Tribunal upholds depreciation allowance for technical know-how, corrects accounting errors, emphasizes consistency

The Tribunal upheld the allowance of depreciation on technical know-how for the appellant, rejecting the Revenue's challenge to the valuation and nature of the asset. It also affirmed the higher depreciation rate for computer peripherals and the correction of accounting errors related to excise duty under Section 145A, leading to the dismissal of Revenue's appeals and the allowance of the assessee's Cross Objections for multiple assessment years. The decision emphasized consistency in depreciation claims and accurate accounting practices.

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Issues Involved:
1. Disallowance of depreciation on technical know-how.
2. Rate of depreciation on computer peripherals.
3. Addition on account of difference in trading account under Section 145A of the Income Tax Act.

Detailed Analysis:

1. Disallowance of Depreciation on Technical Know-How:
The core issue in these appeals was the disallowance of depreciation on technical know-how. The appellant company, engaged in manufacturing cement bricks, blocks, and slabs, acquired the business of Autoclave Aerated Concrete Products (AAC) for Rs. 13.75 crores. The purchase included various assets, one of which was technical know-how valued at Rs. 2.75 crores. The appellant claimed depreciation on this technical know-how, which was initially allowed by the Department for A.Y. 2005-06 and 2006-07. However, for A.Y. 2007-08, the Assessing Officer (AO) disallowed the depreciation, citing discrepancies in the valuation of technical know-how and questioning its nature as an intangible asset. The First Appellate Authority partly allowed the appeal, permitting depreciation but based on the valuation by the District Valuation Officer (DVO) rather than the actual consideration paid.

Upon appeal, the Tribunal held that the AO could not disturb the opening written down value (WDV) of the asset, as depreciation had been allowed in previous years. The Tribunal cited the ITAT Mumbai Bench's decision in HSBC Asset Management (India) Pvt. Ltd. and M/s Godrej Agrovet Ltd., emphasizing that the AO cannot dispute the opening WDV of the block of assets. The Tribunal upheld the First Appellate Authority's decision to allow depreciation on technical know-how and rejected the Revenue's appeals for A.Y. 2007-08 and 2008-09. The Tribunal also allowed the assessee's Cross Objections, directing the AO to grant depreciation on the opening WDV of the technical know-how.

2. Rate of Depreciation on Computer Peripherals:
For A.Y. 2009-10, the Revenue contested the rate of depreciation on computer peripherals. The Tribunal dismissed this ground, referencing the Delhi High Court's decision in CIT vs. BSES Yamuna Power Ltd. and ACIT vs. Caparo Maruti Ltd., which supported a higher depreciation rate for computer peripherals.

3. Addition on Account of Difference in Trading Account Under Section 145A:
The Revenue also appealed against the deletion of an addition of Rs. 1,71,31,908/- made on account of differences in the trading account under Section 145A. The AO had included excise duty in the opening stock, sales, purchases, and closing stock but failed to account for the excise duty paid on sales. The First Appellate Authority corrected this by allowing the deduction of the excise duty paid, which the AO had overlooked. The Tribunal found no infirmity in the First Appellate Authority's findings and upheld the deletion of the addition.

Conclusion:
The Tribunal dismissed the Revenue's appeals for A.Y. 2007-08, 2008-09, and 2009-10 and allowed the Cross Objections filed by the assessee for A.Y. 2007-08 and 2008-09. The Tribunal's decision was based on the principles of consistency in depreciation claims and the proper accounting of excise duty under Section 145A. The order was pronounced in the Open Court on 28th June 2016.

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