Consistency in tax treatment preserves depreciation, deferred subscription revenue recognition, and interest deductions absent material factual or legal change.

Depreciation on intangible assets acquired through a slump sale remains allowable where the assets formed part of the block, were used in the business, and no event reduced their written-down value. Advance subscription receipts are taxable as corresponding services are rendered; amounts retained for unperformed obligations remain liabilities and cannot be taxed again on recognition. Interest on borrowings assumed with an acquired undertaking is deductible where the continuing liability remains linked to the business and was previously accepted without material change in facts or law. Related-party interest cannot be disallowed without establishing that the expenditure is excessive or unreasonable.

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Issues: (i) Whether depreciation on the opening written-down value of intangible assets acquired through slump sale was allowable; (ii) Whether subscription revenue received in advance was taxable before services were rendered; (iii) Whether interest on borrowings assumed with an undertaking acquired through slump sale was allowable.

Issue (i): Whether depreciation on the opening written-down value of intangible assets acquired through slump sale was allowable.

Analysis: The intangible assets had been acquired as part of going concerns, put to use, generated taxable revenue, and had entered the block of assets in the preceding assessment year. Depreciation on the assets was examined and allowed in that year. No material change in facts, law, asset character, or the block during the relevant year was established. Once an asset forms part of a block, its written-down value cannot be denied depreciation absent an event reducing that value. The accounting treatment of assets as under development did not displace their tax treatment where they were in use.

Conclusion: Depreciation on the opening written-down value of the intangible-asset block is allowable, in favour of the assessee.

Issue (ii): Whether subscription revenue received in advance was taxable before services were rendered.

Analysis: The assessee consistently recognised subscription revenue over the validity period of vouchers as services were provided. The balance received in advance represented unperformed service obligations and was disclosed as a liability. The material showed that the opening balance of advance revenue was recognised and offered to tax in the relevant year upon service delivery. No contrary material rebutted this treatment; taxing the amount again would result in double addition.

Conclusion: Revenue received in advance is taxable upon rendering of the corresponding services and cannot be added again, in favour of the assessee.

Issue (iii): Whether interest on borrowings assumed with an undertaking acquired through slump sale was allowable.

Analysis: The borrowings were liabilities transferred with the undertaking acquired as a going concern and were not fresh borrowings in the relevant year. The borrowing arrangement and corresponding interest deduction had been examined and accepted in the preceding year. In the absence of a change in facts or law, the continuing liability could not be selectively disturbed. Further, disallowance for a related-party payment requires a finding that the expenditure is excessive or unreasonable; no such finding or quantification was made. The assumed borrowings remained linked to the acquired business.

Conclusion: The interest expenditure is allowable and no disallowance is warranted, in favour of the assessee.

Final Conclusion: The assessee's depreciation, deferred-revenue recognition, and interest-deduction treatment were sustained, and the challenged additions were deleted.

Ratio Decidendi: Where a claim relating to an asset block or continuing business borrowing has been examined and accepted in the originating year, it cannot be denied in a subsequent year without a material change in facts or law; related-party expenditure also cannot be disallowed without establishing its excessiveness or unreasonableness.

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