Depreciation on non-compete fee and amalgamation loss carry-forward depend on strict statutory eligibility conditions.

Depreciation on non-compete fee was treated as unavailable where the payment did not qualify as an eligible intangible asset under section 32(1)(ii), and the claim was disallowed. Set-off of brought forward losses after amalgamation was also denied because the statutory conditions under section 72A were not satisfied, so the benefit could not be claimed for the year under review. The note records that both additions were sustained and the assessee's appeal failed in full.

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Issues: (i) Whether depreciation was allowable on non-compete fee claimed as an intangible asset under section 32(1)(ii) of the Income-tax Act, 1961; (ii) Whether the set-off of brought forward losses was allowable in view of section 72A of the Income-tax Act, 1961.

Issue (i): Whether depreciation was allowable on non-compete fee claimed as an intangible asset under section 32(1)(ii) of the Income-tax Act, 1961.

Analysis: The claim related to depreciation on non-compete fee paid under agreements restraining competing business activity. The disallowance was sustained on the footing that such payment did not constitute an intangible asset eligible for depreciation under the relevant provision, and reliance was placed on the jurisdictional precedent already applied in the assessment and appellate orders.

Conclusion: The claim for depreciation on non-compete fee was disallowed, against the assessee.

Issue (ii): Whether the set-off of brought forward losses was allowable in view of section 72A of the Income-tax Act, 1961.

Analysis: The assessee sought set-off of brought forward losses after amalgamation, but the claim was rejected on the view that the statutory conditions governing amalgamation-related carry forward and set-off were not satisfied in the assessee's case. The appellate authority accepted the assessment finding that the benefit could not be allowed for the year under consideration.

Conclusion: The set-off of brought forward losses was disallowed, against the assessee.

Final Conclusion: The additions made in respect of depreciation on non-compete fee and set-off of brought forward losses were sustained, and the assessee's appeal failed in entirety.

Ratio Decidendi: Depreciation is not allowable on non-compete fee unless the payment falls within the statutory category of eligible intangible assets, and amalgamation-related carry forward and set-off of losses can be claimed only if the governing statutory conditions are satisfied.

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