TaxTMI 
TaxTMI 
2021 (4) TMI 274
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....t) against the order dated 29.07.2016 passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). ITA Nos.193/2017 and 194/2017 pertain to the Assessment Year 2009-10 whereas ITA Nos.195/2017 and 196/2017 pertain to the Assessment Year 2010-11. Since common question of law arises for consideration in these appeals, they were head analogously and are being decided by this common judgment. The appeals were admitted on the following common substantial question of law: "Whether on the facts and circumstances of the case, the Tribunal is right in law in holding that the depreciation should be granted on total franchisee cost in the first year itself on accrual basis, not on the franchisee fees pai....
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....eclared a loss of Rs. 45,58,78,981/-. While computing the total income for the Assessment Year, the assessee claimed a deduction of Rs. 37,75,29,600/- of the franchisee fee paid during the year. The Assessing Officer, by an order dated 29.12.2011, disallowed the same on the ground that the franchise fee is for the acquisition of business rights which is an intangible asset in terms of Section 32(1)(ii) of the Act. Accordingly, depreciation at the rate of 25% on the amount of Rs. 37,75,29,600/- which comes to Rs. 9,43,82,400/- was allowed and the claim for depreciation was disallowed in respect of balance amount of Rs. 28,31,47,200/-. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals), who by an order date....
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.... to depreciation on the entire amount of franchise fee as the same was not paid. It is also pointed out that the payment under the agreement to the tune of Rs. 3,36,00,000/- has not been treated as an asset in the balance sheet by the assessee. It is further submitted that the franchisee continues to enjoy the right only upon payment of the amount stipulated under para 7(1)(a)(i) of the agreement. While referring to paragraph 11.1 of the agreement, it is also pointed out that if there is a breach of payment obligation, then the franchise agreement is liable for termination. It is also contended that from the terms and conditions of the agreement, it is evident that the rights enjoyed by the franchisee are only subject to payment. It is als....
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....It is also submitted that the Tribunal has rightly held that the depreciation under Section 32(1)(ii) of the Act has to be allowed on the entire cost of franchise rights of Rs. 3,36,00,000/- as against franchise fee installment paid during the particular year of Rs. 33,60,000/- applicable to tax. It is also submitted that the Commissioner of Income Tax (Appeals) had also upheld the aforesaid finding in paragraph 6.10 of the order. It is also urged that the actual cost of the asset is the total amount incurred or laid out for the capital asset by an assessee and not merely the amount paid by the assessee in any year. It is also submitted that the termination of franchise agreement was a mere possibility which has no bearing on the coming int....