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Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :
Both the captioned appeals have been filed by the assessee against the order of the learned The Commissioner of Income-Tax (Appeal)-Delhi-26 [‘CIT(A)’ in short] dated 04.09.2025 under section 250 of the Income Tax Act, 1961 (‘the Act’) arising from the orders dated 21.10.2022 and 22.12.2022 passed by Assessment Unit (herein refereed as ‘the Assessing Officer or AO’) under section 143(3) r.w.s. 144B of the Act concerning Assessment Years (A.Ys.) 2020-21 & 2021-22.
Since the above captioned appeals were heard together and the facts in issues are identical, both the appeals are being disposed of by this common order for the sake of convenience and brevity.
ITA No.7771/Del/2025 for A.Y. 2020-21 :
Briefly stated the facts of the case as culled out that the assessee is a subsidiary to Harita Fehrer Limited which was now merged with Uno Minda Ltd. (herein referred as the 'assessee') and filed its original return of income on 14.11.2021 declaring total income of Rs.26,70,04,520/-. The case of the assessee was selected for 'complete scrutiny' under Computer Aided Scrutiny Selection (CASS), under the E-assessment Scheme, 2019. Subsequently, the assessment proceedings u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 were completed at assessed income of Rs.27,43,97,208/-, with disallowance of (i) Rs. 30,54,000/- on account of depreciation of non-compete fees, u/s 32 of Act and (ii) Rs. 43,38,688/- on account of Health and Education Cess, u/s 40(a)(ii) of Act. Upon appeal, the CIT(A) dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now before the Tribunal with the following grounds:
1.That the order of Ld. CIT(A) u/s 250 of the Income-tax Act, 1961 (‘the Act') is bad in law and on the facts of the Assessee Company.
2.That the Ld. AO and consequently the Ld. CIT(A) erred in law, on facts and in the circumstances of the assessee's case in not allowing the Depreciation on Non-Compete Fees claimed u/s 32(1)(ii) of the Act by holding that the said expenditure does not qualify for depreciation under said section of the Act, despite of already being capitalized and accepted during the Assessment for A.Y. 2010-11.
3.That the Ld. CIT(A) grossly erred in law in not following the binding nature of orders of Hon'ble ITAT in Assessee's own case for A.Y. 2011-12, A.Y. 2013-14, A.Y. 2014-15 & A.Y. 2016-17 on the identical facts arising from the same transaction.
4.That the Ld. CIT(A) erred in law and facts in confirming the disallowance made by the Ld. AO of Rs. 30,54,000/- on account of depreciation u/s 32(1)(ii) on Non-Compete Fees, by overlooking the fact that the actual amount of depreciation of Rs. 8,09,507/- was claimed on such class of Intangible Assets.
Others
5.The aforesaid grounds of appeal are without prejudice to one another.
6.The appellant craves leave to add, amend, alter, change, vary or substitute any of the aforesaid grounds or raise an additional ground if it becomes necessary to do so in the interest of justice.
PRAYER
The appellant prays that the relief as per grounds of appeal above may kindly be allowed to it and the appellant may also be allowed to add, delete, amend or substitute any ground(s) of appeal either at or before the date of hearing.”
The main issue is with regard to disallowance made by the Ld. AO of Rs.30,54,000/- on account of depreciation u/s 32(1)(ii) on Non-Compete Fees. At the outset, the contention of the assessee that the issue is covered in favour of the assessee vide order of Hon'ble ITAT, Chennai, Bench- "A", Order dated 31.01.2023 for AYs 2011-12, 2013-14, 2014-15 & 2016-17 (ITA Nos. 2254/Chny/2018, 3480/Chny/2018, 3481/Chny/2018 & 2746/Chny/2019).
Per contra the ld DR relied on the orders of AO/CIT(A).
We have heard the rival submissions and have perused the relevant materials on record. The assessee (now merged with Uno Minda Limited) was incorporated in 2008 for manufacturing foam for automobile seats. It acquired foam businesses through Business Purchase Agreements (BPAs) from Polyflex India Private Limited (2008) for Rs.47.30 crore and from Harita Seating Systems Limited (2010) for Rs.46.50 crore. The BPAs included non-compete clauses restricting sellers from engaging in similar business and the assessee capitalized non-compete fees of Rs. 5.5 crore as an intangible asset and claimed 25% depreciation under Section 32(1)(ii) of the Act. Depreciation was allowed by the AO in A.Y. 2010-11 and thereafter, assessee consistently claimed depreciation on WDV in subsequent years.
We find that learned AO disallowed the depreciation in respect to the Non-Compete Fees during the A.Y. 2020-21 and 2021-22, solely on the ground that similar claims were disallowed in prior years (A.Y. 2016-17). We find that the issue is fully covered by assessee’s own case in ITA Nos.2254, 3480, 3481 & 2746/Chny/2018 for A.Ys. 2011-12, 2013-14, 2014-15 and 2016-17, wherein the Hon'ble Income Tax Appellate Tribunal (Chennai TAT) vide order dated 31.01.2023 allowed the claim of depreciation for all years. We further find that for A.Y. 2017-18, learned CIT(A) also allowed the depreciation relying on the ITAT’s order in assessee’s own case. In such factual matrix, following the decision of Coordinate Bench of ITAT, we hold that the assessee is eligible for depreciation on Non-compete Fees u/s 32(1)(ii) of the Act. The grounds are allowed.
In the result, both the appeals in ITA Nos. 7771 & 7772/DEL/2025 are allowed.