Tribunal grants appeal, allows depreciation on tenancy rights.

The Tribunal allowed the appeal, directing the Assessing Officer to delete the disallowed depreciation claimed on tenancy rights amounting to Rs. 5,41,406. The Tribunal held that unless the claim was disturbed in the initial assessment year, it cannot be disallowed in subsequent years if the facts remain the same. The decision was supported by a High Court judgment discussing the widened scope of section 32 for allowing depreciation on intangible assets, including goodwill. The Tribunal emphasized the assessing officer's plausible view and the expanded definition of intangible assets post-amendment in 1998, ultimately ruling in favor of the assessee.

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Issues:
Disallowance of depreciation claimed on tenancy rights.

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax [Appeals]- XXV, New Delhi dated 03.06.2014 regarding the disallowance of depreciation claimed on tenancy rights amounting to Rs. 5,41,406. The Assessing Officer observed the depreciation claim during scrutiny assessment proceedings and issued a show cause notice to explain the claim. The assessee claimed depreciation on tenancy rights due to a settlement between legal heirs of a former partner, treating it as an intangible asset. However, the Assessing Officer disallowed the claim citing section 32(1)(ii) of the Income Tax Act, allowing depreciation only on specific intangible assets acquired after April 1998. The Assessing Officer relied on a Tribunal decision for disallowance.

The assessee's reply was dismissed, and the matter was taken to the ld. CIT(A) without success. During the appeal, the assessee referred to a High Court judgment allowing depreciation on intangible assets. The Assessing Officer and the ld. CIT(A) maintained their positions. The Tribunal noted that depreciation was claimed on the written down value, indicating previous claims. Citing the High Court judgment, the Tribunal held that unless the claim was disturbed in the initial assessment year, it cannot be disallowed in subsequent years if the facts remain the same.

The High Court judgment discussed the widened scope of section 32, allowing depreciation on intangible assets acquired after April 1998. It elaborated on the concept of goodwill as an intangible asset, emphasizing its value and nature in business. The Tribunal's decision to allow depreciation on goodwill as a valuable commercial asset was supported by the audit report and assessing officer's acceptance. The Tribunal justified its decision based on the plausible view taken by the assessing officer and the expanded definition of intangible assets post-amendment in 1998.

Ultimately, considering the High Court's decision and the facts of the case, the Tribunal directed the Assessing Officer to delete the addition of Rs. 5,41,406. As a result, the appeal by the assessee was allowed, emphasizing the importance of assessing officers accepting plausible views in such matters.

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