TMI Blog2022 (11) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... inted 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 expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al on record in the right perspective? (ii) Whether the Tribunal was right in holding that leasehold rights partakes the character of land and would not be entitled to depreciation under Section 32 of the Act? 2. Heard Shri T. Suryanarayana, learned Senior Advocate for the appellant and Shri E.I.Sanmathi, learned standing counsel for the Revenue. 3. Assessee is Bengaluru International Airport Ltd. Its case is, it has entered into various agreements with the Central Government, State Government, etc., and acquired certain rights. In order to enter into those agreements, it has incurred expenditure. Assessee sought to treat the said expenditure as capital asset and claimed depreciation. The Assessing Officer disallowed it on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed, further finding of the ITAT that assessee had not acquired any commercial rights is untenable. He urged that as pre-operative expenditure incurred towards entering various agreements is qualified for capitalization, this appeal may be allowed. 7. Shri E.I.Sanmathi, learned Standing counsel for the Revenue submitted that CIT(A) has recorded in Para 4.10 that there is no evidence to show that the expenditure sought to be capitalized has been actually spent. Since amount spent has not been proved, CIT(A) has rightly disallowed the assessee's claim. Accordingly, he prayed for dismissal of this appeal. 8. We have carefully considered rival contentions and perused the records. 9. Assessee's case is, it has entered into sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ize such expenditure and to claim depreciation on that expenditure. 11. In Areva T D India Ltd., assessee-appellant therein had entered into Slump Sale Agreement and acquired know-how, business contacts, business information, etc. The Delhi High Court framed the following questions for consideration; Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that know-how, business contacts, business information, etc. acquired as part of the slump sale described as were not entitled for depreciation under Section 32(1)(ii) of the Income Tax Act? and held that the intangible assets acquired under Slump Sale Agreement were in the nature of business or commercial rights of similar nature spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and commercial rights and licenses by making payment which were in the nature of 'intangible asset' entitled for claiming depreciation under Section 32(1)(ii) of the Act. This finding has not been challenged by the Revenue before the ITAT. 14. The second substantial question of law is 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. 15. In view of the above, the following; ORDER (i) Appeal is allowed holding that the first substantial question of law in favour of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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