Tenancy rights not intangible assets, no question of allowing depreciation on it -ITAT

Tenancy rights not intangible assets, no question of allowing depreciation on it – ITAT. These rights not covered as “any other business or commercial right”

ABCAUS Case Law Citation:
ABCAUS 3009 (2019) (06) ITAT

Important Case Laws Cited/relied upon by the parties:
M.M. Nissim & Co. vs. ACIT
CIT v. Techno Shares & Stocks Ltd. [2010] 323 ITR 69/720091 184 Taxman 103 (Bom.)
Dabur India Ltd. vs. ACIT (2013) 37 taxmann.com 289

The instant appeal had been filed by the assessee.

From the fixed assets schedule submitted, the Assessing Officer (AO) noticed that the assessee had shown tenancy rights and claimed depreciation on it.

Before Assessing Officer, the assessee submitted that the tenancy rights are intangible assets well covered u/s. 32(1) of the Income Tax Act, 1961 (the Act) and thus having acquired the interest in respect of the tenancy rights from the legal heirs of the deceased partners it had rights to claim depreciation on such intangible assets.

However, the both the Assessing Officer and the CIT(A) relied upon the decisions wherein it was held that no depreciation is permissible for tenancy rights since it cannot be constituted as intangible asset.

Hence the assessee filed the present appeal before the Tribunal.

The Tribunal noted that in the decision relied upon by the Revenue, the argument of the assessee was that rights acquired by the assessee should be held as ‘license’. The ITAT held that in section 32(1)(ii), the expression ‘licences’ has been provided in the company of expressions like know-how, patents, copyrights, trademarks, franchises which are in the nature of business or commercial rights. The tenancy rights acquired by the assessee cannot be equated with the license provided under section 32 so as to qualify it as an intangible asset eligible for depreciation.

Further in another case, the Tribunal held that going by the rule of nosticur a sociis, only an intangible asset of the nature of know-how, patents, copyrights, trademarks, licences, franchises etc. can be brought within the ambit of “any other business or commercial right” as appearing in section 32. The Tribunal held that tenancy rights could not be construed as “intangible” assets falling within the meaning of Explanation 3 to section 32(1).

In view of the above decisions, in the instant case, the Tribunal held that since the tenancy rights could not be treated as intangible assets, there is no question of allowing depreciation on it.

As a result, the appeal of the assessee was dismissed.

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