Lease premium as an intangible asset and weighted deduction claim with later DSIR approval required fresh scrutiny.

Lease premium paid to acquire leasehold rights over land was treated as a capital outlay for a commercial right, and depreciation was held allowable in principle under the intangible asset limb. The reasoning distinguished the payment from mere rent or simple amortisation over the lease term. On the weighted deduction claim under section 35(2AB), relief was not finally denied because the assessee produced subsequent DSIR approval in Form 3CI after the impugned order; the matter was therefore restored for fresh adjudication on the existing record and later approval.

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Issues: (i) whether the assessee was entitled to weighted deduction under section 35(2AB) in the absence of Form 3CL and in view of subsequent DSIR approval; (ii) whether lease premium paid for leasehold rights on land qualified as an intangible asset under section 32(1)(ii) so as to allow depreciation.

Issue (i): whether the assessee was entitled to weighted deduction under section 35(2AB) in the absence of Form 3CL and in view of subsequent DSIR approval.

Analysis: The deduction had been declined by the lower authorities only for want of the prescribed DSIR certificate. The record showed that the assessee had subsequently placed on record DSIR approval in Form 3CI, which was issued after the date of the appellate order under challenge. In these circumstances, the claim required fresh examination on the basis of the subsequent approval and the material already on record.

Conclusion: The issue was restored to the Assessing Officer for fresh adjudication.

Issue (ii): whether lease premium paid for leasehold rights on land qualified as an intangible asset under section 32(1)(ii) so as to allow depreciation.

Analysis: The lease premium was treated as a one-time capital outlay for acquiring a commercial right to use the land for the business over a fixed period. The reasoning rejected the view that the amount was mere rent or required amortisation over the lease term. It was held that the right obtained under the lease was a commercial right falling within the scope of intangible assets, and the authorities cited against the claim were distinguished in light of the applicable legal position on depreciation of such rights.

Conclusion: Depreciation on the lease premium was allowable in principle and the assessee succeeded on this issue.

Final Conclusion: The appeal succeeded on the depreciation issue and the weighted-deduction issue was sent back for reconsideration, resulting in partial relief to the assessee.

Ratio Decidendi: A lease premium paid to acquire a business/commercial right over property can, depending on its character, qualify as an intangible asset for depreciation, and a claim under section 35(2AB) may require reconsideration where subsequent statutory approval material to the claim is produced.

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