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2022 (11) TMI 318 - KARNATAKA HIGH COURTDisallowance of the depreciation - Appellant had not acquired any business and commercial rights - HELD THAT:- In the case on hand, assessee has entered into various agreements with Central and State Government, etc. The assessee's agreement referred to hereinabove is with the Central Government. Assessee's case is, to obtain that agreement it has incurred certain expenditure. Shri Suryanarayana, pointed out that in case the assessee transfers its rights under the agreement, it will be transfer of an intangible asset similar to the one considered in Areva T & D India Ltd., and he is right in his submission. A Concession or a right which accrues over a period of time under an agreement will be in the form of an intangible asset and when transferred, the transferee will also be entitled for continuation of the benefit. AO has stated that the expenses in this case are mostly towards legal, technical and management fee. Such expenditure is incurred to obtain a legally enforceable agreement. ITAT has rightly held that such expenses can be capitalized. It is settled that assessee shall be entitled to claim depreciation on such expenses which can be capitalized. CIT(A) has recorded that the assessee has not proved the expenditure also merits consideration. It is relevant to note that CIT(A), on appreciation of material on record, has held assessee had acquired business and commercial rights and licenses by making payment which were in the nature of 'intangible asset' entitled for claiming depreciation u/s 32(1)(ii) of the Act. This finding has not been challenged by the Revenue before the ITAT. Whether a lease right constitutes an intangible right? - In our view, Shri Suryanarayana is right in his submission because, the intangible right accrued in favour of assessee is transferable and therefore, the cost incurred towards acquiring leasehold rights shall be eligible for depreciation.
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