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January 2012

Depreciation: Intangible assets: section 32(1) (ii): A.Y. 2004-05: Depreciation is allowable on abkari licence u/s.32(1)(ii).

By K. B. Bhujle, Advocate
Reading Time 1 mins
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The assessee was owning a bar attached hotel. For the A.Y. 2004-05, the assessee claimed depreciation on the value of the abkari licence u/s.32(1)(ii) of the Income-tax Act, 1961 as an intangible asset. The Assessing Officer disallowed the claim. The Tribunal observed that purchase of licence is a capital asset, but held that the assessee is not entitled to depreciation as the abkari licence does not depreciate.

On appeal by the assessee, the Kerala High Court reversed the decision of the Tribunal and held as under:

“Abkari licence is a business right given to the party to carry on liquor trade. The abkari licence squarely falls u/s.32(1)(ii) on which the assessee is entitled to depreciation at 25% of the written down value.”

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