Tribunal upholds depreciation on non-compete fee, brand equity

The Tribunal upheld the CIT(A)'s decision in allowing depreciation on non-compete fee and brand equity, deleting notional interest income on an interest-free lease deposit, and rejecting the addition towards provision for bad and doubtful debts. The Revenue's appeals were dismissed in all three issues, with the Tribunal emphasizing the assessee's entitlement to depreciation based on previous rulings and the AO's inability to interfere in business decisions.

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Issues:
1. Depreciation on non-compete fee and brand equity
2. Notional interest income on interest-free lease deposit
3. Addition made towards provision for bad and doubtful debts

Depreciation on non-compete fee and brand equity:
The Revenue appealed against the CIT(Appeals) decision allowing depreciation on non-compete fee and brand equity for the assessment years 2004-05 and 2008-09. The Revenue argued that these were not intangible assets listed under section 32 of the Income Tax Act. However, the Tribunal noted that in previous years, the claim of depreciation on non-compete fee and brand equity was fully allowed and upheld. The Tribunal held that the assessee was entitled to depreciation on these assets based on previous rulings. Therefore, the order of the CIT(A) was upheld, and the Revenue's appeal was dismissed.

Notional interest income on interest-free lease deposit:
The Revenue challenged the deletion of notional interest income of Rs. 24 lakhs charged on an interest-free lease deposit paid by the company. The AO disallowed the interest, assuming it was paid out of loans availed by the company. However, the CIT(A) observed that the deposit was made for business purposes and had commercial expediency. The Tribunal agreed, stating that the AO cannot decide business decisions for the assessee. Therefore, the deletion of notional interest income was upheld, and the Revenue's appeal was rejected.

Addition made towards provision for bad and doubtful debts:
The Revenue disputed the deletion of an addition towards provision for bad and doubtful debts amounting to Rs. 48.77 lakhs. The AO initially allowed it as a bad debt but later disallowed it through a rectification order. The CIT(A) upheld it as a bad debt. The Tribunal held that the AO's decision to disallow the claim through rectification was not valid as it was a debatable issue. Citing the Supreme Court judgment, the Tribunal noted that it was enough for the bad debt to be written off in the accounts. As the Assessing Officer had examined this aspect, the deletion of the addition was confirmed, and the Revenue's appeal was dismissed.

In conclusion, the Tribunal dismissed the Revenue's appeals in all three issues, upholding the decisions of the CIT(A) in allowing depreciation on non-compete fee and brand equity, deleting notional interest income on an interest-free lease deposit, and rejecting the addition towards provision for bad and doubtful debts.

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