Case Law Details
Hindustan Coca-Cola Beverages Pvt. Ltd. Vs DCIT (ITAT Delhi)
In regard to disallowance of depreciation claimed on acquisition of distributors list it comes up that assessee had appointed M/s. S.R.Mineral Water Pvt. Ltd. as its distributor in Chennai which was earlier distributor of competing product from which it had built a large customer base in Chennai. Assessee had forgone a substantial amount due from S. R Mineral, which was by way of deposits collected on behalf of assessee. This amount as forgone by the assessee was considered as consideration for acquisition of rights to access to the customer data base available with the said distributor. Assessee considered it as a capital expenditure towards acquisition of intangible asset being customer data bank and claimed depreciation.
6.1 Ld. AO allowed the same in the assessment year 2003-04 being first year and in the subsequent years, the assessee claimed the depreciation on opening WDV however, it was disallowed on the ground that copy of agreement with bottler was not furnished. Ld. CIT(A) upheld the same on the basis of not furnishing of the evidence.
6.2 The claim of assessee is that in appellant’s own case for A.Y. 2003-04, the cost of acquisition of customer’s/ bottler’s list was treated as capital asset and depreciation was allowed after scrutiny assessment and Hon’ble Delhi High Court while quashing u/s 263 for A.Y. 2003-04 vide CIT vs. Hindustan Coca Cola Beverages (P) Ltd. [2011] 331 ITR 192 (Delhi) held that business information/ records including customer list constitute an intangible right which is eligible for depreciation. On this basis and relying judgment of Hon’ble Supreme Court in CIT vs. Rajasthan Breweries Ltd. in SLP 30646/2011 of Hon’ble Delhi High Court in CIT vs. OswalAgro Mills : 341 ITR 467 (Del), DCIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd. [2014] 222 taxman 30 (Guj) Bombay High Court judgment in DIT vs. HSBC Asset Management (I) (P) Ltd. 228 taxman 365 (Bom.) and certain judgments of the Tribunal, it was submitted that once an asset enters into block of asset and depreciation benefit has been given in the initial year of claim the same cannot be disturbed in the subsequent years.
In this regard it can be observed that the Ld. tax authorities below have disallowed the expenditure on the basis of non-production of relevant evidence with regard to nature of agreement of assessee with M/s. S.R. Minerals Water. However, the fact of allowance of the expenditure in 2003-04 is not disputed by the Revenue. Thus, the settled proposition of law that if in the initial year of claim the depreciation, is allowed, the claim cannot be disturbed in the subsequent years, has not been followed by the Ld. Tax Authorities below on the basis of lack of agreement between the assesseeand M/s. S.R. Minerals Water,to examine the nature of receipt, cannot be sustained and the grounds arising out of this issue in the respective assessment years are allowed in favour of the assessee.
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