Customer Contracts and Assembled Workforce are “Intangible Assets”: ITAT Allows Genpact’s...

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that customer contracts and an assembled workforce acquired as part of a business acquisition are identifiable intangible assets and are eligible for depreciation. The case involved Genpact's acquisition of a debt collection firm in 2010. The ITAT allowed Genpact's claim for depreciation on the value assigned to these acquired intangible assets. The tribunal observed that an assembled workforce, which represents the value of a trained and skilled employee base, and existing customer contracts, which provide a ready revenue stream, have a discernible value and a limited useful life. Therefore, they qualify as intangible assets under Section 32 of the Income Tax Act. This ruling provides important clarity on the tax treatment of intangibles acquired in M&A transactions, allowing companies to claim depreciation on these key business assets.