Depreciation allowable on Non-Competent Fee and Brand Equity: Madras HC [Read Judgment]

Depreciation - Taxscan

A two-judge bench of the Madras High Court has held that the depreciation under Section 32 of the Income Tax Act, 1961 is allowable on the non- competent fee and brand equity.

The bench was hearing an appeal by the Revenue against M/s.Radaan Media Works (India) Ltd wherein the Assessing Officer denied the depreciation benefit to the Company on the above claims.

When the mater travelled to the High Court, the assessee relied on the earlier decision of the High Court wherein Commissioner of Income Tax, Chennai Vs. M/s.Radaan Media Works India Ltd., wherein both the claims of the assessee was allowed by the Court.

In the earlier order, the department fairly admitted that the brand equity of a sum of Rs.75 lakhs valued at a sum of Rs.75 lakhs would be an intangible right coming within the purview of ‘business or commercial rights’ of a similar nature. Therefore, the Court had held that the brand equity constitutes an intangible asset in terms of Section 32(1)(ii) of the Income Tax Act upon which depreciation is liable to be granted.

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