The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that depreciation under section 32 of the Income Tax Act, 1961 is allowable on the tenancy rights.
The assessee, M/s Premier Book Company has claimed depreciation of Rs. 5,41,406/- @ 25% on the tenancy rights while filing their income tax return for the relevant year. While concluding the proceedings, the Assessing Officer held that as per section 32(1)(ii) of the Act, depreciation is allowed only in respect of know-how, patents, copyrights, trademarks, licenses, franchises, or any other business or commercial rights of similar nature, being intangible assets acquired on or after April 1998.
Before the authorities, the assessee relied on the Delhi High Court decision in Hindustan Coco Cola Beverages wherein the Court has allowed depreciation on intangible assets.
Accepting the contentions of the assessee, Judicial MemberMadhumita Roy and Accountant Member N K Billaiya noted that in the above-cited case, the Court observed that that business or commercial rights should be of similar nature as know-how, patents, copyrights, trademarks, licenses, franchises, etc. and all these assets which are not manufactured or produced overnight but are brought into existence by experience and reputation. They gain significance in the commercial world as they represent a particular benefit or advantage or reputation built over a certain span of time and the customers associate with such assets.
The Tribunal referring a catena of decisions allowed relief to the assessee and held that “Considering the facts of the case in hand in light of the decision of the Hon’ble High Court of Delhi [supra] we direct the Assessing Officer to delete the addition of Rs. 5,41,406/-.”
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