ITAT allows depreciation on marketing information

ITAT allows depreciation on marketing information

The bench relied on an earlier order of the Bombay High Court

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the depreciation is allowable on intangible assets. These include marketing information comprising commercial information, customer data, and distribution network and suppliers contract and non-compete fees.

The assessee, Chemetall Rai India Limited had acquired a chemical business of Gramos Chemicals India Private Limited vide an agreement in April 2011. It was for a total of Rs.7.25 crores, which included both tangible and intangible assets. The assessee earmarked a sum of Rs.7,18,87,000 towards certain specified intangible assets and the remaining amount of Rs.6.13 lakh towards certain tangible assets. The depreciation was claimed on both categories of the assets.

But, the assessing officer (AO) disallowed depreciation on two species of intangible assets.

On the first appeal, the Commissioner of Income Tax (Appeals) observed that an almost similar purchase agreement was entered into between the assessee and another company Coventya India Private Limited. The assessee had transferred its electroplating business during that year.

The Coram of Vice President RS Syal and Judicial Member SS Viswanethra Ravi relied on an earlier judgment of the Bombay High Court.

It allowed the plea of the assessee. The bench ruled, "No contrary decision has been brought to our notice. Therefore, it is clear that the sole reason given by the IT department for rejecting the assessee's claim of depreciation on such categories of capital assets does not survive anymore because of its overturning by the tribunal."

It added, "The department fairly admitted the position about the issue under consideration being a fully covered matter. The authorities were not justified in denying the depreciation on non-compete fees and market information consisting of commercial information, customer data, distribution network and suppliers contract."