ITAT Allows Depreciation Claim on Intangible Asset Block Including Goodwill and Rights

The assessee sought depreciation on the Written Down Value (WDV) of the various intangible assets, including goodwill, distribution network rights, non-compete rights, trademarks, copyrights, and patents, for the Assessment Year 2012-13, without any additions during the relevant year. The Assessing Officer had denied the claim; aggrieved by this, the assessee approached the CIT (A).

CIT (A) Held: The CIT (A) confirmed the order of the AO and disallowed the depreciation on distribution network rights, non-compete rights, and goodwill.

Main Issue: Whether depreciation on the brought-forward WDV of intangible assets, such as goodwill, non-compete rights, and distribution network rights, could be disallowed in AY 2012-13 when such depreciation had been allowed in earlier years.

ITAT Held: The Tribunal allowed the assessee’s appeal with respect to depreciation on the WDV of the intangible assets. The Tribunal observed that, once depreciation had been permitted on the same set of assets in prior years, there was no justification to disallow it in the present year, particularly in the absence of any new additions. It was further clarified that goodwill, trademarks, copyrights, patents, and non-compete rights are components of the intangible asset block and are thus eligible for depreciation.

Thus, the Assessing Officer was directed to allow the depreciation claim. The Bench also noted that charging of interest is mandatory but consequential, and that the grounds not argued were treated as dismissed. As a result, the appeal was partly allowed.

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