2011 (7) TMI 1255 - AT - Income Tax

Summary

Issues Involved:
1. Validity of reassessment proceedings u/s 147 to 151.
2. Disallowance of depreciation on intangible assets (goodwill).

Summary:

1. Validity of Reassessment Proceedings u/s 147 to 151:
The assessee challenged the reassessment proceedings initiated by the AO, arguing that the mandatory conditions u/s 147 to 151 were not complied with. The original return was filed on 31.10.2004, declaring a loss of Rs. 2,14,74,490/-, which was accepted u/s 143(3) on 10.11.2006. A notice u/s 148 was issued on 11.06.2008, citing that depreciation on goodwill amounting to Rs. 2,77,36,266/- had escaped assessment. The assessee contended that the AO had dropped similar reassessment proceedings for A.Y. 2003-04 and A.Y. 2005-06, thus violating the principle of consistency as established in Radhasoami Satsang Vs. CIT 193 ITR 321 (SC). The Tribunal agreed, emphasizing that the revenue should maintain consistency in its approach, especially when no new material change justified a different view. Thus, the reassessment proceedings were deemed invalid.

2. Disallowance of Depreciation on Intangible Assets (Goodwill):
The AO disallowed the depreciation claimed on goodwill, arguing that goodwill is not a capital asset as per B. Srinivasa Shetty Vs. CIT 128 ITR 294 (SC). The assessee argued that goodwill, acquired from Philips India Ltd., provided enduring benefits and should be considered an intangible asset eligible for depreciation. The Tribunal noted the Delhi High Court's decision in CIT Vs. Hindustan Coca-Cola Beverages Pvt. Ltd. 238 CTR 1, which accepted goodwill as an asset eligible for depreciation. However, since the reassessment proceedings were invalidated on the principle of consistency, the Tribunal did not delve into the merits of the depreciation claim.

Conclusion:
The appeal was allowed, invalidating the reassessment proceedings based on the principle of consistency. The Tribunal did not address the merits of the depreciation claim, rendering the reassessment proceedings void. The order was pronounced on 22nd July 2011.