2013 (6) TMI 675 - AT - Income Tax

Disallowance of depreciation - Depreciation on intangible asset goodwill and furniture and fittings - Held that - issue in dispute is squarely covered by the decision of the Tribunal Mumbai in the case of Kotak Forex Brokerage Ltd. v. Asst. CIT 2009 33 SOT 237 (Mum) - any right which is obtained for carrying on the business effectively and profitably has to fall within the meaning of intangible asset. - Supreme Court in the case of CIT v. Smifs Securities Ltd. 2012 348 ITR 302 (SC) held that goodwill is an intangible asset eligible for depreciation under section 32 of the Act. In these circumstances we remit the issue to the file of the Assessing Officer to decide the issue in the light of the said decisions to consider the allowability of depreciation on intangible assets after getting bifurcation of payment of Rs. 75 lakhs and to allow depreciation on the goodwill at 25 per cent. Assessee himself has submitted that the learned Assessing Officer should have appreciated that during the previous year relevant to the assessment year 2008-09 the amount of Rs. 60 lakhs paid by the assessee-company for deduction of Rs. 15 lakhs in question qualifies for inclusion under the head intangible asset as provided under section 32(1)(ii) and is entitled to a depreciation at 25 per cent. on intangible assets. Hence we direct the Assessing Officer to allow depreciation on goodwill at 25 per cent. on the intangible assets and with respect to furniture and fittings depreciation to be allowed at 10 per cent. since they fall under block of assets as furniture and fittings. The assessee is directed to give bifurcation of goodwill and furniture and fittings. - Decided in favour of assessee.

Summary

Issues:
1. Appeal by the assessee against the Commissioner of Income-tax (Appeals) for the assessment year 2008-09.
2. Appeal by the Revenue against the Commissioner of Income-tax (Appeals) for the assessment year 2009-10.

Appeal I. T. A. No. 37/Hyd/12 - Appeal by the assessee:
The assessee, a company engaged in retail trading, claimed deduction for goodwill amortized as a business expense. The Assessing Officer disallowed the claim, stating goodwill is not recognized as an intangible asset. The Commissioner of Income-tax (Appeals) upheld the disallowance due to lack of documentary evidence. The Tribunal referred to precedents where goodwill was considered an intangible asset eligible for depreciation. The issue was remitted to the Assessing Officer to reconsider depreciation on goodwill.

Appeal I. T. A. No. 1482/Hyd/12 - Appeal by the Revenue:
The Commissioner of Income-tax (Appeals) allowed depreciation on the entire amount of &8377; 75 lakhs paid for transfer of leasehold rights, including plant and machinery, furniture, fittings, and goodwill. The Revenue appealed, arguing that 10% depreciation was wrongly allowed. The Tribunal directed the Assessing Officer to allow 25% depreciation on goodwill as an intangible asset and 10% depreciation on furniture and fittings.

In conclusion, the appeal I. T. A. No. 37/Hyd/12 was partly allowed for statistical purposes, and the appeal I. T. A. No. 1482/Hyd/12 was also partly allowed. Both appeals were decided on June 28, 2013.