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TMI Blog2011 (6) TMI 866X X X X Extracts X X X X X X X X Extracts X X X X ..... on to act as Portfolio Manager under the SEBI(Portfolio Managers) Regulations 1993 w.e.f. 16/9/05. 3. On perusal of depreciation chart filed as Annexure to Tax Audit Report in Form No.3CD, the AO noticed that the assessee had claimed depreciation on intangible assets @ 25%. It was further stated by way of note that, the intangible assets comprised of Pre-operative expenses of ₹ 77,58,599/- and SEBI Registration fee of ₹ 25,00,000/-. According to the Assessee, the expenditure incurred in securing registration from SEBI by paying registration fee of ₹ 25,00,000/- was an intangible asset on which the Assessee can claim depreciation u/s.32(1)(ii) of the Act. Further the expenditure incurred prior to obtaining registration to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2004-05 (relevant to previous year ended March 31,2004) (-)19,23,487 WDV as on April 1, 2004 57,70,462 The assessee pointed out to the AO that it had commenced its business on April 2, 2002 and that the above mentioned expenses were incurred prior to commencement of the business of the assessee. It was further clarified that the Assessee was a company incorporated as a private company with the main object of carrying on the business of "Asset Management Company". The sum of ₹ 25,00,000 which is the registration fee paid to SEBI under regulation 9 of the SEBI (Mutual Fund) Regulations, 1996 to obtain registration as n Asset Management Company, which is mandatory to commence its business. The registration fees paid by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of business mainly on account of rent & utilities, salaries, administration, etc. According to the AO, the intangible asset contemplated by section 32(1)(ii) should be in the nature of know-how, patent, copyrights, trade marks, licences, commercial rights etc. and the same should have been "acquired" by the assessee on or after 1/4/1998. According to the AO by no stretch of imagination can the expenses like rent & utilities, salaries, administration, etc. be considered intangible asset nor can it be said that the assessee acquired any intangible asset. Accordingly, the depreciation claimed by the assessee on preoperative expenses were disallowed. For identical reasons the AO held that depreciation on registration fee treating it as int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ining registration of the mutual fund from SEBI should be capitalized and treated as part of the block of assets "intangible assets" and depreciation allowed on the same. The learned D.R. relied on the order of the Revenue authorities. 8. We have heard the rival submissions. It is seen from Page No.63 of the assessee's paper book that in A.Y 2003-04 the assessee had claimed depreciation of ₹ 25,64,650/- as allowable as per the provisions of the IT Act on Block of Assets under the head "intangible Assets". The AO allowed the claim of the assessee of depreciation for A.Y 2003-04 by an order passed under section 143(3) dated 28/3/2006. Thus it is clear that the fees paid for registration as a mutual fund to SEBI and the pre-operative ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licences, franchises or any other business or commercial rights of similar nature. Sec.43(6)( c) of the Act defines written down value and it reads as follows: "43. Definitions of certain terms relevant to income from profits and gains of business or profession.--In section 28 to 41 and in this section, unless the context otherwise requires- (6) "written down value" means-- (a) (b) (c) in the case of any block of assets,-- (i) (ii) in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 1989, the written down value of that block of assets in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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