9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (8) TMI 838 - AT - Income TaxRevision u/s 263 - Whether CIT indeed erred in invoking jurisdiction u/s 263 - Domestic company engaged in the business of manufacturing and distribution of aerated and non-aerated beverages - Assessment u/s 143(3) was completed - CIT held that the assessment order passed by the AO was erroneous and prejudicial to the interest of the revenue, that CIT was justified in assuming revision jurisdiction u/s 263, and that the depreciation claimed on goodwill, needs to be withdrawn. Aggrieved by the stand so taken by the CIT, the assessee is in appeal before us. The claim of the assessee was that the AO has allowed depreciation on goodwill after due application of mind and after considering all the related aspects of the matter. Therefore, even if another view of the matter is possible, CIT cannot take recourse to section 263 for adopting such other view. HELD THAT - We find that on materially identical facts of the case and dealing with the legality of revision proceedings on the ground that the AO had allowed depreciation on goodwill, Pune A Bench of this Tribunal, in the case of Piaggio Vehicles (P.) Ltd. v. Dy. CIT 2009 (5) TMI 923 - ITAT PUNE , We are in considered agreement with the views of the Co-ordinate Bench. As for ld DRs contention that the CIT cannot be a silent spectator to such a wrong grant of depreciation and that the CIT must safeguard the interests of the Revenue, all we can say is that, on the facts of the present case and particularly when CIT has withdrawn depreciation on goodwill on the ground that such a claim is patently inadmissible, we are unable to approve his stand on merits and we must also follow the Co-ordinate Benches which have decided the same issue, on materially identical facts, in favour of the assessee. As we have noted earlier in this order, Bharatbhai s case 2005 (8) TMI 279 - ITAT AHMEDABAD-C dealt with a situation in which goodwill amount was paid to the retiring partner but it did not result in the acquisition of any assets which fit the description of section 32(1)( ii ). These facts are not similar to the case before us in which assessee s claim, which has not been refuted on merits, was that the payment for goodwill has resulted in acquisition of commercial rights which are covered by section 32(1)( ii ). Ld DR s very erudite arguments on the merits of the case are also not relevant for our purposes, as we are refraining from giving any findings on the merits. Suffice to say that in view of the above discussions, and for the detailed reasons set out above, CIT indeed erred in invoking jurisdiction u/s 263. The impugned order is, therefore, set aside. In the result, the appeal is allowed.
Issues Involved:
1. Jurisdiction under Section 263 of the Income-tax Act, 1961. 2. Admissibility of depreciation on goodwill as an intangible asset. 3. Application of Supreme Court and High Court precedents. 4. Examination of the Assessing Officer's decision-making process. 5. Relevance of accounting treatment in tax proceedings. Issue-wise Detailed Analysis: 1. Jurisdiction under Section 263 of the Income-tax Act, 1961: The primary grievance of the assessee was that the Commissioner erred in assuming jurisdiction under Section 263. The Commissioner believed the assessment was erroneous and prejudicial to the interests of the revenue due to the allowance of depreciation on goodwill. The Tribunal examined whether the Commissioner was justified in invoking Section 263, considering the entire records and material facts on record. It was concluded that the Commissioner's assumption of jurisdiction was not legally sustainable, as the Assessing Officer's decision was based on a possible view of the matter. 2. Admissibility of Depreciation on Goodwill as an Intangible Asset: The core issue was whether goodwill qualifies as an intangible asset eligible for depreciation under Section 32. The Commissioner argued that goodwill is not covered under the definition of intangible assets in Explanation 3 to Section 32. However, the Tribunal found that the claim of depreciation on goodwill, which included payment for marketing reputation, trading style, and distribution know-how, was not patently inadmissible. The Tribunal referenced the decision in Skyline Caterers (P.) Ltd. v. ITO, where it was held that the true nature of the asset, rather than its nomenclature, determines its eligibility for depreciation. 3. Application of Supreme Court and High Court Precedents: The assessee relied on the Supreme Court decision in Malabar Industrial Co. Ltd. v. CIT, arguing that the Commissioner cannot invoke Section 263 merely because another view is possible. The Tribunal agreed, noting that the Assessing Officer had taken a possible view based on detailed submissions and explanations provided by the assessee. The Tribunal also referenced the Pune Bench decision in Piaggio Vehicles (P.) Ltd. v. Dy. CIT, which supported the assessee's claim that the Commissioner cannot assume jurisdiction under Section 263 if the Assessing Officer's decision was based on a possible view. 4. Examination of the Assessing Officer's Decision-Making Process: The Tribunal scrutinized whether the Assessing Officer had applied his mind to the claim of depreciation on goodwill. It was noted that the Assessing Officer had raised specific queries and received detailed explanations from the assessee. The Tribunal concluded that the Assessing Officer's decision was made after considering all relevant aspects, and merely because the decision was not elaborately discussed in the assessment order, it could not be inferred that there was no application of mind. 5. Relevance of Accounting Treatment in Tax Proceedings: The Commissioner's argument that accounting treatment of goodwill in the books of account should govern its tax treatment was rejected. The Tribunal emphasized that the true nature of the asset, as detailed in the audit report and supported by the assessee's submissions, determines its eligibility for depreciation. The Tribunal reiterated that even if an asset is described as goodwill in the books, if it fits the description of intangible assets under Section 32(1)(ii), depreciation is admissible. Conclusion: The Tribunal set aside the Commissioner's order, holding that the invocation of jurisdiction under Section 263 was erroneous. The appeal was allowed, affirming that the assessee's claim for depreciation on goodwill was based on a possible view and was not patently inadmissible. The Tribunal's decision reinforced the principle that the true nature of the asset, rather than its nomenclature, determines its eligibility for depreciation under the Income-tax Act.
|
