HSBC Asset Management (India) Private Limited Vs DDIT (ITAT Mumbai)- Pre-operative expenses and registration fee paid to SEBI are allowable as intangible asset and assessee can claim depreciation on the same and AO cannot question the allow ability if same was allowed in the earlier AY.
IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH “H”, MUMBAI
ITA No. 2028/MUM/2009 (A.Y. 2004-05)
M/s. HSBC Asset Management (India) Private Limited, Vs. The Dy. Director of Income Tax
ORDER
PER N.V.VASUDEVAN, J.M,
This is an appeal by the assesee against the order dated 22/1/2009 of CIT(A)XXXIII, Mumbai relating to assessment year 2004-05.
2. The assessee is a company. It acts as investment manager of HSBC Mutual Funds. The SEBI has approved the assessee to act as investment manager of mutual funds. The assessee received certificate of registration to act as Portfolio Manager under the SEBI(Portfolio Managers) Regulations 1993 w.e.f. 16/9/05.
3. On perusal of depreciation chart filed as Annexure to Tax Audit Report in Form No.3CD, the AO noticed that the assessee had claimed depreciation on intangible assets @ 25%. It was further stated by way of note that, the intangible assets comprised of Pre-operative expenses of Rs. 77,58,599/- and SEBI Registration fee of Rs. 25,00,000/-. According to the Assessee, the expenditure incurred in securing registration from SEBI by paying ITA NO.2028/MUM/2009(A.Y. 2004-05) registration fee of Rs.25,00,000/- was an intangible asset on which the Assessee can claim depreciation u/s.32(1)(ii) of the Act. Further the expenditure incurred prior to obtaining registration to act as Mutual fund manager of Rs. 77,58,599/- required to be capitalized and treated as intangible asset and the Assessee was entitled to claim depreciation u/s.32(1)(ii) of the Act. According to the AO, Pre-operative expenses and SEBI Registration fee does not specifically fall u/s. 32(1)(ii) of the Income Tax Act, 1961 (the Act) as intangible asset and therefore he called upon the assessee to justify its claim for depreciation on intangibles. In response the assessee vide letter dated 13/12/2006 submitted the breakup of the preoperative expenses incurred by the assessee during assessment Year 2002- 03 (i.e. relevant to previous year ended March, 31, 2002, prior to commencement of business by the assessee as follows:
