Depreciation on non-compete fees allowed as an intangible asset under the Income-tax Act.

Depreciation under section 32(1)(ii) of the Income-tax Act, 1961 was allowable on non-compete fees capitalised as an intangible asset. The assessee had treated the non-compete payment as part of business purchase arrangements and had consistently claimed depreciation on its written down value in earlier years. The same issue had already been decided in the assessee's favour for prior assessment years, and that reasoning was applied again for the years in question. On that basis, the claim for depreciation on the non-compete fee was allowed.

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

Analysis: The assessee had capitalised non-compete fees under business purchase agreements and had been claiming depreciation on the written down value in earlier years. The issue had already been decided in the assessee's favour in its own case for earlier assessment years, and the same reasoning was followed for the years in appeal. In this factual setting, the claim for depreciation on non-compete fees was found to be allowable under section 32(1)(ii).

Conclusion: Depreciation on non-compete fees was allowed in favour of the assessee.

Ratio Decidendi: Non-compete fee capitalised as an intangible asset is eligible for depreciation under section 32(1)(ii) of the Income-tax Act, 1961 when the claim is supported by the established treatment of the asset and prior favourable adjudication on the same issue.

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