The Income Tax Appellate Tribunal (ITAT), Bengaluru bench has held that the depreciation under Section 32 of the Income Tax Act, 1961 is allowable on the customer relationship rights since the same would amount to goodwill.
The assessee is a subsidiary of Incap OYJ (Incap Finland) and is engaged in the business of manufacturing of electrical equipment, sub-systems, inverter power products and power electronic products and filed the Return of income for the assessment year 2009-10 on 30/09/2009 declaring net loss of Rs.119,738,203/-.
After scrutiny of the returns, the Assessing Officer held that depreciation claim of Rs.1,26,54,563/- is not allowable since customary relationship rights would not amount to goodwill.
The Tribunal found that the co-ordinate bench of the Tribunal based on the findings of the AO, in the above paragraph of the decision, has observed that the claim of the assessee is required to be considered by treating the said payment as goodwill.
“We found strength in the submissions of the learned AR on the claim of depreciation on Customer Relationship Rights supported with observations of the Co-ordinate bench and following the judicial discipline, we set aside the order of the CIT(A) and direct the AO to grant depreciation on Customer Relationship Rights treating the same as ‘Goodwill” and allow the grounds of appeal of the assessee,” the Tribunal observed.
“For the assessment years 2010-11 and 2011-12 similar grounds of appeal are raised. For the parity of reasons given by us while dealing with ITA No.2214/Bang/2018 for assessment year 2009-10, the grounds of appeal raised in the appeals for assessment years 2010-11 and 2011-12 in ITA Nos.2215 & 2216/Bang/2018 are allowed,” the Tribunal said.
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