ITAT Allows Depreciation Claim On Non Compete Fee, Deletes Penalty

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed the claim of depreciation on non-competing fees.

The bench of Yogesh Kumar U.S. (Judicial Member) and Pradip Kumar Kedia (Accountant Member) has deleted the penalty imposed pursuant to the addition of Rs. 21,89,970 made on account of disallowance of depreciation on noncompeting fees.

The assessment order came to be passed against the assessee by making disallowance on account of depreciation claimed on non-compete fee of Rs. 21,89,970/- and disallowance under section 14A of Rs. 7,37,674/-.

In the quantum appeal, the CIT(A) deleted the disallowance made u/s 14A of the Income Tax Act and sustained the disallowance of Rs. 21,89,974/- claimed as depreciation on non-compete fee. The penalty proceedings have been initiated against the assessee, and an order of penalty came to be passed.

The assessee preferred an appeal before the CIT (A). The CIT (A) dismissed the appeal filed by the assessee.

The assessee contended that no penalty is leviable on account of the addition of Rs. 21,89,970/- on account of disallowance of depreciation on non-compete fees. Depreciation on non-compete fees is a debatable issue, and as such, no penalty under Section 271(1)(c) can be levied, thus seeking deletion of the penalty.

The department relied on the orders of the lower authorities and sought dismissal of the appeal filed by the assessee.

The tribunal, while allowing the appeal, held that the provisions of Section 271(1)(c) cannot be attracted against the assessee and quashed the penalty order passed by the AO for Assessment Year 2014-15.

Counsel For Appellant: Salil Kapoor

Counsel For Respondent: Anshul

Case Title: Metro Tyres Limited Versus ACIT

Case No.: I.T.A. No. 1873/DEL/2020 (A.Y 2014-15)

Click Here To Read The Order