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2007 (3) TMI 745 - AT - Income TaxDepreciation on the intangible asset, namely Patents and technical know-how - Payment for acquisition of marketing rights - HELD THAT:- It is admitted fact that the transaction is not a sham transaction but is acted upon. Similar finding has been given also in the appeal of revenue cited (supra). We accordingly hold that the amount of ₹ 2 crores representing distribution franchise fee paid to Ambalal Sarabhai Enterprise is in respect of commercial rights referred in Section 32(1)(ii) of the Act. Accordingly, though Ground No.1 is to be dismissed, as contended in alternate Ground No.2, the claim of assessee in respect of depreciation is allowable. Since the amount was borrowed for acquisition of capital asset and such capital asset were not put to use prior to payment of the front end fees paid to ICICI bank, in view of the decision of Hon'ble Supreme Court in the case of Chellapalli Sugar Mills Ltd.[1974 (10) TMI 3 - SUPREME COURT], such interest has to be added to the cost of capital asset. Since the Tribunal has held that the assessee is entitled to depreciation in respect of various intangible assets and since the front end fees is to be added to the cost of such capital assets, the alternate claim made by the assessee in Ground No.4 regarding depreciation u/s 32(1) has to be allowed. Thus, though Ground No.3 is to be dismissed, Ground No.4 is allowed. In the result, the appeal is partly allowed.
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