Shares purchased by the assessee can be held to be as depreciable intangible asset u/s. s 32 (1) (ii): ITAT

The assessee is a company engaged in the business of running of ammonia storage terminal, generation of power, dealing in ammonia, and trading/investing in shares, mutual funds, and derivatives. It filed its return of income declaring a total income of Rs. 87,984,410 and computing book profit u/s. 115JB of the act at Rs. 93,484,751. The assessee also claimed a speculation loss of Rs. 7,32,376 to be carried forward.

After scrutiny, the assessment order u/s. 143 (3) of the Income Tax Act, 1961 was passed by the AO wherein he disallowed depreciation amounting to Rs 4,44,07,662 and computed the total income of the assessee at Rs. 132,394,070.

Appeal before CIT(A): Against this order, the assessee preferred an appeal before the learned CIT(A), and deleted the disallowance of depreciation of Rs. 4,44,07,662.

Appeal before ITAT: Aggrieved by that order, learned AO filed an appeal before the tribunal. The issue is whether the shares purchased by the assessee can be held to be depreciable intangible assets or not. On the assessment order for the assessment year 2011-12, the depreciation schedule has a narration of ‘Intangible Assets’ Iron Ore Mining Rights. There is no evidence that the assessing officer examined that in a block of intangible assets, the assessee has included “shares’ also. The ld. CIT(A) had also accepted the plea of the assessee with respect to the consistency as in the assessment year 2011-12 depreciation has been allowed. Such is also not the mandate of the decision of the Hon’ble Bombay High Court relied upon by the learned CIT(A). Section 32(1)(ii) defines intangible assets as ‘know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature’. Even otherwise shares are financial assets classified as tangible assets because they derive value from contractual claims. Hence, the same are not depreciable u/s 32 (1) (ii) of The Act.

Therefore, the tribunal reversed the order of learned CIT(A) and restored the order of the ld. AO disallowing the depreciation of Rs 4,44,07,662 on shares purchased by the assessee holding that it is not a depreciable intangible asset. So, the appeal of the ld. AO was allowed.

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