2018 (5) TMI 2095 - AT - Income Tax

Depreciation on intangible assets i.e. know-how patents and trademark goodwill and non-compete fee - HELD THAT - As following the decision of Hon ble Apex Court in the case of CIT Vs. Smifs Securities Ltd. 2012 (8) TMI 713 - SUPREME COURT held that the assessee is eligible for claiming depreciation on know-how patents and trademarks. Since this issue has already been dealt in detail by the Co-ordinate Bench in assessee s own appeal for assessment year 2004-05 2018 (1) TMI 12 - ITAT PUNE and 2005-06 2018 (1) TMI 12 - ITAT PUNE allowing the claim of assessee we apply the same reasoning to allow grounds No. 2 3 and 4 in the present appeal of the assessee as well. It is an undisputed fact that there is no change in the facts and circumstances in the assessment year 2006-07. The ld. DR has not brought before us any judgment wherein contrary view has been taken. Valuation of land at Taloja and Panki - scope of Business Transfer Agreement (BTA) - HELD THAT - As decided in own case for assessment year 2004-05 2018 (1) TMI 12 - ITAT PUNE no merit in the stand of CIT(A) that the land at Taloja was transferred by ICI India Ltd. to the assessee under BTA and hence the value of slump price is first to be attributed to the cost of said land - assessee fairly admitted that the value of 17.37 crores be attributed to Panki assets. However revised allocation value of land at Panki would be 13 crores out of total slump price of 153 crores. Accordingly we direct the Assessing Officer to re-compute the value of both tangible and intangible assets accordingly. Valuation of trademark patent and know-how acquired by the assessee from ICI India Limited - HELD THAT - Identical ground was raised in appeal by assessee in assessment year 2004-05 2018 (1) TMI 12 - ITAT PUNE Find no merit in the stand of learned Departmental Representative for the Revenue that actual cost for entire block could be examined in the succeeding year if there were circumstances necessitating such change. We find no merit on the same and the same is rejected. Since we have decided the issue both on merits and also on preliminary issue of whether the WDV of assets could be disturbed in the succeeding year we hold that the issue of enhancement whether can be made by the CIT(A) or not becomes academic in nature and the same is not adjudicated. Accordingly we direct Assessing Officer to allow claim of depreciation on tangible assets; know-how trademark and patents; goodwill and non-compete fee.

Summary

Issues Involved:
1. Reassessment proceedings under section 147 of the Income Tax Act.
2. Disallowance of depreciation on Know-how, Patents, Trademarks, Goodwill, and Non-compete fees.
3. Valuation of land at Taloja and Panki.
4. Initiation of penalty under section 271(1)(c) of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Reassessment Proceedings under Section 147:
The assessee challenged the reopening of assessment under section 147, arguing that the reassessment was invalid as the objections filed were not disposed of by the Assessing Officer. The Tribunal dismissed this ground as academic since the appeal was allowed on merits.

2. Disallowance of Depreciation on Intangible Assets:
The assessee claimed depreciation on intangible assets such as Know-how, Patents, Trademarks, Goodwill, and Non-compete fees, which was initially allowed in the assessment year 2003-04. The Tribunal had previously upheld the assessee's claim for depreciation on these assets in earlier years, including 2004-05 and 2005-06, following the decisions of higher courts. The Tribunal reiterated that once an asset forms part of the block in the first year, depreciation cannot be disallowed in subsequent years. The Tribunal allowed the assessee's claim for depreciation on intangible assets for the assessment years 2006-07, 2008-09, and 2009-10, applying the principle of consistency.

3. Valuation of Land at Taloja and Panki:
The assessee contested the valuation of land at Taloja and Panki, which the authorities had adjusted, affecting the valuation of intangible assets. The Tribunal referred to the terms of the Business Transfer Agreement (BTA) and Toll Conversion Agreement, concluding that the land at Panki and Taloja was not part of the BTA. The Tribunal directed the Assessing Officer to re-compute the value of both tangible and intangible assets, reducing the value of Panki land from the intangible assets' valuation. The Tribunal allowed the assessee's appeal on this ground for the assessment years 2006-07, 2008-09, and 2009-10.

4. Initiation of Penalty under Section 271(1)(c):
The assessee challenged the initiation of penalty proceedings under section 271(1)(c) of the Act. The Tribunal dismissed this ground as premature, stating that it could not be adjudicated at this stage.

Conclusion:
The Tribunal allowed the appeals of the assessee for the assessment years 2006-07, 2008-09, and 2009-10, partly on similar terms, upholding the claim for depreciation on intangible assets and directing re-computation of asset values. The cross-appeals by the Revenue for the same assessment years were dismissed.