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2015 (12) TMI 358 - AT - Income TaxDeduction u/s.10B disallowed - CIT(A) confirmed disallowance - Held that - The assessee would be entitled to claim for deduction u/s.10B of the Act, for a period of 10 consecutive years from the date of commencement of its manufacture as envisaged in the section. In the case in hand, the assessee has not demonstrated the actual date of commencement of the commercial production. However, the AO and the ld.CIT(A) have given finding that the commercial production was commenced even prior to the period claimed by the assessee. Under these facts, we do not see any reason to interfere with the order of the ld.CIT(A) as the first requirement is the commencement of manufacturing or production of undertaking - Decided against assessee. Disallowance of depreciation on goodwill - Held that - Since the facts of the case are identical to that of AY 2006-07 in assessee s own case, taking a consistent view wherein held as erlier in the case of B. Raveendran Pillai, (2010 (9) TMI 434 - Kerala High Court), the Hon ble High Court has also held that the goodwill is certainly comparable with trade mark, franchisee, copy right, etc., hence, entitled for the depreciation.- Decided in favour of assessee.
Issues Involved:
1. Legality of the assessment order. 2. Denial of exemption under Section 10B of the Income Tax Act. 3. Disallowance of depreciation on goodwill. Issue-wise Detailed Analysis: 1. Legality of the Assessment Order: The first ground of appeal was general in nature and did not require independent adjudication. Therefore, no specific legal analysis was provided for this issue. 2. Denial of Exemption under Section 10B: The primary issue was whether the assessee was entitled to an exemption of Rs. 60,01,695/- under Section 10B of the Income Tax Act for the Assessment Year 2008-09. The assessee contended that the exemption under Section 10B is available for ten years from the initial year of manufacturing, which began in February 1999. The authorities below, however, held that the manufacturing started in AY 1998-99, and the exemption period should be reckoned from AY 1999-2000. The assessee claimed that the registration as a 100% Export Oriented Unit (EOU) was received on 05/04/2007 (AY 2008-09), and the exemption was claimed for the first time in AY 2008-09. The Revenue argued that the commercial production had commenced before the claimed period, as evidenced by the balance sheet showing significant investment in fixed assets before February 1999. The Tribunal examined Section 10B, which stipulates that the exemption is available for ten consecutive assessment years from the year the undertaking begins manufacturing or production. The Tribunal found that the assessee did not demonstrate the actual date of commencement of commercial production and upheld the findings of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] that the commercial production began before February 1999. Consequently, the Tribunal rejected the assessee's claim for exemption under Section 10B, supporting its decision with the judgment of the Karnataka High Court in the case of Sami Labs Ltd. vs. ACIT. 3. Disallowance of Depreciation on Goodwill: The third ground of appeal concerned the disallowance of depreciation on goodwill amounting to Rs. 61,768/-. The assessee argued that this issue was covered in their favor by a previous decision of the Tribunal in ITA No.2497/Ahd/2011 for AY 2006-07. The Revenue conceded that the issue was indeed covered by the Tribunal's earlier decision. The Tribunal referred to its previous order, which relied on the Supreme Court's judgment in CIT vs. SMIFS Securities and other relevant High Court decisions, holding that goodwill is an intangible asset eligible for depreciation under Section 32 of the Income Tax Act. Given the identical facts and consistent legal precedent, the Tribunal allowed the assessee's appeal on this ground and directed the AO to allow the depreciation on goodwill. Conclusion: The Tribunal partly allowed the appeal, rejecting the claim for exemption under Section 10B but allowing the claim for depreciation on goodwill. The order was pronounced on October 15, 2015, at Ahmedabad.
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