Allowance of depreciation under s.32(1)(ii) upheld for pre-operative and SEBI registration fees; AO cannot reopen opening WDV after s.143(3) assessment

For AY 2003-04, HC affirmed allowance of depreciation under s.32(1)(ii) on pre-operative and SEBI registration fees as intangible assets. The court held the AO could not reopen or examine the opening written-down value of the block of assets carried from earlier years where prior assessment under s.143(3) stood and no proceedings had been initiated to disturb it. Because the department had allowed depreciation as claimed, the challenge by revenue was dismissed.

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Issues:
1. Disallowance of depreciation on intangible assets by Assessing Officer.
2. Discrepancy in treatment of expenses for registration to SEBI.
3. Rule of consistency in allowing depreciation claims.

Issue 1: Disallowance of depreciation on intangible assets by Assessing Officer:
The case involved the disallowance of depreciation claimed by the Assessee on intangible assets, including pre-operative expenses and SEBI registration fee. The Assessing Officer disallowed the claim stating that the expenses incurred did not qualify as intangible assets under Section 32(1)(ii) of the Income Tax Act. The Tribunal noted that in prior years, similar claims were allowed, emphasizing the consistency in treatment. The Tribunal held that the expenses were treated as intangible assets forming part of the block of assets, and the Assessing Officer could not change the stance. The Tribunal based its decision on the rule of consistency and previous allowance of similar claims.

Issue 2: Discrepancy in treatment of expenses for registration to SEBI:
The main focus of the appeal was on the payment of registration fees to SEBI. The Commissioner of Income Tax (Appeals) upheld the Assessing Officer's order despite the Assessee's argument regarding the consistency in allowing such claims in prior years. The Tribunal referred to the treatment of similar claims in the Assessment Year 2003-2004 and held that the fees paid for registration to SEBI were to be considered as intangible assets. The Assessee relied on a Delhi High Court judgment, arguing that such claims cannot be allowed under Section 32(1)(ii) of the Income Tax Act. However, the High Court dismissed the appeal, emphasizing the Tribunal's decision based on the rule of consistency.

Issue 3: Rule of consistency in allowing depreciation claims:
The Tribunal's decision was based on the rule of consistency, citing the Hon'ble Supreme Court's ruling in Radhasoami Satsang v/s Commissioner of Income Tax. The Tribunal emphasized that once expenses were treated as intangible assets in prior years, the Assessing Officer could not change the stance for the subject assessment year. The Tribunal held that the Assessing Officer was bound to maintain consistency in allowing depreciation claims on the block of assets. The High Court dismissed the appeal, stating that the Tribunal's decision was justified based on the Assessee's consistent treatment of such claims in successive assessment years.

In conclusion, the High Court upheld the Tribunal's decision to allow the Assessee's appeal based on the rule of consistency in treating expenses as intangible assets. The court dismissed the appeal, stating that the Assessing Officer could not change the stance for the subject assessment year when prior claims were consistently allowed. The court emphasized that the issue did not raise a substantial question of law and that the Assessee's consistent treatment of depreciation claims in successive assessment years supported the Tribunal's decision.

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