Court: Bangalore bench of the Income-tax Appellate Tribunal
Citation: Bosch Ltd. Vs. CIT [2009-TIOL-736-ITAT-BANG]
Brief :Bangalore bench of the Income Tax Appellate Tribunal (the Tribunal) in the case of Bosch Ltd. Vs. CIT [2009-TIOL-736-ITAT-BANG] held that the taxpayer company was entitled to claim depreciation on the skill and the know-how brought by the employees of the transferee company classified as ‘business information’ under the category of ‘other identifiable intangibles’ (goodwill) under section 32(ii) of the Income Tax Act, 1961 (the Act).
Facts of the case
Contentions of the taxpayer
Tax department’s contentions:- The tax department contended that the AO had neither discussed nor considered in detail the issue and also failed to examine it in depth. Thus, the order of the AO was erroneous which had resulted in the invoking of the provisions of section 263 of the Act.
Allow ability of depreciation on Goodwill and related intangibles has been a subject matter of debate before various bench of Tribunal. The Bangalore Tribunal, after considering various judgments on the matter, has ruled in favor of the taxpayer that the depreciation is available on the amount paid to acquire skill and know-how of the incoming employees as business information under section 32(1)(ii) of the Act.
This is a welcome decision to the extent that it has allowed depreciation on such a unique intangible asset being skill and know-how of incoming employees as ‘business information’ classified under other identifiable intangibles (Goodwill).
We would like to bring to your attention that various bench of Tribunal have dealt with several types of rights (intangible assets) for the allow ability of depreciation. Some of the key decisions are given below:
|S.r. no.||Intangible assets||Case laws||Allowed|
|1.||License for making roads for government||Asoka Info (P) Ltd. Vs. ACIT  123 TTJ 77 (Pune)||Yes|
|2.||Goodwill||Kotak Forex Brokerage Ltd. Vs. ACIT (ITA no. 2692/Mum/2007)||Yes|
|3.||Marketing Rights||Sarabhai Zydus Animal Health Ltd. Vs. ACIT (ITA no. 26/ Del of 2005)||Yes|
|4.||Non Compete Right||ACIT Vs. Real Image Tech. (P) Ltd.  120 TTJ 983 (Chen)||Yes|
In the above cases the Tribunal has examined the meaning of various intangible assets mentioned in section 32 of the Act. Further it has also dealt with the ambit of the term ‘any other business or commercial rights of a similar nature’ and allowed depreciation on various different rights (intangible assets).