India Capital Markets (P) Ltd v DCIT IT Appeal No. 2948 (Mum.) of 2010 dtd December 12, 2012 (Mum ITAT) Background: Assessee is a share broker and the main source of income is generated through brokerage. During the year, the assessee has purchased entire clientele business of M/s. Ashmavir Financial Consultants Pvt. Ltd. (AFC) by assigning all clients to the assessee for a consideration of Rs. 2.50 crores . Assessee booked these expenses as purchase of goodwill and has claimed 25% of depreciation amounting to Rs. 62,50,000 thereon. After considering the provisions of section 32, AO was of the opinion that in the said provision, it is apparently clear that goodwill as such does not find any reference and accordingly, disallowed the claim of depreciation on account of goodwill at Rs. 62,50,000. 

Purchase of clientele data is intangible/ goodwill eligible for depreciation – Mum ITAT

DCIT v Prithvi Prakashan (P.) Ltd. IT Appeal NO. 5189 (MUM.) OF 2006 (Mumbai ITAT) Background: The assessee had purchased 17 Iron Rolls used in Steel Industries from M/s. Indore Steel & Iron Mills Ltd. (ISIM) for a sum of Rs. 34,97,500/- on 25.3.1993. These rolls had been purchased by ISIM for a sum of Rs. 36,88,540/- in 1991. The assessee vide lease agreement dated 27.3.1993 had leased these rolls to ISIM for a period of three years commencing from 27.3.1993. At the time of original assessment dated, the AO noted that there was no physical movement of iron rolls which remained with ISIM. No physical possession was handed over by ISIM to the assessee. Further, prior to the purchase by the assessee these were heavily depreciated due to use by ISIM. The assessee had claimed depreciation of Rs. 17,48,750/- @ 50% of the normal rate for 100% of depreciation The AO held that it was a case of simple loan transaction which had been given the colour of lease transaction to reduce tax liability of the assessee. In appeal, the CIT(A) allowed claim of depreciation in order dated 28.6.1996. In further appeal, the Tribunal in the order dated 30.1.2004 in ITA No. 5840/Mum/2006 noted that the authorities below did not examine as to what happened to the leased assets on expiry of lease period and therefore, set aside the order of CIT(A) and restored the matter to the file of AO for passing a fresh order.

Mumbai ITAT lays down tests for determining whether sale & leaseback is a sham transaction!

DCIT Vs M/s Coromandal Bio Tech Industries (I) Ltd [ITA No.287/Hyd/2007] Hyderabad ITAT Facts of the case The Assessee company for the AY 2001-02 and 2002-03, filed its return of income declaring loss after claiming depreciation on Ponds and Plant & Machinery business of which is discontinued long back. The Assessing Officer observed that the claim of depreciation was not proper and the assessment was reopened u/s 147. In the reassessment, the AO disallowed and added back the depreciation on ponds and plant & machinery. Similarly, for the AY 2003-04 and 2004-05, on the grounds the business of prawn and shrimp farming had been apparently discontinued, the AO held that the assets were not put to use and the assessee was not entitled to depreciation on ponds and plant & machinery.

Depreciation allowable even on assets of discontinued business – Hyderabad ITAT

Shri Vishnu Anant Mahajan v ACIT ITA No.3002/Ahd/2009 (Ahmedabad Special Bench) Background and facts of the case The assessee is an individual and derives income by way of share of profit from the firm of M/s.Mahajan & Amar Doshi, capital gains, interest, dividend and house property. The assessee derives 76% of professional income as share from the firm and the balance amount by way of remuneration and interest income from the firm. The AO allocated the expenses to the income not includible under Section 10(2A). Thus, the business income by way of remuneration and interest from the firm has been taxed in the hands of the assessee under section 28(v) after allowing 24% of the expenditure. Thus, 76% of the expenditure has been disallowed. 

14A Disallowance on Partner’s share of profit & Depreciation not an expenditure for 14A – ...

DCIT v WEIZMANN FOREX LTD ITA No.3571/Mum/2011 (Mum ITAT) Assessee Company is engaged in the business of dealing in foreign exchange, money transfer and wind power generation. During the year under consideration, the assessee company had acquired franchise from AFL Pvt Ltd (ALF) – filed its ROI claiming depreciation on franchise rights. During the course of assessment proceedings the AO took a view that depreciation was not available on such things – Aggrieved with the order of the AO assessee contended the issue before the CIT(A) who after analyzing the agreement of franchise allowed the appeal of the assessee. Held that:  

Wear & tear is not an essential condition for depreciation on intangible assets