Non-Compete rights are an “intangible asset” eligible for depreciation

ACIT vs. GE Plastics India Ltd (ITAT Ahmedabad)

The assessee paid Rs. 4.55 crores to obtain a non-compete covenant from another company for a period of 10 years and claimed that the expenditure had resulted in an “intangible asset” u/s 32(1)(ii) on which depreciation was allowable. The AO rejected the claim though the CIT (A) allowed it. Before the Tribunal, the department relied on Srivatsan Surveyors (P) Ltd. vs. ITO 125 TTJ 286 (Chennai) where it was held that a non-compete right is a ‘right in persona’ and not a ‘right in rem’ and so depreciation was not allowable. HELD by the Tribunal dismissing the appeal: