Section 32 – Dealership network is an intangible asset eligible for depreciation u/s. 32(1)(ii).
Facts
During the previous year the assessee claimed deprecation of Rs. 1,84,65,131 credit for TDS of Rs. 58,22,932
The assessee, a company which is engaged in the business of dealing in foreign exchange, filed its return of income for the year under consideration declaring total income of Rs. 9,48,61,257/-. During the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee had claimed depreciation of Rs. 1,84,65,131/- @ 25% on the dealership network purchased by it in the previous year relevant to A.Y. 2007-08 from AFL.
The assessee submitted that the AFL had vast representative/dealer network in India and the same was acquired by the assessee for expanding its base and business. It was contended that the said network was in the nature of license and franchisee and therefore was eligible for depreciation @ 25% u/s. 32(1)(ii) of the Act.
The AO was of the view that the assessee could not prove that any right of the nature as provided in section 32(1)(ii) of the Act was acquired by it and that the right or advantage so acquired was depreciable over a period of time. He, therefore, disallowed the claim of the assessee for depreciation on the dealership network.
Aggrieved, the assessee preferred an appeal to the CIT(A) who deleted the disallowance made by the A.O. by following the order of his predecessor in assessee’s own case for A.Y. 2007-08 wherein a similar claim of the assessee for depreciation @25% on dealership network was allowed by his predecessor treating the dealership network as intangible asset eligible for depreciation u/s. 32(1)(ii) of the Act.
Aggrieved, the revenue preferred an appeal to the Tribunal.
Held
It is observed that a similar issue was involved in assessee’s own case for A.Y. 2007-08 wherein the claim of the assessee for depreciation on dealership network is allowed by the Tribunal vide its order dated 30-03-2012 passed in ITA No. 3571/Mum/2011 holding that the consideration paid by the assessee to AFL was for the purpose of enhancing its network in the field of money transaction business by acquiring rights or infrastructure or other advantages attached to the marketing network and since the same was in the nature of intangible asset as contemplated u/s. 32(1)(ii) of the Act, the assessee was entitled to depreciation thereon @ 25%. The Tribunal following the decision of the co-ordinate Bench, in the assessee’s own case for A.Y. 2007- 08, upheld the order of the ld. CIT(A) allowing the claim of the assessee for depreciation on dealership network u/s. 32(1)(ii) of the Act and dismiss ground No. 1 of Revenue’s appeal.
