In a major setback to the Fortis Hospitals, the Delhi High Court dismissed the appeal against Income Tax Appellate Tribunal (ITAT) order disallowing the depreciation on the non-compete fee.
The appellant, Fortis Hospitals challenged the Order passed by the ITAT disallowing the depreciation claimed by the appellant on the non-compete fee.
Mr.Ajay Vohra, senior counsel for the appellant submits that the learned ITAT has exceeded its jurisdiction by delving into issues that were accepted by the Assessing Officer. He submits that the Assessing Officer had rejected the claim of the appellant on account of depreciation on non-compete fee, not on the ground that it was not an intangible asset but on the ground of non-deduction of TDS, thereby being disallowed under Section 40(a)(ia) of the Act.
It was only this limited finding which was challenged by the appellant before the learned CIT(A). The Assessing Officer had, therefore, accepted the claim of the appellant that the depreciation claim on non-compete fee could be claimed. The Revenue did not challenge the said order. The appeal was filed only by the appellant herein. In appeal, the CIT(A) had set aside this finding of the Assessing Officer, by holding that the appellant was not obliged in law to deduct any tax under Section 194L of the Act as the said section ceased to operate with effect from 01.06.2000. The CIT (A) therefore, also did not dispute that the non-compete fee was entitled to depreciation as an intangible asset.
The division bench of Justice Navin Chawla and Justice Manmohan held that it cannot be said that the issue of claim of depreciation on non-compete fee stood concluded before the Assessing Officer and/or the learned ITAT has exceeded its jurisdiction in considering the same.
“The Assessing Officer did not go into the question as to whether the non-compete fee can be treated as an ‘intangible asset’, whereby the appellant would be entitled to claim for depreciation under Section 32(1)(ii) of the Act, or not. The claim of the appellant of depreciation was in fact rejected by the Assessing Officer. Therefore, there was no occasion for the respondent to have challenged the said order. In appeal, the CIT(A) went ahead and directed the Assessing Officer to allow the claim of depreciation on the non-compete fee treating the same to be an ‘intangible asset’,” the court observed.Subscribe Taxscan AdFree to view the Judgment