assessee, Chemetall Rai India Limited, acquired Chemical business of Gramos Chemicals India Pvt. Ltd. vide agreement on 04-11-2011 for a total consideration of Rs.7.25 crore, which included both tangible and intangible assets. The assessee earmarked a sum of Rs.7,18,87,000/- towards certain specified Intangible assets and the remaining amount of Rs.6.13 lakh towards certain tangible assets. Depreciation was claimed on both the categories of the assets.The Assessing Officer disallowed depreciation on two species of the Intangible assets, namely, Marketing Information comprising of Commercial information, Customer data, Distribution network and Suppliers contract and Non-compete fees.
On first appeal, the CIT(A) observed that almost similar Purchase agreement was entered into between the assessee and Conventya India Pvt. Limited during the year in which the assessee transferred its Electroplating business.
Shri R.S. Syal, Vice President and Shri S.S. Viswanethra Ravi, Judicial Memberrelied on the judgment of Bombay High Court in Pr. CIT Vs. Piramal Glass Limited.
While allowing the plea of the assessee, the Tribunal observed that “As regards the depreciation on Customer data and Distribution network etc., the Tribunal relied on another decision in Brembo Brake India Pvt. Ltd. Vs. DCIT [TS-5119-ITAT-2015 (Pune)-O]. No contrary decision has been brought to our notice by the ld. DR. In view of the foregoing discussion, it is clear that the sole reason given by the ld. CIT(A) for rejecting the assessee’s claim of depreciation on such categories of capital assets, being, his own decision in the case of Conventya India Limited, does not survive anymore because of its overturning by the Tribunal. The ld. DR fairly admitted the position about the issue under consideration being a fully covered matter. Respectfully following the precedent, we hold that the authorities below were not justified in denying depreciation on Non-compete fees and Market information comprising of Commercial information, Customer data, Distribution network and Suppliers contract.”
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