Short Overview: Depreciation on non-compete fee was allowable @ 25% by treating it as an intangible asset.

Assessee company, engaged in manufacturing and sale of glass containers and vials for pharma and non-pharma markets, acquired Glass Division from Nicholas Piramal India Ltd. and in connection with the said acquisition paid an amount of Rs. 18 crore towards non-compete fee. Assessee allocated the non-compete fee to various fixed assets and claimed depreciation at the rate applicable to those assets. AO disallowed assessee’s claim. Assessee alternatively claimed depreciation on non-compete fee @ 25% by treating it as an intangible asset. AO disallowed this.

It is held that depreciation on non-compete fee was allowable @ 25% by treating it as an intangible asset.

Decision: In assessee’s favour